Letting Agent Today: Stamp duty surcharge will prompt buy...
Fri 27 Nov 2015
Existing and would-be landlords are set to go on a buy to let buying spree, snapping up homes before the threeper cent stamp duty surcharge kicks in next April - but then the rot may set in and demand may plummet.
Thats the view of letting agents like Rory ONeill, head of residential at high end agency Carter Jonas.
This new legislation could create a surge in demand, as landlords look to beat its implementation date.Conversely, once it comes into effect, this, coupled with other recent legislative changes on the reduction of taxrelief on buy-to-let mortgages, could deter all but the most determined non-professional buy-to-let investors fromexpanding their portfolios he says.
Ray Boulger of mortgage broker John Charcol says that the idea of saving tax is so ingrained in the UK psychethat anyone even contemplating of purchasing a buy to let property will now look more earnestly in the next fourmonths.
As buy to let represents over 15 per cent of total housing purchases the tax changes are large enough to distortprices in an inelastic market. Buyers need to be careful price falls after April dont wipe out the three per centstamp duty saving they make by rushing to buy now he cautions.
Elsewhere in the industry there has been more anger and frustration at buy to let being used - once again - as acash cow for the Exchequer.
Now buy-to-let mortgage holders will potentially have to pay up to 15 per cent stamp duty on future
purchases and lose out on mortgage interest tax relief.The result? Fewer landlords will come into the market,there will be a lack of supply and rents will rise warns Jonathan Adams of London estate agency Napier Watt.
The other issue is that because the stamp duty hike wont come in until April, we could see a rush of landlordsbuying before then, further pushing up prices in the short term he adds.
This may deter one-off landlords, but is unlikely to put off the vast swathes of professional investors who enjoygood capital growth and promising yields. This new measure needs to be carefully monitored to ensure it doesnthave the unintended consequence of limiting lettings supply and therefore pushing up rents. Its also worthremembering that it doesnt make prices any more affordable for buyers it just penalises investors according toPeter Rollings of Marsh &Parsons.