Rush to beat the buy-to-let stamp duty hike

The big news last week was the Autumn statement piling the misery on to landlords. From April 2016 any property purchase for the purpose of buy-to-let will be subject to an additional 3% stamp duty charge.

With the average UK buy-to-let purchase of £184,000, that will mean a £5,520 increase in stamp duty. Here in Chichester, the average property purchase price is £348,741, meaning stamp duty is currently £9,237. From April 2016 this will increase to £16,699 for buy-to-let purchases.

Frankly, I’m getting a little tired of the landlord bashing from George Osborne and the wider public. Yes, there are some landlords who overcrowd their properties that aren’t fit for habitation, but this is rare. Most landlords abide by the 400+ pieces of legislation to provide safe and proper homes to those who aren’t in a position to buy.

The tax changes announced in the Summer budget and now the additional 3% stamp duty to new buy-to-let properties will reduce investment in rental properties. There is already a shortage of rental properties on the market and the new legislation will further limit the options available to tenants, which will ultimately increase rents.

People say the homes won’t just disappear if landlords don’t buy them but instead will be bought by an owner occupier. The problem with this is that many don’t have the (minimum) 10% deposit (£34,874 average in Chichester) nor the money left over for all the other fees to be able to buy.

There is also a growing number who choose to rent rather than buy. They do this for both financial reasons but also the flexibility it offers in not having to tie themselves to a particular property (without enduring the added time and expense of selling). 

As UK housing has returned an average 7% compound annual growth rate over the last thirty years, investment bank UBS doesn't think the attractive investment case will diminish with the additional one-off 3% stamp duty charge. It can also be partially offset against the capital gains tax when you come to sell the property too.

In the long-term, I agree that buy-to-let is still a strong investment if implemented correctly. The consistent lack of new properties being built in the country and continued strong demand from tenants means the 3% penalty charge will pale into insignificance in the long-term.

In the short term there could be a rush for those who were considering buying a buy-to-let to do so before the additional 3% fee comes into force in April 2016.

If you’re considering investing in a buy-to-let I’d advise you to start putting those plans into action. If you’d like some free advice and assistance in beating the buy-to-let stamp duty hike, please get in touch.

(This article was featured in the Chichester Observer's property section 

on 3rd December 2015).

Clive Janes, CRJ Lettings.  

www.crjlettings.co.uk

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