Maybe it was all an April Fools’ prank from George
Osborne, but assuming that isn’t the case; why might the 1st April
2016 go down as a particularly unhappy day for many?
I am of course talking about the additional 3% stamp
duty charge for second homes and buy-to-let purchases, which comes in to effect
from tomorrow.
It was only in the Spring Budget a couple of weeks
ago that some of the previously unanswered questions were addressed, but still
the new rules drag many into paying the additional charge that you might not
expect. Some parents helping their children on to the ladder as well as those
with second homes anywhere in the world will be penalised whenever they move
home.
As for landlords, they will have to pay the taxman
an additional £5,520 if buying the average priced (£184,000) buy-to-let
property. Meanwhile, here in Chichester, there will be an additional £10,132
stamp duty to pay on top of the £6,887 already due, based on an average
property purchase price tag of £337,736 locally.
The question remains as to whether we will see
prices drop by 3% to absorb this tax increase or whether owner-occupiers will take
up the reigns whilst investors simply have to take it on the chin?
Some say that in a years’ time it will simply be
the norm and that in the scheme of things, a 3% one-off charge will pale into
insignificance over the long-term (it’s taken just four months for prices to
increase 3% in Chichester).
I however question whether there is enough demand
from owner-occupiers in Chichester who have the (minimum) 10% deposit (£33,774 average
in Chichester) to replace these investors. This, at a time when we have seen the
proportion of private renting in Chichester increase from 8.5% of households to
12.8% in a decade (which is still below the national average).
The real sting in the tail that I fear many will
face tomorrow due to this legislation will be the sudden collapse in their
property sale or onward purchase. Having spoken to local estate agents and
solicitors, there are many sales agreed with the caveat that it either completes
by the 1st April or the buyer will pull out.
There could be a lot of vendors unwittingly affected
by this, either directly or indirectly by a transaction elsewhere in the chain
that could scupper proceedings. I think there will be a spike in properties
coming back on the market, which could yet offer a glimmer of hope to those
looking to buy.
If, on the other hand, you have just completed on a
buy-to-let purchase before tomorrows ‘deadline’ and are now looking for tenants
or someone to manage the property for you, please get in touch to see if I can
help.
(This article was featured in the Chichester Observer's property section
on 31st March 2016).
Clive Janes, CRJ Lettings.
www.crjlettings.co.uk
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If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.
E-mail me on clive@crjlettings.co.uk or call 01243 624 599.
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