In Nov 2015, George Osborne announced a stamp duty increase for buy-to-let properties and second homes – of 3% across all stamp duty bands. The new rates will apply for all investment properties purchased on or after April 1st, 2016.
For the 2 million buy-to-let investors in the UK, the news is disappointing, leaving landlords questioning the impact of the changes on their future property portfolio. Richard Lambert, chief exec of the National Landlords Association, commented: “The chancellor’s intention is crystal clear; he wants to choke off future investment in private properties to rent.”
The Buy2Let Shop raises the question: Just how much impact will this have on investors in real terms?
New Rates – Effect on Property Investment Opportunities?
From April 2016, all properties purchased as a buy-to-let or second home will incur an additional 3% stamp duty. The threshold will also change – to £40K. Here’s a quick breakdown of the new rates.
Why the Increase in Stamp Duty?
According to Osborne, the decision to raise stamp duty is to support those who are being “priced out of home ownership”. He claims that the additional revenue generated will raise “almost a billion pounds by 2021”; which the government plans to reinvest in local communities in London and places like Cornwall, where second-home ownership is relatively common.
However, whilst many acknowledge the need to support first-time buyers and ensure properties remain affordable, not many buy-to-let investors agree with the chancellor’s decision. As mortgage lenders Paragon state: “The creation of buy-to-let has very much been a force for good. It has helped to shape a private rented sector that is fit for purpose and provides choice, value and flexibility for tenants.”
By placing pressure on buy-to-let investors, Osborne may be inadvertently impacting tenants in the future; making it less easy for them to find homes to rent.
Implications – Buy-To-Let Property for Sale
Fortunately, the rental market is still buoyant, with around 4 million people living in rented accommodation in the UK. For many individuals across the country, purchasing a home simply isn’t an option for financial reasons – and of course, numerous students and young professionals actively seek rented accommodation. This is welcome news for investors. As long as demand is still high, there are still benefits to investing in UK property on a buy-to-let basis.
Of course, the hike in rates will carry financial implications, but the initial expense should be counter-balanced by an attractive rental yield. However, it’s more important than ever to invest in the right property, in a good location, to ensure a healthy return on investment.
The Buy2Let Shop
As the UK’s leading estate agents for investment properties, The Buy2Let Shop are on hand to help you to develop your property portfolio. If you have any questions about the stamp duty increase, or want to find out more about investment opportunities in your area, simply get in touch today, or book your place on one of our property seminars in London.