From midnight tonight the Stamp Duty Land Tax 3% surcharge kicks in on purchases of second homes – including on those deals that have failed to complete in the nick of time.
Meanwhile there has been a flurry of last minute warnings – as well as a finding that landlords are unlikely to be shaken or stirred.
The Nottingham Building Society released a study showing only 14% have decided against adding to their portfolio or entering the buy-to-let sector.
Most have not changed their plans and still see investing in property as part of their retirement planning.
However, ARLA managing director David Cox said: “We’re about to see supply nose-dive, demand sky-rocket and rent prices go through the roof. The new Stamp Duty charges are set to push the private rental sector into a state of despair.
“Back in November, when the Chancellor announced an increase in Stamp Duty tax on buy-to-let properties, we called this a huge kick in the teeth for the private rented sector.
“The news that larger investors will also have to pay the tax comes as an even bigger blow.
“Professional landlords, who normally own more than 15 properties, are crucial for providing the market with rental stock.
“As a result of the rising costs involved, we are very likely to see the new tax discouraging landlords from investing in properties, which will of course mean supply falls.
“Something urgently needs to be done to make the prospect of being a landlord appealing again, or the vicious cycle of supply and demand is only going to get worse and worse.”
Robert Pullen, tax manager at accountancy firm Blick Rothenberg, said that the new surcharge would affect individuals who were not the Chancellor’s main target, including parents buying property for their children, and owners of properties overseas even though ownership of a foreign property has no bearing on UK housing stock.
Pullen said that while there is a 36-month period in which someone who has bought a second home can sell their first, they will still have to pay the surcharge before being able to reclaim it.
He warned: “This creates a major cash-flow problem that could result in individuals having to take high-cost bridging finance.”
Separately, LendInvest, an online marketplace for property, says that landlords in London and the south-east will need the equivalent of at least 20 months rent to repay their higher SDLT bills.
It said landlord purchasers in 13% of the country will be paying SDLT for the first time.
Christian Faes, CEO of LendInvest, said: “The Stamp Duty hike spells bad news for landlords – and their tenants.
“Put simply, when taxes rise, someone has to pay.”
I dont agree with the predicted rise in rents, people can only afford to pay what they can pay – they are on the brink as it is with the rental cost in a lot of areas more than half of their salary.
I predict that the current rental prices will need to see a reduction to get them moving – and house prices will stablilise as a result of this – if rentals increase people will relook at the option of buying instead as it could work out a better deal, therefore we could see a flooding of rental properties on the market where landlords cannot reclaim their SDLT costs. I believe there needs to be some sort of regulation for rentals to prevent landlords charging ridiculous rents for average properties.
The whole issue of SDLT has only come about since private investors have taken their money out of stocks and put it into property – these people are investors not landlords, we need to be careful not to get the two mixed.
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‘Regulation for rentals’? So, I wonder who would decide how much let’s say, a two bedroomed flat in Clapham should cost to rent?
Supposing The Regulator said it should be £1250 pcm and the landlord had 150 applicants, how would the landlord decide on who should have it?
Would it be perhaps decided by drawing lots, maybe the best looking tenants would get it? Perhaps the landlord could organise a 100 metre sprint and the first past the post would get it? Problem with that though is you would certainly get very fit tenants but they might not be able to afford the rent.
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