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Buy-to-Let Stamp Duty Announcement Hides Immigration Issues
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Letting agent Martin & Co has spoken out to instil confidence in the property industry after a shocking announcement during last week’s Autumn Statement.
On Wednesday, Chancellor George Osborne revealed that buy-to-let investors would soon pay an extra 3% Stamp Duty on property purchases. Read more here: /btl-homes-hit-with-increased-stamp-duty/
Buy-to-Let Stamp Duty Announcement Hides Immigration Issues
However, Osborne claimed that the extra charges would not hit larger rental firms, such as investors in the build-to-rent sector.
The Association of Residential Letting Agents (ARLA) described the move as a catastrophe.
But Ian Wilson, the Chief Executive of the Property Franchise Group – the trading name of Martin & Co – says this reaction is “overblown”.
He also claims that the changes have helped hide bad news on immigration.
He says: “While admittedly an unwelcome move for letting agents, we believe current thoughts as to the severity have been greatly exaggerated.”
He adds that the Chancellor’s intervention in the industry was unexpected: “It comes at a time when the buy-to-let market is working extremely efficiently and we believe this move has been announced for political rather than economic reasons.
“Lending in this market is at record post-credit crisis levels, with over 1,000 buy-to-let mortgage products available, and about 20% of the population is now housed in the private rental market.
“The day after the Chancellor’s announcement, it was revealed that the Government had once again missed its target to reduce net migration into the UK and the latest figures were at a new high, with 336,000 people added to the UK population over the year.”
Wilson has found that all the factors supporting buy-to-let growth remain strong, including high net migration and affordability.
He believes that total returns from buy-to-let will continue to exceed other investments, including pensions, “and have the psychological and emotional advantage of being an easily understood, tangible asset”.
However, he says that the increase in Stamp Duty will affect how much investors are willing to pay for a property; “this will have a dampening effect on appreciating house prices in some sections of the market”.
He continues: “One may argue as a consequence, that buy-to-let purchasers could be outbid purchasers for owner-occupation, e.g. first time buyers.
“However, we believe buy-to-let purchasers will continue to be better placed to bid/complete on these properties, given that they typically have more cash to inject and less restrictive buy-to-let mortgage conditions, meaning that there is greater certainty of the sale completing.”
Wilson also states that a Stamp Duty rise is the “lesser of evils”.
He says: “Given the Government’s new-found desire to promote homeownership, we believe that higher transaction costs are significantly less severe than other potential regulatory levers, such as restrictions on buy-to-let lending or rent controls.
“In the short term, we would actually expect some benefit to the buy-to-let market, as we would expect prospective investors to bring forward purchases to before the April 2016 deadline for these changes.
“There is also the interesting possibility of tax engineering by creating corporate vehicles, such as Real Estate Investment Trusts, to own larger numbers of properties and escape both the extra Stamp Duty and the taper reductions in mortgage interest relief.”1
Will you be buying any more properties before the Stamp Duty changes are enforced?
