5 Jan

Landlords – Big changes to stamp duty are almost here.

Landlords – Big changes to stamp duty are almost here.

What does this mean for you?


There is no dispute that there is a growing crisis of home ownership in our country. Fifteen years ago, around 60% of people under 35 owned their own home; next year it’s set to be half that.

With this fast paced trend and upward pressure on property prices in mind it may well be that George Osbourne has caved in to pressure groups such as ‘Generation Rent’ and looked to slow (or perhaps reverse) the surge of the by-to-let investor who could be seen to be pricing out would be first time buyers from aspiring to own their first home.

From April 2016 a 3% stamp duty supplement (for the entire property value) will be charged on top of the current residential stamp duty (revised 1st February 2015) significantly increasing the costs to buy-to-let investors for the acquisition of new properties to their portfolios. This is applicable for all second homes and/or those brought for buy-to-let purposes.

It seems it is the chancellor’s rationale is to try and halt a surge in buy-to-let investments over the last 12 months where lenders report that buy-to-let mortgages have jumped by 36%, compared to a 10% increase over the same period for first time buyer mortgages. Ironically this investment boom may well have been partly fuelled by the early access to pensions that the conservative government brought in last year. Osbourne claims that this new surcharge on stamp duty will raise £1 billion for the Treasury by 2021.

The tough news for landlord’s sadly doesn’t end there. Not only will prospective landlords have to pay far more than conventional residential buyers, they immediately face much heavier taxes on profits. Maximum tax relief for investors will drop from 45% and 40% to just 20%. These changes are clearly going to have a profound effect on the after tax profits available to investors. Some investors will reluctantly stomach a smaller yield with house prices forecast to rise in 2016 by 6% (source RICS) so a significant capital gain may just be the real inventive to keep them in the game. On the other hand, the buy-to-let prospect is already a less appealing proposition and other investment vehicles may start to be considered above bricks and mortar.

As much as this is worrying news for landlords, ironically it is equally gloomy for those renting these properties.

The chronic lack of supply of housing is not solely a symptom of the current sales market, it runs true in the rental market also. This last year we have seen landlords spoilt for choice when it comes to re-letting their properties, able to cherry pick the very best fit for their properties often from multiple applications.

Demand to rent in 2015 has been nothing short of unprecedented and it is not unusual for us to see more than a dozen enquiries for new rental properties that come to the open market, immediately upon launch. With less landlords forecast to enter this sector we will see an inevitable increase in rental prices. Homelet report that in 2015 rental prices were (averaged across the UK) 7.6% than the previous year – it’s a worrying trend fuelled by a lack of supply, ironically about to be squeezed even further.

Short-term we are already seeing upward pressure on house prices from prospective landlords looking to complete before April 2016. Longer term we may well see a decline in investor activity but whether this will result in the government’s aim to give more opportunities to first time buyers and increase home ownership in the UK remains to be seen. Whilst welcomed by these hard-done-by youngsters, those currently in the rented sector may well be in for a tough time, especially when it comes to their next move.

Darryl Stanley

Essex Country and Village Homes
01206 589109

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