Our Principal solicitor, Neil Shearing reflects on Chancellor George Osbourne’s 3% Levy for Buy to Let
Stamp duty for Buy to Let investors and second home buyers will rise by an extra three percentage points from next April. I believe this could put pressure on BTL investors to increase rents to retrieve the additional purchase costs involved but may create a market whereby new BTL investors fall away to allow first-time buyers and wannabe homeowners to fill the void. In the lead up to April (when the rise takes effect from) there is the possibility that BTL investors will seek to sell off assets before purchasers (including investors) are affected by the rise. This could create a temporary hike in prices which could damage short term investments for first time buyers in particular.
Many of SLC’s institutional investment clients will be disappointed that new build projects have not been ring-fenced away from this rise in stamp duty. At a time when it seems the government is seeking to want to see more institutional investment in the lettings sector to safeguard against small and rogue landlords to protect tenants’ rights, this lack of ring-fencing for new build projects could potentially lead to a downturn in demand from the corporate institutional landlord market. In turn, this could damage the financial viability of many new build schemes by limiting supply and will not actually be conducive to the government’s own policy of expanding the rate of residential housing construction.
It has been an interesting last few years as the rental market has grown beyond recognition from what it was prior to the last recession. The UK has lagged behind other countries such as Germany and USA in the private rented sector and just as it seems that we might start to develop a similar, more institutional led private rented sector our Chancellor announces measures that may damage this progress. Government revenues will grow in the short term, but it may well be at the cost of a less inclined corporate world to invest in more affordable housing schemes. On the flip side, this could have the effect of keeping the private rented sector relatively buoyant whilst new build projects slow down limiting supply to first-time buyers. Six and 2 threes? Who would be a Chancellor?