Stamp Duty changes ahead for Landlords – explained
While acting as a landlord has been considered a viable way of bringing in additional income in recent years, various changes in recent times have made it a less than attractive proposition for some people. In the Spending Review and Autumn Statement issued in November 2015, many landlords will find that changes to the rate of stamp duty will reduce the benefits of being a landlord.
Some experts have referred to the latest change as being “the final nail in the coffin” for the buy to let market in the United Kingdom. The change will see an additional 3% points added to the rate of stamp duty. This will come into place from April of 2016 and it will apply to people who already own property who are looking to buy additional property. This will have a big impact on the amount of money that people will have to spend in order to buy a home. This of course will have a knock-on effect on their ability to make a return on their investment, given that the cost of the property and the level of expenditure a landlord outlays will impact on their rental yield.
This change will see the tax due on a £250,000 property rise from £2,500 to £8,800 for a landlord who already owns property. A landlord buying a property valued at £350,000 would find themselves facing an increase of over £10,000 with respect to the tax that they owe. This means that there will be an impact on the market after the changes come into play in April, but of course, it is also likely to have an impact on the market between now and then.
If people were contemplating entering the buy-to-let market, it is likely that they will now want to do so before the increase in stamp duty takes place. This means that there will be more people looking to buy, which will impact on the level of demand in the market place, which could see prices rise as potential landlords will be looking to snap up property for a lower level of outlay.
There is also a lot to be said for the fact that the impending changes may convince some people to try and sell now. If people want to buy now as opposed to buying later, there will be better market conditions for people selling property at the current time, so this could lead to a higher level of supply of property between now and April. It may be that the changes in supply and demand will balance out to leave house prices at a similar level as to what they are now, but there is likely to be a greater volume of property sold between now and April.
This will be a boom period for estate agents and it could lead to the market being more buoyant than it normally is during the festive period. The housing market in the UK is more active in the winter than it used to be but these impending changes may see people decide to buy or sell now while the conditions are more favourable for them.
The changes in stamp duty have been undertaken to prevent landlords from snapping up homes and pricing would-be buyers out of the market. This is a noble suggestion but there are concerns that the potential buyers aren’t actually available at the moment and that renting is the only option for people. This ultimately means it could be a move which has a negative impact on landlords and tenants.