A change in Stamp Duty leaves the property market in uncertainty
George Osbourne has announced that from April 2016 buy-to-let landlords will have to pay a 3% additional across all stamp duty bands. Though this has huge impacts across the property market, buy-to-let investors are affected mostly by the change. For example, someone buying an additional property worth £150,000 will pay 10 times more in tax after April 2016 than they currently do.
Below are some of the most likely outcomes that will occur as a result of the increase.
Long term fall in prices
An increase in tax will result in properties becoming more expensive. This could trigger a surge of sell-offs from owners who are looking to avoid the additional charge. Investors may decide to re-evaluate the attractiveness of the residential market which may mean properties will be worth less. This is due to potential landlords and homeowners not willing to pay as much for them in the long term.
Short term rise in prices
As people rush to buy before the higher stamp is implemented, it could mean a soar in prices in the short term. Those who have been considering investing in property could now decide to fast-track their plans. This could mean that over the next few months and before April 2016, a large amount of investors will enter the market to make use of the cheaper tax. It has been suggested that more than 50,000 people may try to complete buy-to-let purchases before the higher rate of stamp duty kicks in. As a result it would mean a higher demand, hence increasing property prices in the short term.
A disadvantaged tenant
With a higher cost for investors it means that they are likely to pass the cost on to their tenants either in the form of higher rent or through a lower quality property. However the Government does benefit as the rise in rates will bring in almost £4 billion in increased tax income by 2021.