Buy To Let Overview
If you believe all you read in the recent press, the 3% Stamp Duty Land Tax increase for Buy-to-Let properties and second homes will only have a negative impact on the property market as a whole, but is this entirely true?
Politically, this is seen as a positive move, as it is perceived that Buy-to-Let Investors compete at the lower end of the market with First Time Buyers (although there is some dispute about how much this is the case in reality). Buy-to-Let Investors may, quite rightly feel that the Conservative government is gunning for them when this increase is considered alongside the July 2015 budget announcement of the tapered reduction in Buy-to-Let mortgage relief for higher rate tax payers. They attempt to provide high quality rental accommodation to satisfy a very real need, and yet appear to be pariahs in the eyes of the government.
After 1st April 2016, a property purchased as a Buy-to-Let will incur 3% more Stamp Duty. An average property acquired for this purpose might well be valued at £125,000, meaning an additional £3,750 in tax becomes payable. An investor would expect capital growth in 2016 to be similar to that of 2015 (6.2% source Rightmove blog) and income of about 5.38% (Rightmove). So in other words an investor will expect to see a total return of about 11.5%. The additional Stamp Duty burden should therefore take slightly over three months to be compensated for. This should be seen as a hiccough not a choking situation!
There has been increased activity from sellers who are anticipating that prospective buyers will effectively discount their purchase after April 2016 and pass the new cost on to the
Vendor. Similarly there will be pressure from purchasers on their solicitor to exchange contracts by the end of March 2016 in order to save on the new increase.
Until there are fundamental changes in the economy, either with a substantial increase in the number of new homes being built or a viable source of alternative investment, Buy-to-Let will remain a popular sector providing an important service, and many savers will continue to invest their capital in rental property. This may be particularly the case with the recent uncertainty in the stock market.
We see this as only a positive to the rental market and therefore the Buy-to-Let investor. If you are looking to invest in property, Complete Buy To Let a sister company of James Sellicks can help you acquire a new portfolio or manage an existing one with our wealth of experience and complete solution under one roof.
We listen • We Research • We Advise • We Finance • We Survey • We Acquire • We Let • We Manage ...allowing you to watch your investment grow. Call Richard Trustram Eve on; 0116 2854554