Buy-to-let outlook gloomy after stamp duty blow
12-25-2015
Faith Glasgow
Buy-to-let outlook gloomy after stamp duty blow
Forty per cent of letting agents are expecting the supply of rental property to fall over the coming five years, according to the latest survey by the Association of Residential Letting Agents (ARLA).
ARLA's monthly Private Rental Sector report finds members markedly more pessimistic about the outlook for the rental market, following chancellor George Osborne's announcement in the Autumn Statement that an additional 3 per cent in stamp duty will be payable on rental property and second home purchases with effect from April 2016.
The additional stamp duty means, for example, that a BTL property worth between £250,000 and £500,000 would be subject to marginal stamp duty of 8 per cent rather than 5 per cent.
On a £275,000 property this would work out at £12,000 (£125,000 x 3 per cent plus £125,000 x 5 per cent plus £25,000 x 8 per cent) rather than the current £3,750 - an increase of more than 200 per cent.
- Government warns of buy-to-let risks to economy
- North-south divide between residential rental yields and capital gains
- Stamp duty bills fall by £4,500
- Barclays increases buy-to-let lending restrictions
- Autumn Statement 2015: stamp duty blow for buy-to-let investors
CATASTROPHIC CHANGES
The proportion of agents predicting supply will decrease has jumped markedly since October, when it stood at 25 per cent.
'This month's findings are triggered by the chancellor's announcements around buy-to-let (BTL) tax in his Autumn Statement,' says David Cox, ARLA managing director.
'When the rabbit was first pulled out of the hat, we said these changes would be "catastrophic" for the rental sector, and this has been echoed by letting agents across the country.
'The new stamp duty increases will make owning BTL unprofitable for a lot of landlords, and certainly make new investors think twice about purchasing a BTL property.'
The chancellor has already dealt the buy-to-let market one body blow this year, with his announcement in the Summer Budget that tax breaks would be curbed on mortgage interest payments on rental properties.
In April, before the second Budget, the ARLA survey found that just 16 per cent of letting agents were anticipating a decline in the number of rental properties over the coming five years.