With the recent release of the Autumn budget, the property market has been hit by another SDLT shockwave.
As of April 2016, Stamp Duty Land Tax will be 3% higher for buy to let investors and second homeowners. We understand that commercial developers and corporate investors are to be exempt from this hike.
What does this mean in money terms?
Let’s say Dave decides to purchase a buy-to-let investment flat for £1 million in January of 2016. Dave has a £43,750 stamp duty land tax bill, which is an effective rate of 4.375%.
If Dave decides to purchase the same buy-to-let investment in May 2016 for £1 million, his stamp duty land tax bill will be £73,750.
If Dave was buying more expensive properties, these SDLT bills get a lot higher very quickly!
The changing face of investment
To those in property, it is clear what Government is trying to do; making housing more affordable for end users. It became evident that Government was shifting the burden of delivering more affordable homes from their desk, to that of developers with incentives such as the build to rent scheme.
If you twin this with the quashing of rising prices in the Prime Central London due to the December 2014 SDLT reform, the changing of taxation on off-shore entities that own UK property (now having to pay Capital Gains Tax, Inheritance Tax and Annual Tax on Enveloped Dwellings unless rental investments) it becomes apparent that Mr. Osborne is trying to help the everyday home buyer.
Overseas investors have become the collateral damage in this 11 month shake up.
What does the crystal ball say?
The market wil have to adjust and vendor expectation will have to come down to meet that of the buyer. How this normally happens in the prime areas is that sellers hold on long enough, sometimes years and then the seller”s and buyer’s price expectations meet.
The Market has reached a point were transactions will drop dramatically, as one agent put it “The market has gone into a temporary coma!”
Often at times like these opportunities also present themselves so if you are a long term player start looking!
Transactions will be driven by “necessity purchases” and the overseas investors will continue to buy properties for the future of their children and the diversification of their investment portfolios.
Investment in residential property will shift to instituitional and corporate investors who will buy rental investments for medium to long term. When these portfolios change hands the tenants will not be affected. Quality of rentals will improve as will security of tenure.
Property flipping and unjustified hikes in prices will stop.
Markets always find a way and so will this one.
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