As expected, the Chancellor today confirmed additional stamp duty of 3% will be applied to purchases of second homes, including buy-to-let properties, from April 2016.
Although the industry saw these changes as a given since their announcement back in November and has prepared itself, it was only today that final confirmation arrived as part of Chancellor George Osborne’s eighth budget and with an added sting in the tail for professional investors.
Today’s announcement confirms that not only individuals will be penalised through additional stamp duty, but professional and institutional investors with portfolios of more than 15 properties will also be hit with the surcharge for additional purchases, even though in initial proposals they would be exempt.
It was also announced that higher rate Capital Gains Tax would be cut from 28% to 20% from April 2016, but again the property sector was singled out for penalisation with gains from the sale residential property (not including main homes) subject to an 8% surcharge, meaning pretty much a status quo.
These new measures, along with the gradual phasing out of mortgage tax relief on buy-to-let properties by 2020 will no doubt have a knock on effect in the private rented sector and may see rents rise as a result.
Although simpler and more attractive ways for the next generation to save for a deposit have been welcomed along with proposed reforms to try and speed up the planning process, the budget has failed to address many key issues with the shortage of not just affordable, but overall housing throughout the UK.
The Government states it supports home ownership for everyone, but by aggressively targeting both the private landlords and institutions who provide a high number of good quality homes in to the private rented sector, they may actually force increases in rents as landlords try to offset their additional tax liabilities, putting increased financial pressure on those in rented accommodation trying to save a deposit for their own home.
Not only this, but by making buy-to-let less attractive to would-be landlords, fewer new properties will find their way in to the rental market, creating a potential shortage and another possible cause for increasing rents as a result. Although the Government’s desired effect through the punitive taxation of existing landlords is to perhaps encourage them out of the market to free up stock levels, it may have the opposite effect and encourage them to hold on to properties so again constricting supply of property to the sales market, potentially driving prices further upward as a result.
This, along with no definitive plan from the Government of how to actually fund and build more much needed housing for first time buyers and those on lower incomes leaves many questions still to be answered and an overall feeling of disappointment from all corners of the market.
For an overview of the announcements made in today’s budget by the Government, click here