Stamp Duty rise kicks in on April fool's day - but will the joke backfire on the BTL sector?
Tuesday 29 March 2016
As the new stamp duty reform is introduced on Friday 1st April there are growing concerns that the changes will backfire and have the opposite effect of helping people on to the housing ladder. Article by Simple Landlords Insurance.
Like a lousy April Fools’ joke without a punch-line, George Osborne’s new rules on stamp duty will kick in this Friday - April 1 – with an additional three per cent surcharge on second homes.
There are growing concerns that the so-called reform will backfire and have the opposite effect of helping people on to the housing ladder as increased costs force some landlords to cut their losses and sell up, while others will simply raise rents.
Members of the Association of Residential Letting Agents (ARLA) predict the reform of stamp duty will not only push rents up for tenants, but also pull down the overall number of homes available for rent.
In the last month, just over half of ARLA’s members (52 per cent) have seen a rise in interest from potential BTL investors hoping to snap up properties before the stamp duty deadline – a figure which has risen by 5 per cent since January.
But over 60 per cent of members believe supply will fall as landlords are discouraged from investing, while 57 per cent think rents will go up after April 1.
Around 75 per cent of letting agents in London expect rents to rise as landlords pass on the increased costs.
'The changes will affect small landlords and institutional investors alike'
David Cox, managing director of ARLA, says the changes will affect small landlords and institutional investors alike.
Despite the current rush of landlords looking for BTL investments, he predicts the market will plunge after the April deadline, and doesn’t expect to see it revive until 2017.
He believes competition for the smaller number of available properties will intensify – and this claim is supported by the figures:
Last month demand for rental properties rose by almost 20 per cent, with an average of 37 prospective tenants registered at each member branch – the highest level since February 2015, when each branch had an average of 40 tenants registered.
And as demand has grown, the supply of rental properties on letting agents’ books also rose from 172 in January to 176 in February.
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