Surveyors expect buy-to-let investor demand for UK residential property to increase ahead of stamp duty changes, which arescheduled to come into effect in April 2016.‘Stamp duty’ is a tax that the UK government charges on property and land sales that eclipse a certain threshold in England and Wales. At present, buyers must pay stamp duty on residential property sales worth at least £125,000 and non-residential land or property deals worth at least £150,000.
In the 2015 Autumn Statement, UK Chancellor George Osborne announced changes to stamp duty rates. He said that from April 2016, buy-to-let landlords and purchasers of second homes would have to pay an additional 3% surcharge on each stamp duty band, when buying a residential property in England and Wales.
A new survey from the Royal Institution for Chartered Surveyors (Rics) shows that buy-to-let landlord residential property purchases are expected to climb ahead of April 2016. The poll of Rics members found that new buyer enquiries rose for the tenth month in a row in January 2016, accelerating for a second successive month.
Also, 74% of Rics members expressed the belief that buy-to-let landlord residential property purchases will rise in the months before April of this year. Furthermore, 27% more Rics agents expected UK house process to increase in January 2016 than those who believed they would remain stable or fall.
Rics suggested that these findings show that increasing buy-to-let landlord demand for residential property ahead of stamp duty changes will raise average UK house prices and rents.“The near-term pressure on prices is if anything intensifying despite a higher level of supply,” said Rics chief economist Simon Rubinsohn.
“How the tax changes planned for the buy-to-let sector over the next few years play out remains to be seen but there are concerns raised in the survey that some existing landlords will look to either gradually scale back on their portfolios or exit the market altogether as the more penal regime begins to bite. Against this backdrop, it is perhaps not surprising that the key Rics indicators points to further rent – as well as house price – increases” continued Rubinsohn.
Figures from estate agents Rightmove support this theory. They found that average house prices in England and Wales increased by 2.9% in February 2016, to reach £299,287. Also, Rightmove reported a 5% rise in the number of new residential properties coming to the market in this period when compared with the year before, but this varies according to region.
“January has seen a huge jump in demand that has surpassed the normal seasonal increase… Undoubtedly, this is partly fuelled by investors looking to take advantage of a quick purchase before the tax change in April and sellers looking to secure a sale to an investor who is panic buying” commented Robert Scott-Lee, Managing Director of Chancellors estate agents.
The National Landlords Association suggests that the situation will reverse once the stamp duty changes come into effect. They estimate that it could lead to 500,000 UK rental properties being sold in the coming year and an additional 100,000 being sold per year until 2021. The trade body found that UK landlords looking to sell their properties have risen from 7% to 19% since July last year.
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