Posted: Wednesday, March 30, 2016

Stamp Duty changes: How will they affect you?

The recent budget confirmed that an additional 3% of Stamp Duty will be introduced on second homes, in an attempt to curb the growth of the private rental market. But what are the potential implications, especially for the vast majority of homeowners for whom purchasing a second property is a faraway dream? Marcus Whewell, CEO of The Guild of Professional Estate Agents, explores the possible outcomes.

The immediate impact has been to accelerate investment in so-called ‘Buy To Let’ properties, with a rush to complete before the new tax comes into force. Surprisingly, this has affected homes and flats up to £1.5m in value, not just those at the lower end of the price spectrum.
The UK is already suffering a severe shortage of new instructions (with buyer to vendor ratios at record levels), so the immediate impact will be to push up asking prices and limit availability for the remainder of the residential market. But what is likely to happen in the medium term?

I believe that the market for ‘Buy To Let’ is unlikely to fundamentally change, for several reasons:

-    Despite the tax, yields on rentals remain on average higher than other investment options such as ISAs.
-    Rental investments are perceived by many as ‘less risky’ than shares, commodities or pensions.
-    House prices are likely to continue to rise faster than inflation, given the long-term imbalance of supply and demand, so equity growth is also highly likely.

If you are a Buy To Let Investor…
When the cost of buying a private rental property increases, rents would normally follow suit as landlords seek to maintain their margins / returns. For that reason, one likely effect is a rise in prices and rents. Also, many larger landlords (i.e. those with more properties) may now try to incorporate themselves to avoid the extra stamp duty.

Longer term, there are other measures being introduced to deter this sector of the market, such as no longer allowing the offsetting of mortgage costs against rental income for tax purposes. This might put off investors, or again just nudge up rents, but it’s difficult to say at this stage.

So the long-term trend looks unaltered, but you may need to keep hold of your investment for longer to recoup the additional taxes.

If you are a first timer buyer…

The extra ISA and saving allowances will help those saving for a deposit, but this could easily be cancelled out by higher rents or continuing house price rises. In fact, the latest statistics from ONS show that there has been an 8.6% rise in property prices in the last 12 months in England. Therefore, on first analysis, it seems there is little here to assist the aspiring homeowner.

Overall, what is really needed to make a fundamental difference for the first time buyer is an expansive, affordable housebuilding programme.
 
Or an existing homeowner looking to move…
You are probably the least affected of all the groups. Purchase prices may nudge up a little, but so in the majority of cases will the value of the home you are selling.

Fundamentally, barring some significant external shocks from the forthcoming Euro referendum (another story), residential property will remain in short supply against rising demand (growing population, smaller family units. people living longer, people less willing to downsize) – so buying a house, in many people’s eyes, remains ‘a one-way bet’.

The one caveat here is potential interest rates rises. Rates are unrealistically low and many mortgagees have no significant ‘rainy day’ savings, especially as they are already stretching their finances to secure the property of their choice. It has been estimated that current rates are between 1% and 2% below long-term sustainable levels, and the unwinding of quantitative easing may start this correction process.

So a summary could easily be that the Government has decided to collect some relatively ‘easy money’ to try to help balance the books - but it has missed the fundamental flaw in the property market. To adapt a famous phrase, ’it’s the supply, stupid!’.

Looking to buy?

Looking to buy?

We'd love to help you on your journey home.
Don't miss out on on the latest properties by registering for our property alerts.

Register with us today

Read What Our
Customers Say

I can't speak more highly of the team at Homesearch. When I met Michael to discuss the sale of my home instantly from that meeting, I could tell how knowledgeable they were. From that moment until closing, everything went absolutely flawless. This experience of selling went without a hitch with them giving great tips on preparing my home for viewings. Thank you. I really appreciate all your help during this process. I highly recommend Homesearch to any person who is looking to sell their home or buy a new home.

Loretta Barrett, Seller

I started with two very well known real estates, but I hated it. I was simply another number to them and I didn't feel they were honest and transparent. With HomeSearch I felt comfortable that they were on my side and they were always available to help. The process is hard enough, so having a team who supports you can make such a difference. Highly recommend.

Arian Barvarz, Seller

The reason we chose Homesearch to sell our property was that we liked the straightforward, no-nonsense approach of both Anna and Michael. They gave an honest appraisal of our property and a clear idea of what we could expect to sell it for. In fact, the offer we accepted exceeded our expectations. The sale took longer than we would have liked, due to delays caused by the buyers' solicitor, but Michael was tenacious and must have worn his phone out keeping everyone informed of progress.

Nicola Watson, Seller

Homesearch are hands down the best agent I have ever worked with ! The team helped me in an extremely complex sale. Without the knowledge and experience of the whole team, my sale would not have completed. I dont normally write reviews, only when they are truly deserved. An exceptional team! Very kind and personable, reliable & trustworthy.

Leslie John, Seller

My experience with Homesearch is that they are professional, friendly and go above and beyond to ensure that something stressful like selling a house runs as smoothly and stress free as possible. They work hard to get the results and have kept me updated throughout the process. I honestly could not recommend them enough, they are easily the best company I’ve dealt with in the buying/selling houses field. And to top it all off, they always answer the phone in the most pleasant tone and always provide service with a smile.

Chanelle Hunte, Seller

Homesearch are PROFESSIONALS. I sold my property through Homesearch and I have not dealt with a more competent agency. Every single person  dealt with knew exactly what they were talking about and I can tell that they all have knowledge in the industry and were not just picked up from the street. From the get go I was impressed and I will certainly do business with them again.

Paul Hobbs, Seller

Many thanks Homesearch for locating professional corporate tenants for my property. I am very happy with your property management service as you always ensure that the tenants give the property back in good order at check out. Five Stars!

Maria Foran, Landlord

I have been absolutely delighted with the exceptional service I have received from Homesearch. They have removed all the stress & hassle of renting my property and dealt with all manner of situations I would have struggled with in such a professional & courteous manner. They give valuable unbiased advice with such a wealth of experience. Nothing is ever too much trouble for the staff, who are always friendly & helpful. Homesearch let and managed my property and I am very happy with their property management services, they are very knowledgeable.

Paula Carter, Landlord

Homesearch always do what they say they will do. They are efficient and raise any issues early and provide options to resolve them. Homesearch is very  easy to get hold of and talk to, no matter where I am in the world! My property is well looked after, regarding tradesmen, replacement of items swiftly etc. with the minimum of fuss.

David Connells, Landlord

From our first viewing right through to the present, Home Search were brilliant. They helped make the whole process quick and stress free and even now we are in and settled, they are still happy to assist us with any queries we may have. We couldn't recommend them highly enough.

Julie Maney

Home Search helped us move into our new flat smoothly and Tim was always happy to provide help to put our nerves at ease. Arranging a viewing was easy and Home Search were happy to open after hours for us to sign the paperwork. They were very helpful and often would offer to help! Having moved in we received a lovely card and they have always been swift in communicating with Usif we have any questions. Would recommend it.

Will Houghton

Michael and his team were simply amazing!! They helped us to find the perfect house, offering a nice and attentive service from the beginning through to the end. Thank you so much!! 5 stars service. Highly recommended!!!

Giordana Sicali

Very helpful and friendly staff. Tim, Michael and the team Made the whole renting experience easier.

Amol Sinare

I had a very difficult situation as I did not have a guarantor and my dad was earning enough but was not a homeowner. It took a about 3 weeks but Michael sorted it all out in the end and my dad became my guarantor. I got a lovely home and all the staff were very helpful including Paris, Zainab and Tim. Thank you all very much! Would recommend them to anyone

Misti Chakraborty

On behalf of myself, Noa & Niamh, we would like to start off by saying a massive thank you for the amazing service Home Search Ltd provided us with, especially highlighting the work of Clorissa. Within a week we were able to sign, seal and move into the property that we looked at, all down to Clorissa's prompt and effective work ethic, which allowed us a smooth transition from one property to another, without her, this move would not of been possible to have happened within the time stamp that it did. We are very grateful for the work that was done by Home Search Ltd, highly recommend.

Lewis Francis
How Much is Your Property Worth?

Expert Valuation

We always come armed with evidence and statistics of why we are pricing your property a certain way. We know the importance of getting the initial price of your property right, first time. With our extensive experience we will also explain current market conditions as we want to get our sellers the best price.

What's more, get a free gift with your free expert valuation with one of our experienced Valuer's.

Book a Valuation