Yet another blow to Buy-To-Let investing
The recent Autumn Statement appears to have delivered another hammer-blow to Buy-to-Let investing, as it introduced an additional 3% Stamp Duty on second and buy-to-let homes from 1st April 2016. We do not have the finer details as the government will consult, but there have been suggestions of exemption for corporate owners and investment funds with more than 15 properties.
Reactions from landlords has been consistently hostile, with a leading article in the Saturday Telegraph Money section suggesting that all landlords with little history in letting will give tenants notice and sell up, (http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12020298/One-in-three-Tory-MPs-own-buy-to-lets-but-theyve-wrecked-it-for-everyone-else-say-landlords.html).
On the Property 118 forum, (www.property118.com), there were 16,500 readers and 123 comments in four days on one thread, http://www.property118.com/spending-review-2015-3-increase-on-stamp-duty-for-btl-and-second-homes/82625/, and none of the comments appear to be supportive!
For anyone contemplating Buy-to–Let as an investment strategy, there are two possible reactions, purchase now hurriedly to avoid the Stamp Duty increase or wait and see. A little more thought suggests a few more possible approaches;
- Go corporate, as this appears to be the governmental direction of travel, either by investing in an existing property company or set one up.
- Join a collective investment scheme.
- Change investment strategy
For an existing landlord, the choices are starker, more complex and more personal. With the previous change to the treatment of mortgage interest payments already on the way, some landlords were contemplating selling up or transferring all of their property holdings to a limited company, which is likely to cost a great deal in professional fees, Capital Gains and Stamp Duty Land Tax.
For all landlords, a rise in rent will be almost inevitable in the short term, but the medium and long-term aim is likely to be pay off mortgages and hold the existing stock, if it is profitable, or sell off their holdings in an orderly manner. For sitting tenants, these will be interesting times, in the Chinese curse meaning of the phrase.
The stated aim for George Osbourne was to change “Generation Rent” to “Generation Buy”, by increasing the supply of new houses, apparently choking off the demand from small buy-to-let landlords, and increasing the subsidies using “Help to Buy” and more shared ownership. Whether this works over time we will only find out by experience, but Mr Osbourne appears to have alienated a section of Middle England that would normally be his staunchest allies.
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