Tax hike for property investors: how will it affect north Londoners?
- Credit: PA Archive/Press Association Images
Property investors will have to pay an additional three per cent in Stamp Duty, equating to thousands of pounds more than those buying property to live in in changes announced by George Osborne in the Autumn Statement from April 2016
The changes will come into effect from April 2015 with revenue raised spent on increasing ‘affordable’ home ownership, including funding the new Help to Buy Equity loan in London.
Anyone buying a second home or a buy to let property will have to pay three per cent of the price of the property on top of the existing Stamp Duty charge for that price bracket.
The increase means that many non-corporate buy to let investors will have to pay more than twice as much tax as potential owner occupiers, especially at lower price brackets.
For example buy to let investor buying a £150,000 property must currently pay £500 Stamp Duty. From April, this figure will be £3,800 as the Stamp Duty rises from two to five percent.
At £450,000, the figure would rise from £12,500 now to £24,800 in future.
You may also want to watch:
Some commentators say that the delayed introduction of the increase may lead to an immediate surge in interest in second homes, but over the longer term transaction levels are likely to dwindle.
Buying agent and property pundit Henry Pryor said: “We’re potentially going to see a spike in transactions between now and April when the new tax is introduced.
- 1 Haringey Council leader ousted by rival in Labour group vote
- 2 Hampstead man jailed for pub 'revenge attack' on Jewish Tory barrister
- 3 Camden’s recycling rate has fallen – and this rubbish is now urgent
- 4 Revealed: The five most polluted places in Camden
- 5 Obituary: 'Striking and beautiful' north London mother Mary Collins
- 6 Hundreds oppose Hampstead Heath dog walker licence scheme
- 7 Vagina Museum reopens with the history of periods
- 8 Three men charged after police officer injured in traffic stop
- 9 Masks scrapped 'as early as next month' and over 35s jabs 'soon'
- 10 Planning application nears for Murphy's Yard redevelopment
“However, those who were thinking of making a purchase may already offer less now than they would have done previously. We’re seeing prices adjust following the higher rate of Stamp Duty above a certain price introduced in December last year, which has been blamed for the 30 to 40 per cent drop in turnover.
“The changes are clearly going to have a disproportionate effect on the people living in Hampstead and Highgate because the capital has a very vibrant and flourishing second home market, whether it’s holiday homes or landlord properties.”
Nick Collins, partner at Hadleigh Residential, agreed that prospective investors may think twice before taking the plunge but questioned the extent of the policy’s impact.
He said: “It will calm buy to let investing and I think we’ll see a slowdown in people buying to let, but people will hold on to the properties they’ve already got.
“On top of the previous Stamp Duty increases, the reduction in tax relief for landlords and the abolition of the wear and tear allowance mean that buy to let is becoming less attractive to new investors and the three per cent increase will further diminish the appeal.
“That said, if you’re properly wealthy it won’t really matter to you, but if you have modest aspirations for a second home in the country it might put you off.”
Simon Gerrard, managing director of Martyn Gerrard and former president of the NAEA also warned of the potential negative impact of the Stamp Duty increase on London tenants.
He said: “The proposals in the Autumn Statement seem, on the surface, to make things easier for young professionals who aspire to buy in London. But this is partly because there is unlikely to be as much competition for properties at the first time buyer level as buy to let investors (the main source of rental properties in the capital) are dis-incentivised from entering the market, or are priced out.
“The government may be being a little short-sighted given that the majority of young professionals who live in London want the flexibility to be able to move around and so are looking to rent, or are unable to buy because of the mortgage multipliers.
“These changes are likely to have a catastrophic effect on any hope of an increase in supply of rental property, whilst demand for rental property will continue to increase. This will only force rents up and make living in London even less affordable, which implies that the government are giving up on young, professional Londoners.”