The announcement of a 3% rise in stamp duty across every single stamp duty band on second homes and buy-to-let properties, made in Chancellor George Osborne’s Autumn Statement, riled up many landlords and landlord organisations. The National Landlord’s Association even went as far as to insinuate that the Chancellor intends to â€œcompletely eradicate buy-to-let in the UK…â€
The voices of dissent have now been joined by that of an economic think tank, the Institute for Fiscal Studies (IFS). George Osborne said that the new surcharge would raise £1 billion for Treasury by 2021. But the IFS argues that raising stamp duty will slow down the building of new homes and increase rents.
Property developers would see less incentive to invest in the private rented sector. Although it could result in house prices falling, renters could end up having to cover the costs of a potential landlord’s increased expenses.
There is also concern that, with the stamp duty hike set for April 2016, there will be a flurry of activity, with investors looking to beat the deadline. The result of which would be an increase in prices and preventing first-time buyers from competing.
The stamp duty rise, combined with the measures announced in the July Budget (lowering the rate of tax relief on mortgage payments, and the modified interpretation of annual wear and tear allowance) will certainly make buy-to-let investment less appealing. As a result, tenants could be worse off, with greater competition for fewer properties.