Buy-to-let blow after government announces three per cent tax hike

Purchasing costs for landlord buyers to rise significantly, says Oryx World Portfolio

While the UK economy is stronger and more stable than almost anywhere in the world, the British government has dealt a blow to potential property investors, increasing taxes on the purchase of buy-to-let homes from April 2016.

In his Autumn Statement, Chancellor George Osborne announced a 3% surcharge on stamp duty land tax (SDLT), significantly increasing costs for landlord buyers.

This additional fee applies above current SDLT rates, which means on a home worth £400,000 the stamp duty rises from £10,000 to £22,000, while the duty on a £1m home jumps from £43,750 to £73,750.

Homes worth up to £1.5m will be subject to 13% SDLT. Those above this amount will incur a 15% charge.

According to Ray Hogan, managing director of award-winning real estate company, Oryx World Portfolio, the news has created a short-term investment rush.

He says, “We are still confident in the London market despite the latest changes in the purchase of buy-to let homes. The SDLT announcement has created a surge of interest as clients try to strike the best investment ahead of the changes in April.

Oryx World Portfolio’s Battersea Exchange development has been an incredible success as investors look to buy more property prior to the tax hikes. Some developments have increased in price due to the higher demand but we still hold our exclusive pre-launch rate of only £1,000 per square foot, giving larger room for capitalisation,” Hogan adds.

Adam Challis, Head of Residential Research at property developer JLL, says the increase will cause market uncertainty, saying, “New build properties are heavily reliant on off-plan investors to trigger development finance. A reduction in demand from this group will dramatically reduce the viability of many new build schemes, reducing supply.”

Subject to consultation, the higher rates will not apply to companies or funds owning more than 15 residential properties.

This exemption is hoped to encourage large-scale institutional housing investment.