Will the hike in Stamp Duty kill buy to let in Bexley Borough?

In his autumn statement last week George Osborne announced that landlords will have to pay an additional 3% stamp duty on top of the standard rate when they buy another buy to let property from April 2016. This means, for example, that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year. Landlords asked whether buy to let is still a viable investment option.

Some say that property in Bexley Borough will be worth less because potential landlords will not be willing to pay as much, and that if builders or existing homeowners don't feel they are going to get as much for them there is less motivation to build or sell.

The person to blame for this situation is George himself. Back in 2012, he chose to utilise the British housing market to kick-start the UK economy by providing subsidies, funding for lending and help to buy. While that helped the Tories get back into power in 2015, some say that this impressive growth in the UK property market has priced out younger people who want to buy their first home. For some, this the straw that breaks the camel’s back. Following changes announced in the summer budget, over the next four years landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income. Landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (i.e. 40% or 45%). However, this will be reduced slowly to the basic rate of tax, which is currently 20%.

Surely this is the end of Buy to Let in Bexley Borough? Perhaps. But before we all run to the hills in panic, here’s another thought: stamp duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the old “slab style stamp duty” system. For example, the stamp duty bill on a £285,000 property was lower on the old slab style duty (pre Dec 2014), at £8,550, but not a million miles away from the new £12,800 stamp duty bill. Interestingly, George has left a legal loophole in the new rules. When it comes to selling up, property owners can offset purchase costs against any eventual capital gains tax, including stamp duty.

I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. And the best part about investing in property is that it is bricks and mortar: You can touch it, you can feel it, and it isn’t controlled by some City whiz kid in Canary Wharf. The British understand property and that goes a long way!

Buy to let has enough impetus that prospective landlords will continue to buy even with a larger stamp duty bill. However, Bexley Borough landlords will need to be savvy with property to ensure that extra stamp duty costs are mitigated. Buy to let property is a long term venture. In the past, it didn’t matter what property you bought in the borough or at what price, because you would always make money. With the extra taxes, the adage of “any old house will make money” has gone out the window. 

You wouldn’t dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so why would you not take the same advice and opinion about buying a buy to let property in Bexley Borough? One source of information, opinion and advice is the Bexley Borough Property Blog: www.bexleyproperty.co.uk or you can call our offices on: 01322 559955.