Analysts await with interest the impact on the UK property market of the forthcoming ‘buy-to-let tax’, due to be introduced as of 1st April, with the government hoping it will ultimately ease what some believe are unsustainable price increases.
However, in the run up to the introduction of the new stamp duty rules, estate agents are in fact reporting increased demand from property investors aiming to buy homes before the surcharge becomes effective.
As of 1st April, anyone in the UK purchasing a property with a value of more than £40,000 to use as a second residence or to let out is set to pay stamp duty three percentage points higher than the standard rate. This measure is being introduced in order to help first time buyers or those simply buying properties to live in themselves, as opposed to serial investors who might be seen to exploit the rental market to the detriment of others.
But unsurprisingly there are signs of a late surge from investors to snap up whatever property they can before it effectively becomes more expensive to them.
The Guardian newspaper in London writes that ‘The Royal Institution of Chartered Surveyors recently reported that the housing market had seen an “unusually buoyant” December, and suggested that this was in part a result of investors trying to beat the tax change. Those involved in the market suggest that this has continued into 2016.’
For investors who are spending £1,000,000 on a property – not an unusually high sum in many parts of London – the new tax would essentially cost them £30,000 extra if they buy after 1st April.
But for those in London who are struggling to get their foot on the ladder with a first property purchase the new surcharge will not apply and will therefore potentially put them ahead of the queue – in front of investors – for certain properties.
The change to property taxation was announced by the Chancellor of the Exchequer George Osborne last autumn and caused mixed reactions amongst observers, some believing it could be counter productive, some believing it does not go far enough to help first time buyers and others believing it could be highly successful.
Estate agents in London in particular have reported a flurry of activity to ‘beat the tax’. Central London estate agent Cory Askew, of Chestertons, told the Guardian, “December and January are not normally busy months for us – it was fairly striking the change in activity. If we have the surge in demand now we can only assume it will quieten down in April, or there will be strong negotiation by buyers.”
Of course some first time buyers and buy-to-let investors will be holding fire for now, believing that increased activity before 1st April could temporarily distort the market and push prices higher up for a few weeks. The story looks set to roll on.