On the 1st of April 2016, the “Landlord Tax” or stamp duty surcharge comes into affect of a 3% surcharge for anyone buying a second home or an investment or buy to let property.
However what will be the impact for the property investor? Will it reduce prices or first time buyers? Will the extra cost be passed on to renters? Will the UK property market crash?
Today the ONS released statistics that property prices are rising 6.7% year on year in 2015, and that is 9.4% in the UK. So in effect and extra 3% is the same as if you delay the purchase of your property in London by 4 months, or alternatively you will cover the cost by the increase in prices within 4 months.
Well this is not exactly the case as usually a buy to let investor puts in about 25% deposit, and stamp duty is not covered by the mortgage value, so really the buyer needs that much extra cash available.
In this case an investor may try to pass on the additional cost to the renter. This will be a completely possible strategy and the property market will allow it. However will this make up the difference. For example a residential property yielding 6%, there for a 3% stamp duty surcharge would mean 6 months rent. If the Landlord increases rents by say 10% then it will take 5 years to recover the surcharge.
But, and its a big but, with the FTSE being volatile and the interest rates not likely to rise anywhere near enough to compete with property, an investors best place to invest is still property.
In conclusion the stamp duty surcharge will not really put investors off, it will just increase rents and increase the tax revenue.
Do you want to avoid the stamp duty surcharge?
Look into other options for property investment. Contact us we have a number of opportunities where you can invest in property development deals, with profit shares or fixed incomes. Contact firstname.lastname@example.org