The new buy-to-let stamp duty reforms will push up rent costs and trigger a decline in the supply of available properties, a new survey has revealed.
According to the Association of Residential Letting Agents, over half (52%) of letting agents reported an increase in buyers looking to invest in buy-to-let property before the stamp duty deadline in February, up 47% from the previous month.
However, nearly two-thirds (63%) predict supply will fall as landlords are pushed out of the market.
Almost six in 10 (57%) ARLA members agree rents will be pushed up once the stamp duty reforms have come in to effect, as landlords pass on costs to tenants. This is especially high in London, where three quarters of letting agents (73%) expect to see this happen.
The 3% increase on stamp duty is set to take effect from 1 April as part of the government’s attempt to curb the buy-to-let market and free up property for first-time buyers. The basic rate of tax relief landlords can claim on properties is also set to fall to 20% from April 2017.
Under the changes, the stamp duty on a £250,000 buy-to-let property will rise from £2,500 to £10,000, while the rate for a £400,000 property will more than double from £10,000 to £22,000.
David Cox, managing director of the Association of Residential Letting Agents, said: “The stamp duty changes are now imminent, and as well as hitting small landlords, they will also impact institutional investors.
“Although members are reporting a rush from landlords trying to snap up their buy-to-let investments now, it’s likely that we’ll see the buy-to-let market drop like a stone come April and probably not pick up again until next year. This will most certainly cause rents to increase, with supply dropping, as competition for the limited availability of properties intensifies.”
Demand rose 19% in February, with an average 37 prospective tenants registered per member branch, the highest level since February last year. The supply of rental properties on letting agents’ books increased to 176 in February, a rise from 172 in January.
“The demand for housing continues to intensify as supply remains an issue across most of the country. We are concerned that the government rhetoric of wanting to help people onto the housing ladder does not tally with their action of continuing to target the rental market with additional costs. Some landlords will simply withdraw from the market whereas others who can take the hit of the extra stamp duty will simply raise rents to cover the extra costs. The dream of home ownership will remain out of reach for many as we move closer towards becoming a nation of forever renters,” said Cox.
This is crazy, it’s not about ‘hurting’ the landlords, because like already said, that will only get passed on to the renters which in turn are the wannabe first time buyers.
The solution should be to ‘help’ the first time buyers, with easier opportunity to loan, maybe a better loan to value rate for first time buyers, or something across the board which should have already happened to help the financial crisis aswell, would be to bring in reasonable incremental wage increases, at minimum, along with inflation.
Then you give the first time buyers more money to save/buy, and a lot of the landlords would not be affected by a wage increase.
So there’s 2 options there, all they have to do is pick one! 🙂