Stamp duty surcharge will fail to deter buy-to-let investors

The new stamp duty surcharge will fail to deter buy-to-let investors due to house price inflation, new research shows.

According to estate agent Jackson-Stops & Staff, projected annual property price growth will eclipse stamp duty for landlords in eight out of 10 UK regions within a year.

Jackson-Stops & Staff predicts that the biggest losers of the stamp duty reform will actually be tenants as landlords pass on their additional costs to rental prices.

The findings revealed that if property prices continue to grow at their current rate in the South East region the capital gain on an average priced property will be £28,412 annually.

Total stamp duty on the purchase of an averagely priced home will be £11,328 under the new proposed stamp duty regime for second homeowners, a figure which is eclipsed by the annual increase in equity.

In London, house prices are expected to grow by £73,840 (13.9%) compared to an increase in stamp duty of £32,433, a difference of £41,407.

As most landlords keep their properties from between 10 to 20 years, they are therefore likely to benefit from the positive impact of house price growth in the longer term.

The only regions where capital growth will not eclipse the cost of stamp duty in the first year are the North East and the North West.

Nick Leeming, chairman at Jackson-Stops & Staff, said: “Our message to landlords is that when you do the sums, and look at the direction of house prices, placing money in bricks and mortar is still by far the best investment vehicle.

“If property prices continue on their current trajectory, within a year or less of buying their investment property the vast majority of landlords would have earned back all the money given through stamp duty, even with the new 3% surcharge, by doing nothing at all – just sitting back and watching the price of their home increase. Therefore the idea that the stamp duty tax will act as a deterrent is a fiction, as for most landlords it won’t amount to a significant figure.

“In fact, the only losers will be tenants as landlords are likely to pass on any additional costs they might not want to shoulder to their tenants by increasing rents. This could mean that those currently in rented accommodation who are saving for a deposit to buy a home, take even longer to pull this money together.”