25th November 2015
The Chancellor delivered a further blow to buy-to-let landlords by unveiling a 3% increase to stamp duty on second homes and rental properties in a bid to make it easier for first-time buyers to get o the housing ladder.
The stamp duty rise will take place in April next year and comes on the back of the announcement in the July Budget that tax relief on buy-to-let mortgage interest will be phased out from April 2017.
The bad news for landlords was accompanied by better news for first-time buyers, with a £7bn boost for housebuilding and an extension of the Help to Buy scheme to encompass the shared ownership sector and a London-specific initiative.
The 3 percentage point additional rate of stamp duty will be applied to the existing tax bands on all buy-to-let and second homes worth £40,000 or more from April 1 2016.
The additional tax will not apply to houseboats or caravans and the Government will consult on whether or not it should apply to organisations owning 15 or more properties such as pension funds.
The Chancellor said: “For there is a growing crisis of home ownership in our country. 15 years ago, around 60% of people under 35 owned their own home, next year it’s set to be just half of that.
“We made a start on tackling this in the last Parliament, and with schemes like our Help to Buy the number of first time buyers rose by nearly 60%. But we haven’t done nearly enough yet.”
He continued: “First, I am doubling the housing budget. Yes, doubling it to over £2 billion per year. We will deliver, with government help, 400,000 affordable new homes by the end of the decade.
“And affordable means not just affordable to rent, but affordable to buy.
“That’s the biggest house building programme by any government since the 1970s. Almost half of them will be our Starter Homes, sold at 20% off market value to young first time buyers.
“135,000 will be our brand new Help to Buy: Shared Ownership which we announce today. We’ll remove many of the restrictions on shared ownership – who can buy them, who can build them and who they can be sold on to.”
Osborne said that the second part of his housing plan delivers a manifesto commitment to extend the Right to Buy to housing association tenants, with a new pilot allowing tenants of five associations to start the buying process from midnight tonight.
The Chancellor promised the Government would boost housing supply with planning reforms, the release of more public land for Starter Home and loans to small builders.
Osborne said: “The government will help address the housing crisis in our capital city with a new scheme – London Help to Buy.
“Londoners with a 5% deposit will be able to get an interest-free loan worth up to 40% of the value of a newly-built home.”
On the clampdown on landords, Osborne said: “The fifth part of our housing plan addresses the fact that more and more homes are being bought as buy-to-lets or second homes.
“Many of them are cash purchases that aren’t affected by the restrictions I introduced in the Budget on mortgage interest relief; and many of them are bought by those who aren’t resident in this country.
“Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy.”
He said the extra stamp duty raises almost a billion pounds by 2021, which will be partially reinvested in London, Cornwall and other places where residents are being priced out of home ownership.
Alex Gosling, chief executive of online estate agents HouseSimple.com, says: “Ouch. That’s another blow to landlords, so soon after the cut in mortgage interest tax relief.
“In the space of two announcements, George Osborne has become Enemy No1 for the buy-to-let sector.
“We are likely to see a stampede over the next year to purchase buy-to-let properties before the stamp duty hike comes into force.
“But the future is now decidedly uncertain for the UK’s buy-to-let sector.
“It seems like the Government has forgotten, or just ignored the large number of amateur buy-to-let landlords who aren’t looking to make vast fortunes, but are just looking to supplement their incomes.
“We are not talking about the professional landlords with multiple properties. We are talking about the pensioners, for example, who have invested in buy-to-let to boost their pensions, because low interest rates have decimated their savings income. Hopefully, this hasn’t sounded the death knell for buy-to-let.”