18th February 2016
Around one in four of Britons who had been considering a buy-to-let property (BTL) investment have now been put off in the wake of the Government’s plan to bring a 3% stamp duty surcharge and cut tax relief on their finance costs, claims new research.
The analysis by the online investment platform rplan.co.uk shows that some 9% have given up on aspirations to own a BTL property because of the government’s plan while 30% are still considering whether to do so.
Around 14% of existing landlords said they will now sell one or more of their properties because of the new rules.
Under the changes, the stamp duty on buying a £250,000 BTL property will rise from £2,500 to £10,000 from April, while that for a £400,000 property will more than double from £10,000 to £22,000. Also, from 2017, the tax relief currently allowed on finance costs such as interest payments on mortgages and loans to buy furnishings will be gradually reduced over four years.
Those planning to invest in BTL were going to use savings and investments worth an average of £43,592 to buy a property. Instead, 39% of these adults will use the money to save in a cash account, 30% will invest in an ISA, 20% will put it into their pension and 13% will put it in other stock market investments according to rplan.co.uk’s survey.
The 3% stamp duty on any property bought as a BTL or as a second home will be introduced in the new tax year starting in April. Latest figures in the Bank of England’s Credit Conditions Survey have revealed a rush to buy BTL properties before the new tax is introduced: lenders reported that demand for secured lending for house purchase increased slightly in the final three months of 2015 and was expected to increase in the first quarter of this year. But within this, demand for buy-to-let lending increased significantly in between October and December.
Stuart Dyer, rplan.co.uk’s CIO, said: “The British have strong faith in property as an investment and many see it as a means of providing a pension income. But the government clearly has a policy to dis-incentivise BTL and the sharp increase in landlord mortgages revealed by the Bank of England credit survey will probably be a last rush before the gate slams shut.
“Having a BTL property can also mean an over-exposure to one asset class for many investors, who should strongly consider the alternative of investing in a diversified portfolio for the long term, especially if this can be achieved through a tax-free ISA wrapper.”