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UK’s fledgling Build to Rent sector dealt stamp duty blow
The UK’s fledgling Build to Rent sector has been dealt a blow with the announcement that large investors will not be exempt from a new extra stamp duty surcharge that is introduced in a few weeks’ time. From 01 April there will be an extra 3% stamp duty payable on additional homes and it has been hoped that those investing in more than 15 properties would be exempt, and Chancellor George Osborne had indeed hinted at this. However, in his Budget announcement he confirmed that large scale investors in buy to let properties will pay the extra 3% which will apply equally to purchases by individuals and corporate investors. Melanie Leech, chief executive of the British Property Federation, said the move would hit the private rented sector. ‘The government’s decision to not include an exemption for investors who are purchasing large portfolios of properties for rent is extremely disappointing, and deals a huge blow to the build to rent sector,’ she pointed out. ‘This is going to be a significant deterrent to the institutional investment currently poised to settle in the purpose-built rented sector, which has the opportunity to deliver a significant number of new, quality affordable homes,’ she added. The failure to give relief from the additional stamp duty levy for large investors could inhibit the development of a much needed institutional private rented sector, according to Lucian Cook, Savills UK head of residential research. ‘While purchases of six or more residential properties can be treated as a non-residential transaction, the reform of stamp duty on commercial properties is likely mean greater entry costs for large scale residential investors one way or another. Our recent analysis suggests there will be demand for another one million private rented households in the next five years despite policies to boost home ownership,’ he explained. Investors could be put off, according to several experts, including Steve Sanham, development director at HUB. ‘A threshold on how many homes the stamp duty surcharge applies to is also crucial for institutional landlords and investors. The aim of delivering more homes will not be achieved if investors are put off from creating large developments of new homes to begin with,’ he said. Elizabeth Bradley, head of the corporate tax team at international law firm Berwin Leighton Paisner, also believes investors will be discouraged. ‘Much of the British property industry will be very disappointed with the Budget changes,’ she said. ‘The Chancellor has acknowledged the need to build more homes but the extension of the extra SDLT rate on buy to let to large investors will discourage investment in the private rented sector,’ she added. Continue reading
No good news for buy to let landlords in UK Budget
There was little good news for residential landlords in the UK’s Budget announcement with the Chancellor of the Exchequer adding to their woes by excluding them from a tax giveaway. Just weeks before landlords in the growing buy to let sector face an extra 3% stamp duty charge under a change to tax on additional homes, George Osborne announced they will be excluded from Capital Gains Tax change. ‘Buy to let investors could be forgiven for being completely paranoid. On this evidence, the Chancellor really has got it in for them and has excluded buy to letters from a huge CGT giveaway,’ said Jamie Morrison, private clients partner at the chartered accountants HW Fisher & Company. ‘With more incentives to help savers and first time buyers get on the property ladder, buy to let owners have once again been cast in the role of fall guy,’ he added. David Cox, managing director of the Association of Residential Letting Agents (ARLA), pointed out that this is now the third Budget which directly attacks landlords. ‘The sector has been punitively taxed, with stamp duty on buy to let properties, mortgage interest relief and now capital gains tax changes. It’s an outright assault on the sector,’ he said. ‘Every other sector has been offered a tax break yet there is nothing here to help the private rented sector, including landlords and most importantly tenants, who will see rent costs rise to subsidise the taxes that landlords pay on property. The government talks about wanting to help the younger generation get onto the property ladder, but with the changes announced today the supply of available property is bound to decrease, and as a result rents will rise,’ he explained. ‘In November, when Osborne announced an increase in stamp duty tax on buy to let properties, we described this as a catastrophic move. The news that larger investors will also have to pay the tax is even worse. Professional landlords, those who typically own more than 15 properties, play a vital role in providing rental stock to the market, and providing the army of renters we have in this country with housing,’ Cox added. ‘Our members forecast that the supply of buy to let properties will dwindle when the new tax comes in to effect, and this news means that supply will fall even faster and harder. We’re already in a position where demand out-strips supply and as supply falls, rent costs rise, meaning the goal of home ownership falls even further out of reach for most of the country’s renters,’ he concluded. Richard Lambert, chief executive officer of the National landlords Association (NLA), said it is clear that the Chancellor does not regard ordinary people putting their own money into providing homes as worthwhile. ‘The steady upward ratchet of taxation on landlords over the past year shows that George Osborne is determined to bear down on the private rented sector, but he still depends on… Continue reading
Property markets in north of England will get boost from investment announcements
Property markets in the north of England are set to benefit from hundreds of millions of pounds of new investment in rail and road networks announced by the UK government. As part of a continuing policy to create what is known as ‘the northern powerhouse’ the Chancellor George Osborne has announced funding of £60 million for a HS3, a high speed rail link between Leeds and Manchester to cut journey times between the two cities. He also announced £75million to explore options for an 18 mile Trans-Pennine road tunnel between Sheffield and Manchester which would be the longest road tunnel in Europe. Both projects are in the early phases of development and if they go ahead billions more will be invested in the region in the coming decades. Experts believe that prices and demand for property will rise and while this will be good news for those selling it also means that first time buyers will find it harder to get on the housing ladder if values increase. There could be a large influx of foreign buyers to the region, according to Jan Crosby, head of housing at KPMG, as connectivity across the region and with the wider UK is a significant tick on their wish list. ‘While property investors from the likes of Asia and the Middle East have been interested in the Government’s narrative around the Northern Powerhouse, they have been waiting for the words to be backed with action and financial commitment to improve the region’s infrastructure before making large scale investments,’ she explained. ‘The issue for these investors has been end user demand for property across the North as the scale of appetite simply isn’t as high for housing or for commercial property as they are used to in London or the South, because the ecosystem of infrastructure hasn’t been there to create an environment which attracts the end user in significant numbers,’ she pointed out. ‘However, with HS3, improved road links and a trans-Pennine tunnel all garnering the Chancellor’s support, occupier demand for homes and business in the surrounding areas will rise, which we can expect to attract international property investors looking to place their money outside of the capital’s heated market,’ she added. Graham Davidson, managing director of buy to let specialist, Sequre Property Investment, believes that the job creation that will come with the infrastructure projects will result in increased demand for property, providing a positive outlook for buy to let investors who are chasing returns that have been squeezed out of London and the South East. ‘Since the Northern Powerhouse agenda was first touted two years ago, our own business has seen a circa 30% rise in interest in northern property at a granular level with many millions being invested further up the chain at a global level in residential and commercial projects. The message is more clear than ever; the north is open for business,’ he said. The new routes across the Pennines and between Manchester… Continue reading
