The Stamp Duty cut announced in today’s mini-budget has been welcomed by Chelmsford-based property investment consultancy Hawkhurst Invest as a first step to protecting the sector from rising costs and the inevitable rise in rental values. However, the good news has been tempered by the Government’s failure to act on the 3% Stamp Duty levy imposed on buy to let landlords.
Today’s announcement raises the stamp duty exemption from £125,000 to £250,000 and has been made permanent, meaning that property investors won’t have to spend additional capital on taxation simply to buy a property. However, the benefit to landlords is limited because the 3% levy that they already pay has not been removed.
The knock-on effect means that rising interest rates may be tempered somewhat by the Stamp Duty reduction, and could encourage those landlords who were putting their growth plans on hold during the cost of living crisis.
Commenting on the Stamp Duty cut, Gavin Perrett said,
” Today’s move, which removes Stamp Duty from property transactions below £250,000 completely, is a welcome one that tempers some of the tax liability in property purchases for buy to let landlords. However, it is not clear whether the 3% levy that investors currently pay is to be cut. Government must act on this levy too to level the playing field for all property purchases.”
The rising cost of living and rental values means that some costs have had to be passed on to tenants through increasing rents, and rising interest rates have contributed to these increases. Not only that, but landlords face additional costs to meet new Environmental Performance Certificate requirements coming into force in 2025, as well as other tax changes and regulatory responsibilities.
For property investors taking on new investments, the removal of Stamp Duty below property values of £250,000 is welcome, but uncertainty around the 3% levy isn’t likely to help investors make decisions on investment opportunities.
£100,000 to £200,000 is the sweet spot for property values in growth areas in the North and Midlands where investment in the Midlands Engine and Northern Powerhouse has already seen Government and private sector investment in those economies. Alongside this is significant house building to meet consumer demand for quality properties.
Commenting on the Stamp Duty cut, Gavin Perrett said,
“We have advocated investment in the North and Midlands as high-performing areas for property investors for some time. Property values between £100,000 and £200,000 in those areas are already an attractive proposition for investors, and the removal of Stamp Duty in that price point protects capital for further investment in property improvements and regulatory requirements.”
Mr. Perrett continued, “However, it is critical that the 3% Stamp Duty levy that property investors currently pay on buy to let properties are removed as well so that buy to let landlords and their tenants can benefit from the full effect of the Stamp Duty cut announced today.”
The full reduction in Stamp Duty including the 3% levy should allow property investors to manage rising interest rates over the next 18 months until inflationary pressures begin to stabilise.
