Stamp Duty Hikes Won’t Help Generation Rent, Warns Expert

Chancellor George Osborne’s increased tax for buy-to-let landlords will be “ineffective for its purported aims”, according to the mortgage director of one of the world’s leading independent financial advice bodies.

Stamp Duty Hikes Won’t Help Generation Rent, Warns Expert

Mike Coady, head of deVere Group’s deVere Mortgages, made this claim after Osborne announced that buy-to-let investors and second home buyers will be charged an additional 3% in Stamp Duty from April.

Coady begins: “It is commendable that the Government wants as many people to own their own home as possible and, of course, this is something all of us in the mortgages industry would promote.

“However, for three main reasons, the Chancellor’s new 3% Stamp Duty surcharge will be ineffective in its purported aims of raising cash to help first time buyers and paying for more affordable housing.”

He explains: “First, the revenue raised by this initiative – £1 billion by 2021 – is a nominal figure when given the scale and seriousness of the UK’s affordable housing crisis.

“To many it seems this is something of a political stunt. The Government is wanting to be seen to be acting on this emotive and topical issue and is doing so by appealing to the politics of envy with buy-to-let landlords and second home owners the targets.”

Coady warns that many buyers will be rushing to buy property between now and April to avoid the higher costs. Naturally, this would push up house prices in the short-term.

He continues: “Furthermore, in the medium to long term, I don’t believe it will put off overseas or UK purchasers from investing in property. Despite the 3% Stamp Duty surcharge, which is not ideal of course, most investors will still regard investing in property in the UK, especially in areas like London, the South East and Manchester, as an attractive and safe investment opportunity.”

Coady also notes that as property investment is often a long-term commitment, 3% over the entire investment period is something that many landlords will be able to manage.

However, he warns that tenants could find their rent prices rising when the change is made in April, as landlords are likely to pass on their costs to renters. This could make it even harder for prospective first time buyers to get onto the property ladder.

He concludes: “The Stamp Duty will be ineffective in helping first time buyers, indeed it could hinder them further. If the Government is serious about helping generation rent, it needs to rethink. The solution to the housing crisis is not the rate of Stamp Duty.

“Planning restrictions and building more homes would be a better way to deal with the ongoing housing crisis in Britain.”¹

¹ https://www.landlordtoday.co.uk/breaking-news/2015/12/btl-tax-clampdown-wont-help-generation-rent