The new three per cent stamp duty rate surcharge is the equivalent to 11 months income for the average mortgaged landlord, says Countrywide.
The agency group says that if the higher tax burden is not factored into the purchase price of a property, it would mean a reduction in gross yield of 0.2 per cent - equivalent to 11 months income for the average landlord, taking into account borrowing costs, and based on the average loan to value of 68 per cent.
Landlords in the South West and North East of England will see the highest cost relative to rental income, as the extra tax burden is equivalent to 14 months and 12 months of income, respectively. Those buying in the North West of England will see the least, with the extra stamp duty equivalent to eight months of income.
The majority of landlord purchases take place in London, the South and East of England - 60 per cent of homes sold to landlords in England this year were in these regions.
Landlords in these areas will see the biggest cash increase in stamp duty, £6,000 on average. However, high expectations of future price growth will likely mitigate some of the impact of the tax increase. If prices grew at the same rate as the last five years, within 12 months the growth in house prices would have offset the cost of the additional stamp duty.
In the Midlands and North of England, 16 per cent and 12 per cent of sales respectively are to landlords. Countrywide data shows that the average property bought by landlords in these regions would previously not have faced any stamp duty but will now incur £3,200.
“The stamp duty increase will impact landlords’ purchasing power. Many entering the market will be faced with a choice between making a lower offer when buying or having to cover the additional costs themselves, impacting yields” explains Johnny Morris, research director at Countrywide.
“It’s unlikely the change to stamp duty will see an immediate impact on rents, Landlords are rarely able to pass on increasing costs to tenants, as rental prices are set by market forces. But if less landlords choose to invest in the sector in the short term, a fall in homes available to rent could put pressure on prices” he says.
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Really hard to see any other rationale from the Government other than more tax.
Whilst there is such an enormous shortage of property, slow planning decisions and cutbacks in local council planning departments the only people who will suffer in the short and medium term will be the people the Government are "trying" to help.......Tenants!
They already pay rents that are beyond fair which will rise and reducing landlord numbers will not help. A transient workforce needs to be able to rent properties. The prices make it hard to buy anyway and trying to remove the competition(landlords) just isn't the answer!
I'd like to know who the Government consult with as they should get the fee back if they have!!
So you bought some buy to let properties and have a choice of 2 buyers, one an investor and on a say 'normal' buyer. Normal buyer not faced with huge stamp duty cost so will in theory pay the price and the investor deducts the stamp duty rise and offers less. Which buyer would you go for?
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