Investment advice company London Central Portfolio says the proposed three per cent stamp duty surcharge on the purchase of buy to let properties, coming into effect in April, can be absorbed by investors in Prime Central London.
Investors buying in other parts of the UK, however, are likely to be sharply hit bythe controversial surcharge, says LCP.
“For UK investors buying outside prime central London, for affordability reasons and who have benefited from very low levels of stamp duty, the new additional rate sees the tax jump by almost 2.5 times” warns the LCP’s latest newsletter.
“In Prime Central London, on the other hand, stamp duty will rise less than 50 per cent on average. This is likely to be absorbed very quickly due to the strong, long-term price growth in Prime Central London of 10.1 per cent per annum, which would equate to 61 per cent over the next five years” says the newsletter.
It contrasts the relatively modest effect on central London with the much sharper effect on Manchester, for example, where long term growth has averaged only four per cent per year. “The additional three per cent stamp duty will significantly eat into profits. As investors weigh their options, it is areas outside Prime Central London that are likely to suffer the most” the advice company warns.
LCP says the stamp duty is part of a concerted government attack on buy to let and instead institutionalise the sector via Build To Rent and institutional investment - hence the fact that large-scale buyers of properties will be unaffected by the stamp duty change, which will not apply to acquisitions of 15 or more units at one time.