The residential property sector is reeling from the news that Stamp Duty will increase by 2% on buy-to-let properties from tomorrow.
Chancellor Rachel Reeves increased the rate of tax on investment property in the Budget from 3% to 5%, in a move that will hit landlords hard.
Reaction swift and critical
Angharad Truman, ARLA Propertymark President, says: “We continue to see a growing disparity in the number of private rented homes available against a backdrop of increasing demand from tenants.
“Therefore, it is disappointing to see that the UK Government did not address this fundamental issue in its Autumn Budget, and instead has announced yet another blow for landlords by increasing Stamp Duty on second homes.
Richard Donnell, Head of Research and Insight Zoopla, says: “Changes to stamp duty land tax, together with higher property prices, has seen stamp duty raise over £11.5bn in 2023/23.
It’s a tax that falls most heavily on buyers in southern England with London and the South East accounting for over 50 per cent of annual tax receipts from stamp duty,” he says.
“Second home buyers are already responding to last year’s Budget which allowed councils to charge double council tax for second homes.”
Emma Cox, MD of Real Estate at Shawbrook, says: “The Government should of course priotise the needs of renters and buyers, but landlords will feel like they are once again bearing the brunt of punitive measures with a further increase in the stamp duty surcharge on additional homes coming into effect from tomorrow.
“The Private Rental Sector (PRS) has a key role to play in the UK housing market, and will be a crucial component to providing adequate stock. Demand still far outweighs the supply of quality homes, and tackling this will be extremely difficult if landlords are disincentivised by government measure,” she says.
“Our research shows that landlords have confidence in the market, with a third planning to add to their portfolios in the next 12 months, so the Government should be incentivising – not deterring.”
Dominic Agace, CEO at Winkworth, says: “Stamp duty needs to be addressed. It stops people from buying homes to live in and it prevents landlords from buying properties to let out, which hinders social mobility.
“Removing this benefit at a time when it has struggled due to a difficult UK economic and political backdrop will severely damage this wealth generator platform from the UK economy. This has significant implications for the UK as a business-friendly marketplace to operate in if it can no longer provide a liquid and functional AIM market,” he says.
“We are seeing HNW (High Net Worth) individuals already moving abroad as a tax on money earned elsewhere will be subject to inheritance tax here. This makes the cost of choosing London as a place to live is a step too far. With this exodus, a significant amount of what makes London global centre will disappear and that will be felt across the capital’s economy.”
Nick Leeming, Chairman of Jackson-Stops, says: “Today’s Budget misses a key opportunity for broader stamp duty reform—a sentiment shared by one in four people across the UK, and by a third of those aged 65 and over.
“A targeted downsizing incentive would have been a forward-thinking approach, encouraging older homeowners to move to smaller homes without incurring high tax burdens. This would help free up family-sized properties for growing households and create a more balanced housing market,” he says.
“We do however welcome the Chancellor’s decision to leave Capital Gains Tax (CGT) on residential property and buy-to-let properties unchanged. With supply already tight across the rental market, increasing CGT would have likely discouraged landlords from maintaining or expanding their portfolios, adding further upward pressure to rental prices and impacting affordability for renters.”
Nick Sanderson, CEO at Audley Group CEO, says: “The new government’s Budget crept by with only one mention of stamp duty – an increase for those buying second homes.
“No mention of Stamp Duty reform for downsizers which could do so much to get the market moving. A disappointing blow but it’s the silence on wider housing reform that is more hauntin,” he says.
“Housebuilding targets and overhauls to the planning system are empty promises without the devil that is in the detail. Progressive and decisive action is needed if Labour are to get a handle on the issues that plague the housing system, and implement real change.”
Verona Frankish, CEO of Yopa, says: “With no stamp duty relief extension granted today many homebuyers will be in for a fright should they look to purchase from March of next year.
“Whilst many first-time buyers will still benefit from a stamp duty free purchase should they remain within the previous £300,000 threshold, many existing homebuyers won’t be so lucky,” she says.
“Those existing buyers purchasing over the value of £250,000 are set to be hit by the maximum increase in tax which will see an additional £2,500 added to the already high cost of home buying and ownership.”
Marc von Grundherr, Director of Benham and Reeves, says: “It’s a case of trick not treat for homebuyers following today’s Budget, as they’ve once again been shown the cold shoulder, with the government refusing to extend current stamp duty relief thresholds.
“Whilst this won’t deter homebuyers from pursuing their aspirations of homeownership, it will add to the cost of purchasing for the vast majority, particularly those climbing further up the ladder.”
Jonathan Samuels, CEO of Octane Capital, says: “The property market is in very good shape, driven by significant improvements across the mortgage sector in recent months. So a lacklustre Budget was always on the cards with respect to homebuyers and sales market incentives.
“With Budget uncertainty now behind us, it should mitigate any temporary fears on the side of lenders and continue to drive the market forward.
“Of course, it remains a delicate balancing act and we could see lender appetites soften due to today’s changes to National Insurance contributions, particularly if the result is a softer employment market.”
Colby Short, Co-founder and CEO of GetAgent.co.uk, says: “Yet another Budget with nothing for homebuyers to write home about other than a regurgitated pledge to get Britain building.
“Whether or not these housebuilding ambitions are ever realised is another matter and based on the track record of Labour’s predecessors, a fair degree of scepticism is understandably justified,” he says.
“The property industry will certainly feel that today was another wasted opportunity to focus more on improving the home moving process as a whole and for the benefit of buyers and sellers.”
Mark Harris, CEO at SPF Private Clients, says: “Raising the stamp duty surcharge for landlords from tomorrow results in an additional entry cost that investors will have to absorb into their business models.
“These days we don’t see so many investors looking to make a quick profit by buying a property for say £250,000, spending £50,000 doing it up and selling it on at £400,000.
“Most people are in it for the long term and continue to want to hold property for the long term – an additional entry cost is irritating and might put off new entrants to the market,” he says.
“But those already in it with established models will continue to invest as it is a market they understand and know. The decision to keep CGT at the same levels for property sales is welcome and will hopefully stave off any panic selling.”
David Alexander, CEO at DJ Alexander Scotland, says: “Freezing the rate of Inheritance tax (IHT) for a further two years to 2030 is a further slap in the face for homeowners who wish to leave something for their children and grandchildren.”
“This means that by 2030 this tax will have been frozen for 21 years. To put this in perspective if IHT had risen in line with inflation it would now be at £503,878. In six years’ time it will be worth tens of thousands more,” he says.
“The impact of fiscal drag in freezing the threshold at £325,000 since 2009 has resulted in the annual tax take more than trebling from £2.38bn to £7.5bn.”
John Phillips, CEO of Spicerhaart and Just Mortgages, says: “Today’s Budget was an opportunity for Labour to show that its plans for housing are far more than just increasing supply. Sadly this wasn’t the case, with a real lack of support for buyers and the wider housing market.
“While increasing supply is necessary, we also need tangible support right now to increase routes to homeownership and reduce affordability pressures, particular for first-time buyers,” he says.
“While not mentioned, it seems the Stamp Duty relief will still end in April, removing important financial support for buyers and downsizers, while creating another cliff-edge deadline for the industry to deal with.
“We will have to see if the almost instant increase in stamp duty on second homes does indeed increase transactions as the Chancellor hopes, or whether as some worry, it will impact rental supply further and send rents higher – adding further pressure to those trying to save for deposits.”
Ben Thompson, Deputy CEO at the Mortgage Advice Bureau, says: “Net zero pledges will continue to stalk the housing sector with the government’s inaction on EPCs. 60% of UK housing stock is below standard, and 16 million homes need retrofitting.
“The Chancellor had an opportunity to enact real change today using Stamp Duty as an incentive, but that has sailed on by.
“This is a disappointing blow that leaves both the responsibility and the bill firmly in the laps of homeowners. If the UK is to meet its climate commitments, it’s critical that this isn’t the end of the story.”
Oli Sherlock, Managing Director of Insurance, Goodlord, says: “With so many lettings market reforms already announced in the Renters’ Rights Bill, it’s no surprise that today’s Budget focused on house building.
“House building (or the lack of it) is at the heart of the issues currently facing the rental market; we desperately need more homes. And whilst they won’t be built overnight, the Government has today laid out tangible plans to get things movin,” he says.
“Having committed funding, announced an intention to hire more planning officers, and levelled-up key policy areas for Local Authorities, let’s hope the cogs of construction will start to turn that bit faster.”
Guy Gittins, CEO at Foxtons, says: “Landlords across the nation have been impacted by a raft of legislative changes in recent times and so they will be delighted to see that Capital Gains Tax increases have not been applied to the sale of residential property portfolios.
“We’ve already seen buy-to-let investors return to the lettings market and today’s Budget should reassure many more to remain within the sector. This is good news for tenants across the capital in particular, as it will deliver desperately needed additional stock back to the market,” he says.
“That said, the additional stamp duty charged on the purchase of second homes will add to the upfront costs of investing for those looking to grow their portfolios, however, the scale of the increase is unlikely to deter landlords considering the long term gains of this asset class.”
Ben Beadle, CEO at NRLA, says: “Hiking stamp duty on homes to rent when 21 people are chasing every rental property makes no sense.
“Analysis by Capital Economics has found that increasing Stamp Duty on rental properties from three to five per cent will see a net loss of half a million homes to rent over 10 years. This will not help the huge number of tenants for whom homeownership is still a distant dream.
“The Chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up,” he says.
“What tenants needed was a Budget to boost the supply of new, high-quality rental housing. What we got is a recipe for less choice and higher rents.”
Tim Bannister, Property Expert at Rightmove, says: “Increasing stamp duty on additional home purchases by 2% means that, based on the average asking price for a home (£371,958), a landlord could face an additional charge of more than £7,000 from tomorrow when buying a property.
“In the short-term, some landlords may need to pause for thought, but in the longer-term it becomes yet another charge that landlords wanting to invest in buy-to-let will have to become accustomed to and factor into their decision making.
“Overall, we need more homes in the rented sector not fewer, but in recent times we have seen record levels of stock leaving the rental market,” he says.
“There was no mention of retaining the current residential property thresholds for paying stamp duty, which means we expect that the typical first-time buyer will be over £3,500 worse off come 1st April based on current prices. After paying fees, carrying out any surveys, and stretching their budget with high mortgage rates, this will be an unwelcome additional charge next Spring.”
Main picture: BBC News
