Ray Boulger, senior technical manager at John Charcol, Ying Tan, managing director of The Buy to Let Business and property analyst Kate Faulkner have all predicted a short-term smash and grab following the Chancellor’s Autumn Statement yesterday, which revealed landlords and those buying a second home will be subject to a stamp duty surplus charge of 3% after next April.
Boulger said: “Giving four months’ notice of a substantial increase in stamp duty land tax brings back memories of the short-term boom before bust in 1988 caused by the Chancellor giving similar notice of the abolition of double MIRAS.
“Saving tax is so ingrained into the UK psyche that the imbalance in the market between buyers and sellers will be greatly accentuated over the next few months as anyone already thinking of buying a second home or buy-to-let will start actively looking.
“As buy-to-let represents over 15% of total housing purchases the tax changes are large enough to distort prices in an inelastic market. Buyers need to be careful price falls after April don’t wipe out the 3% SDLT saving they make by rushing to buy now.”
Tan criticised the government for not upping stamp duty gradually as it plans to with the crackdown on mortgage tax relief.
He said: “Stamp duty is going to double or even quadruple for some which will create a boom bust situation.
“It will result in a surge of business in the next five to six months but I’m concerned about what’s going to follow.”
He added: “The tax changes while disappointing were gradual but this doesn’t give anybody a chance to change – the government is creating a boom bust situation which is exactly what they said they wouldn’t do.
“In 18 months new build landlords will be paying more than they signed up for.”
Faulkner said there is precedence for tax changes resulting in a boom before bust, adding: “A similar thing happened with first-time buyers in 2012 when they didn’t have to pay stamp duty – they actually ended up paying more because of the cost of house price hikes.
“I don’t have a major problem with the stamp duty changes because it is tax deductible on capital gains at the other end.
“You have to pay more at the front end but if you are holding the property for 10-15 years you will get the money back.”
She added: “The bigger issue is the loss of higher rate mortgage tax relief as that will cause many buying new properties to become cashflow negative. If you want to make money from property now you need to buy uninhabitable properties with cash, renovate them and then remortgage them. As investors we’ve got a duty to bring properties back to market.”
From April 2017 to 2020 the amount of buy-to-let relief landlords can claim back will be cut from 45% to 20% for top rate taxpayers.
