UK Property Stamp duty changes
- In his autumn statement, George Osborne announced that for those individuals buying ‘buy to let’ properties or a second home that stamp duty will be increased by 3%. On homes between £40,000 and $125,000 the rate will be 3%, the next $250,000 the rate will be 5% and then 8%up to £500,000. On a $275,000 home the increase will be another £7,050. These new rates take effect from April 2016.
- Interestingly, Scotland will be exempt from these charges as their land and buildings transaction tax replaced SDLT. Investors may consider buying north of the border particularly in Edinburgh. Others may be tempted to opt for a corporate ownership instead. Full details have not yet been issued on the full changes. There are many scenarios where this presents problems. What about those who switch jobs and own a second home for a short while? Unmarried couples with 2 homes may look to own these in separate names, others may put the house in the names of their children.
- Buying up to 15 properties or more through a corporate will avoid the new rules. Another method is to set up a company on behalf of a number of investors.
- Paragon lending reveals that lending was up 102% in the past few months as buyers rush to avoid the new duties. The effect of this is an expected dampening of the market by up to 2-3% in terms of prices but increased rents as buyers look for compensation.
This will probably not put off the foreign buyer who bought 1/3 of all properties for sale in 2015. Recently Chinese investors have bought a $250M private property portfolio. It will mean however that some investors will think twice before investing in real estate.