Immediate Stamp Duty Rise on all second property purchases

Chancellor Rachel Reeves has used her first budget to announce an immediate stamp duty rise from 3% to 5% for all second property purchases.

This will be a further blow to landlords, who are already trying to navigate an increasingly regulated sector, and will put their rental returns under additional pressure.

The knock on effects could result in a market downturn – as it becomes more costly, therefore less attractive to buy – and is likely to hit tenants in the pocket as landlords put up rents to offset higher purchase costs.

Vendors will also find themselves under pressure to reduce sale costs, which will arguably have a cooling effect across the whole residential market.

For all homebuyers, Stamp Duty Land Tax (SDLT) relief will reset in April from £250,000 back to £125,000 on primary homes. Again this could lead to pressure on house prices and further slow the residential market.

There is the possibility the SDLT rise on second properties is actually good news for first time buyers, or any other buyer looking for a primary residence at the cheaper end of the market.

Discouraging investors, depressing prices, slowing growth, and reducing competition could provide more opportunities for FTBs by making properties more affordable.

First timers should also be aware of the change in the SDLT threshold which will see them paying tax on properties valued over £300,000 from April, where it had been up to  £425,000. This possibly won’t hurt too many in Lancashire but could hit hard in London and the South East.

What isn’t clear from today’s budget is what the Government’s overall plan is, and what we can expect from them in the future.

Do they want to reduce the private landlord sector and encourage more first time buyers?

Have they considered the impact on tenants within the private rented sector?

Do they expect the British obsession with homeownership to result in most people simply swallowing the rises?

And are they counting on the popularity of second homeownership as an alternative to other investment – which has become an increasingly a popular option for millions of families as well as professional landlords – to continue, and for the tax receipts to keep rolling in.

Whatever the Government’s long game, there will undoubtedly be a short term pain for investors and a likely cooling of the residential market.

But, if we know anything about the property market in the UK, it’s that people want to own their own home, and a second home will probably remain a favoured investment option.

For help navigating this new landscape, speak to your property advisors today.

Whether you’re a family looking to invest your savings, a landlord building a portfolio, or a first time buyer taking that first step, our experienced property teams are here to help.

Call us on 01772 555 176 or email enquiries@vslaw.co.uk