Last year the Chancellor of the Exchequer was the home buyer’s friend when he overhauled the way Stamp Duty on the purchase of residential property is calculated. He is now seen as the pantomime villain with his further tinkering of this already unpopular and insidious tax in the latest autumn statement.
From the 1st April 2016 all buyers of second properties will have to pay a whopping additional 3% on top of the current bands of stamp duty. Whilst those purchasing just their main home, which accounts for the majority of house transactions, will be unaffected by this amendment, anyone buying a holiday home or investing in a buy-to-let property most certainly will be.
Previously buying a £150,000 property would cost the purchaser £500 in tax but in future for someone buying an additional home to one they already own this will be pushed up to £5,000. An owner-occupier buying a £600,000 currently pays a huge £20,000 but from next spring an investor landlord or weekend cottage buyer will have to pay an eye-watering £38,000.
There will be some who will have little sympathy for those with the ability or means to buy properties that will not be their full time homes and who might be under impression that this category of buyer artificially drives up property prices, depriving local people of the opportunity to stay within their local communities. There is more to it than this however.
Second home or weekend cottage owners bring money into the areas they buy in and often employ local tradesmen. As this part of Wessex is such a lovely place to live, these occasional residents often end up moving here full time, disposing of their previous main home in London or wherever. They are very important for house sellers and over the last couple of years have accounted for a significant proportion of property sales in the region. Without them there will be a much smaller pot of potential buyers.
Buy-to-let investor buyers are also important for the local economy and if there are not landlords around, there will not be any properties available to let and for many, renting is a more suitable or perhaps only option. There is the very real danger that landlords enlarging their portfolios will push up rents to cover the cost of the additional tax, surely something the chancellor should have but clearly did not envisage.
The change was intended partly to boost the chancellor’s coffers and also to free up more housing stock for first time buyers however it will actually have ramifications across the whole of the housing sector. Driving away second home/investor buyers by making it financially unattractive for them to buy property cannot be good news for what is already a fragile market.