The Budget came and went with little fanfare as far as landlords, the buy-to-let market and private rental sector (PRS) was concerned, but documents that came out of the Office of Budget Responsibility (OBR) after the event revealed that a new challenge might well have been avoided.
The OBR documents suggest the Chancellor and Treasury were seriously considering a further increase in the stamp duty charge for additional property owners – which includes landlords – from its current 3% level to 4%. Indeed, those very same documents say the Budget introduced such a measure which would again suggest that the decision to reject this option was taken relatively late in the day.
What perhaps put a hold on this increase was the suggestion that it could have had an impact on tax take because presumably landlords, and other additional property owners, would be put off from buying by extra stamp duty costs and, transaction levels dropping would reduce overall stamp duty tax revenue.
However, it seems fairly well-documented that the consideration was serious and was perhaps made in light of the decision to include landlord purchases within the stamp duty holiday period.
The fact it didn’t make the Budget is a positive for the sector but there might be a strong argument to suggest the Government might well revisit the option in the near future.
Which presents an interesting scenario for landlords to consider; our own recent landlord research recently revealed that the number of landlords looking to buy has returned to the levels seen at the start of the year – when the stamp duty holiday was available to them.
That figure was the highest one registered for the past four years, so it seems that even with the stamp duty holiday having finished, landlords are still looking at how they can expand their portfolios, no doubt fully aware that tenant demand/rental levels/rental yields all remain strong and a short-term focus on purchasing, especially if the values are reasonable, is worth pursuing.
Add into the mix the understanding that a 3% surcharge on stamp duty might be raised at some point in the medium-term, and you can perhaps understand why now might seem like a better time to buy rather than later. Especially if house prices continue to move upwards in trend.
One of the major questions is how landlords intend to fund these new purchases and it seems that refinancing existing properties within the portfolio in order to release accrued equity, will be a strong option, particularly for portfolio landlords.
Again, our research shows that portfolio landlords are most likely to remortgage in the next 12 months – 51% of those who own more than 11 properties stated this would be the case – and that certainly makes sense for those professional participants who want to grow their portfolios and have perhaps benefited from house price growth over the past 18 months.
Overall, this signals good news for the buy-to-let market and those advisers who are active in this space. Even if it is based on the potential hiking of stamp duty sometime in the future, we are all aware that landlords tend not to sit on their heels in terms of activity, especially if they believe a change is coming which could ultimately cost them more in tax.
That has been a trend that has repeated itself in recent years when the Government has pushed through stamp duty increases. It may be one that happens again even if, on this occasion, it did not go quite that far.
George Gee is commercial director at Foundation Home Loans