It is no secret that the housing market within London has been less than forgiving in recent years. Unfortunately, things only seem to be getting worse according to some recent developments. Buy-to-let landlords are not only facing an increased stamp duty, but the tax relief which was previously offered is set to substantially fall. Let’s have a look at what these two scenarios mean for the average landlord and how 2016 could soon be shaping up.
16 March Budget: Less Than Forgiving Stamp Duty
From the spring, it has been shown that buy-to-let landlords will now have to pay an additional 3 per cent stamp duty surcharge when contrasted to residential buyers. Interestingly enough, this was actually seen as causing much of the housing “rush” which occurred towards the end of 2015. Let’s not forget that according to related figures, the cost of buying a home increased by 7.7 per cent since November 2014. What does all of this mean?
First, buy-to-let landlords will have a much more difficult time obtaining properties within the London area which were already considered to be expensive. Even if they do, such increases are likely to trickle down to the tenants themselves. Should rental prices increase as a result, we are left wondering whether or not tenancy rates will drop (thus decreasing prices from a long-term perspective). Was this the intention of such a stamp duty increase?
Tax Relief Falls
Another newsworthy point to make is that the mortgage interest relief now offered to landlords has been slashed from 45 per cent to a staggering 20 per cent. It has also been shown that the relief is slated to coast the treasury no less than £6.3 billion pounds per year. It seems that George Osborne is indeed looking to shake up the London property market, but it may not all be bad.
First-time buyers with a limited supply could very well benefit from this massive paradigm shift while this very same figure could eventually cause the playing field between investors and buyers to be levelled. Will this strategy help to counteract the current housing bubble witnessed in London during 2015? We will have to see.
A Potential Migration
Another offshoot of these changes is that some buy-to-let landlords may instead choose to look elsewhere to establish their business. In fact, some consider such a movement to be a boon to rural areas that would otherwise not experience this migration. There is nonetheless no doubt that the brows of landlords throughout London will remain furrowed for some time and many are now scrambling to meet the 16 March deadline.
There are always short-term solutions for those who have no choice but to sell their existing property. Molae Properties offers a number of different options and in a worst-case scenario. A quick home sale may very well be the only option for those feeling the crunch of these new laws. Will the London property market ease off of its prices as a result of such changes? Only time will tell.