Impact of the April 2016 Stamp Duty Rise:
We’re sure that everyone is now fully aware that Stamp Duty Land Tax (SDLT) is going to increase by 3% on all of the tax bands for additional properties purchased after 1st April 2016. In case you’re not sure of the Stamp Duty rates we’ve reproduced them in the table below.
Table 1: Stamp Duty Bands & Rates
If you are a property investor and are not well underway with your next property purchase by now, it is almost certainly too late to complete by the end of this month !
So, have you missed the Buy-to-Let boat ?
To answer this question, let’s look at the facts.
Consider, for example, a typical Crawley investment property, such as a modern 2 bed flat close to Three Bridges station. Currently these types of properties are being advertised for around the £235k mark.
What Stamp Duty would be paid by an investor if a property like this was purchased before or after 1st April 2016 ?
The Stamp Duty payable is shown in Table 2 and, as you can see, the total due from 1st April is a whopping £9250! Put another way, the Government is imposing a SDLT surcharge of £7050 ! No wonder property investors have been trying to complete their purchases before April !
Table 2: Example Stamp Duty payable before & after April 2016
*Assuming second property purchase
However, let’s put some perspective on the Stamp Duty surcharge.
Although we know that property prices can go up as well as down, the average long term trend in prices has been upwards for a very long time.Last year, for example, average prices paid for properties sold in Crawley increased year on year by 10.8%, as we reported in last months’ Crawley Property Update (e-mail crawley@northwooduk.com and request your copy !)
A 3% increase on the Stamp Duty rate for 2nd property purchases would therefore have been easily “gobbled-up” in last years’ average property price rise.
The Stamp Duty surcharge appears even less significant when compared with average price increases in Crawley, over the last 15 years or so. According to the Land Registry, the average price paid for property in Crawley is now some 135% higher than it was in the year 2000.
Putting the Stamp Duty Rise into Context
The Chancellors additional 3% Stamp Duty increase from April 2016 is not particularly welcome for buy-to-let investors. However, we feel that when property price rises over the medium to long term are factored in, it is not something that should deter those determined to invest in the property market.
Of course, it should be stated that investing in the right property and in the right location, is perhaps even more important than it has ever been. If you’re in any doubt about what property to invest in, make sure you talk to a local property expert.
Last, but not least, it has been reported that the Government is currently proposing that the Stamp Duty surcharge can be offset against any capital gain when the property is sold. However, we can’t guarantee that ministers won’t change their minds at some point in the future, perhaps when we’re not looking !
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