When it was announced that the stamp duty surcharge on BTL would increase by 3% on 1st April 2016, a surge of investors pushed to ensure their deals were completed before the deadline. This was a big move by the government, with relatively little warning given when it was announced in the 2015 autumn statement.
The increase had a two-fold purpose: to level the playing field for first-time buyers, whilst generating extra tax to increase the supply of homes in the UK, by investing it into local communities’ housing projects. But how did this big change affect business around the country for everyone involved?
Business climbs before deadline
As soon as the announcement was made in November, lenders reported a surge in interest from BTL borrowers, who wished to purchase their property investment before the deadline loomed. Closer to the deadline, banks reported an eight-year lending high in March, with gross lending reaching £17.1bn, up 64% year-on-year.
Estate agent group Countrywide revealed that around £3.4 billion of properties were exchanged on the 31st March alone. Across the country, estate agents, sellers and buyers delivered by hand key documents to remove the possibility of postal delay.
Countrywide estimates that those who avoided the changes saved a total of £275 million on stamp duty. As landlords hurried to complete before the deadline, solicitors around the country worked over the bank holiday weekend to ensure their clients were able to complete. With £6,000 being added to the average £200,000 property, there was a big incentive to get deals through.
House prices increase from high demand
According to real estate portal Rightmove’s HPI, the rush to beat the stamp duty increase resulted in prices for three or four bedroom detached homes increasing by 0.6%. At the top of the market, where properties with four, five or even more bedrooms were put on sale, the prices rose by 1.9%.
Some experts suggested that the changes would see a number of landlords selling on their properties to other landlords. But figures released reveal that those who sold during the transitional period were mostly first-time sellers looking to trade up or remortgage to take advantage of continuing low rates.
Landlords prepare for the next April deadline
As the dust settles after the BTL rush, lenders, investors and advisers alike will begin to cast their eye on the upcoming reduction in tax relief for landlords, due to come into effect from April 2017. The quieter period following the deadline will no doubt give investors, both existing and new to the market, time to manage the upcoming tax relief changes. Some landlords are even looking at moving their portfolio to a limited company mortgage to avoid many of the changes, although there are other costs to consider.
There are some important decisions to be made by those looking to invest in the buy-to-let sector over the coming year. Talking to an adviser will give you a clearer picture of how best to invest in what is still a growing and popular sector, despite more changes being on the way for landlords.
If you would like to discuss this, or any anything else, contact our advisers today on 01202 937444 or visit our other websites to speak to a mortgage broker in Reading or a mortgage broker in Bournemouth