Will the rise in UK stamp duty tax put off buy-to-let expats?
The new levy, set to come into effect from April 1 next year, will increase stamp duty by 3% on additional rental properties
The UK government’s move to increase tax on additional homes is unlikely to put off British expats from purchasing buy-to-let properties back home, an offshore lender said earlier this week, while others claimed the upcoming rules were unclear.
Under the new levy, stamp duty on a $225,000 house will rise from $750 to $5,700.
“While this is clearly not a welcome decision, most expat investors view UK property as a long term investment,” said Jim Coupe, managing director of the Guernsey-based Skipton International in a press release.
“Hence a 3% rise over the lifetime of a property should be seen in that context.”
Andrew Blatherwick, a consultant from Dubai-based consultancy Hoburn Assets, which advises British and other Western expatriates, said that the conditions of the new levy are not immediately clear – and that British expats may not fall under the new rules.
“I don’t think enough information has come out yet how that will hit somebody who is an expat or an total overseas, i.e. non-UK buyer who is buying one property and is buying it through a residential mortgage,” said Blatherwick. “I think that could be a loophole.”
The UK government introduced the measures to ease demand for those squeezed out by house price rises.
Yet some industry experts suggest that landlords will respond by raising rents.
“The biggest losers [from the new tax] are tenants who will now find it even harder to get the accommodation they want at a price they can afford,” Alan Ward, chairman of the Residential Landlords Association, was quoted as saying by AOL’s UK site.
A serious shortage
This “will exacerbate an already serious shortage of properties in many areas.”
Double-digit price rises in London last year and at the start of 2015 have led to criticism that buyers who snap up properties to rent them out have prevented would-be first-time buyers from getting a foot on the property ladder.
Ahead of the hike, tens of thousands of people will likely rush to complete their purchases of buy-to-let properties, according to the Institute for Fiscal Studies.
The research house, quoted by London-based paper The Telegraph, warned that over the long-term, the tax would dampen the property market.