It’s been a momentous year in the world of UK lettings, with a raft of new laws and legislations that will shape tenant accommodation moving into 2016. The biggest change, however, was saved for the end of the year when Chancellor George Osborne announced a new way of taxing buy-to-let property investment purchases.
‘How does this affect me?’, you might be asking as a relocation agent. “The new stamp duty system, could threaten the supply of rental properties in the UK market,” comments Alex Hancock, a Director at destination service provider Klippa Relocation. “Especially when dovetailed with the new lettings rules introduced this year, the Right to Rent checks that are being introduced in February 2016 and the reduction of mortgage interest tax relief, which comes into effect from 2017. Some landlords are already beginning to question whether buy-to-let is more hassle than it’s worth.”
For the immediate future, private landlords – lone operators who have a small but growing portfolio and potential landlords thinking of entering lettings – may be reeling from the stamp duty announcement. The increased levy starts from 1st April 2016 and sees buy-to-let purchases taxed at a minimum rate of 3% (much higher than presently) – with a sliding scale that rises in line with a property’s value. To illustrate, the stamp duty bill of a property worth £300,000 bought before 1st April 2016 is £5,000. The same property purchased after this date will attract a stamp duty bill of £14,000 – a huge leap that has to be balanced against potential profit.
There are two trains of thought as to what will happen next. Firstly, estate agents are bracing themselves for an imminent rush of buying activity from investors keen to get new buy-to-lets completed before 1st April. The result may be a glut of rental properties flooding the marketing in early spring 2016.
The second train of thoughts is one of contraction – of a lettings market that clams up from April 2016, with the changes prompting some landlords to stop adding to their rental portfolios or even selling up to take advantage of rising property values. Whether this is realized remains to be seen.
There is another dimension to factor in, however, which comes in the shape of a new breed of corporate landlord. REITs – Real Estate Investment Trusts – are being heralded as the future of the UK’s private rental market. This will see businesses, insurers, pensions and even charities bulk buy properties – or even build them themselves – with the sole intention of retaining ownership and releasing the units to the private rental sector. There’s even a Government incentive – with a £1 billion fund available for Build to Rent schemes.
It’s all change in lettings in 2016, and Klippa Relocation – a destination service provider specialising in finding rental properties and client orientation – will be bringing you updates throughout the year ahead.