SDLT holiday causes highest buy to let sales in four years

Undeterred by the global pandemic, weakness in rents, or changes to tax, buy to let sales have reached their highest figure since December 2016.;
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Undeterred by the global pandemic, weakness in rents, or changes to tax, buy to let sales have reached their highest figure since December 2016.

Hamptons, part of the Countrywide brand, has published a report on the findings of the buy to let market in 2020. They attribute this boom to the stamp duty holiday.

Rental properties comprise 15% of all sales

Landlords made up 15% of property sales in November, the highest figure since December 2016.

The majority of the buy to let rush has been concentrated in the midlands and the north, with 22% of homes sold in the west midlands bought by investors.

Blackpool was the town that landlords used the stamp duty holiday most effectively, with 7/10 properties sold as buy to let.

Holiday savings

Buy to let buyers are still paying the 3% surcharge on rental or second homes, which cost more than £40,000. However, the total they have to pay is significantly less, due to the stamp duty holiday.

A typical investor who is liable to pay this extra amount, would see their stamp duty bill rise from £5,400 to £6,500, if they fail to complete their purchase before the deadline.

Race to beat the deadline

March 31st is quickly approaching. There are concerns that high demands for mortgages and restrictions due to the pandemic, have created significant delays in the purchase process.

The Hamptons report estimates that landlords will have paid £365m in stamp duty, on sales agreed between September and November, as long as they complete before the tax holiday ends.

If they fail to complete before March, this figure could rise by 20%. Costing the landlord industry around £74 million.

Commercial Trust’s sales director, Jorden Abbs, proposed a way to mitigate the risk of missing the deadline last week, click here to read the full article.

Rental market recovering?

Head of research at Hamptons, Aneisha Beveridge, said:

“Just like in the months leading up to the introduction of the three per cent second home surcharge back in 2016, landlords have rushed to take advantage of reduced stamp duty bills.  But the difference between today and 2016 is that the stamp duty cliff edge is around five times smaller, meaning the financial impact of missing the deadline is reduced.”

“The rental market has shown signs that it is shaking off its Covid-induced hangover with rents rising in every region of England for the first time since March.  With nearly a fifth fewer new rental homes coming onto the market than last year, it has put upward pressure on the recovery in rental growth.  It is, however, likely that the homes being bought by landlords now will hit the rental market early next year which could serve to stifle rental growth in 2021.”

Although slower to recover than its residential counterpart, there are strong signs of life within the rental market.

Some believe that the unprecedented leap in the number of first-time residential buyers is to blame for the slow recovery, as this can be equated to less demand for rental properties.

To read the rest of the Hamptons report, click here.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.