The 3% increase in stamp duty land tax on buy-to-let properties has led to many landlords to change their buying habits, according to a new report.
Data from Countrywide suggests that buy-to-let landlords are targeting cheaper properties to try and offset the additional charges.
Falls
The average house price paid by residential landlords dropped by 8.3% month-on-month in April. Figures show that investors paid £178,000 on average for a home last month, in comparison to £194,000 in March and £188,000 in April 2015.
London experienced the sharpest drop in property price paid, with landlords spending £365,000 in comparison to £436,000 in March. Overall house price values in the capital rose by 13.9% in the last twelve months, with landlords paying 8.2% less than they did in April 2015.
What’s more, April saw less landlords buying homes, following the rush to beat the stamp duty deadline. 61% more landlords purchased an investment property in the first quarter of 2016, in comparison to one year earlier. With many sales completed in March that would have probably been completed in April, there was a fall of around half of landlords purchasing during the month. However, sales to first-time buyers increased by 19% in the same period.
Landlords’ habits changing after SDLT rise
Adjusting behavior
Average rents increased nationwide by 2% in the last year, which has lead the typical UK rent to stand at £932. In addition, rental growth is only half the rate as it was during 2015. This is due to a number of contributing factors, such as affordability concerns and an increase of homes coming onto the market.
Johnny Morris, Research Director at Countrywide, noted, ‘April’s fall off in investor activity seems to be the consequence of landlords bringing forward purchases to beat the stamp duty deadline. Rather than being dissuaded by the new 3% charge it seems that landlords are already adjusting their behaviour. In response to the extra purchasing costs many are choosing to buy cheaper homes that offer a higher yield and of course a lower stamp duty bill.’[1]
‘There’s early signs that first time buyer numbers are increasing as investor activity has declined. But it’s too early to tell whether this is simply the after effects of the stamp duty rush or the start of a longer term trend,’ Morris added. [1]
[1] http://www.propertyreporter.co.uk/landlords/landlords-change-tact-and-lock-on-to-cheaper-properties.html