An interesting new study on the potential financial impact of the additional 3% Stamp Duty Land Tax on landlords has been conducted.
With the changes coming into force on Friday, the research from LendInvest provides interesting information for landlords.
Charges
The study shows that 13% of landlords in England will pay stamp duty for the first time after Friday. Property prices in 14 out of 105 postcode areas average at £125,000 or less. This means that future buy-to-let purchases will be subject to up to £3,750 in Stamp Duty Land Tax.
LendInvest’s research revealed that Darlington, Halifax and Doncaster will be among the most badly affected regions for first-time stamp duty payments. This is due to the fact that they contain the most properties that will be subjected to stamp duty charges for initial payers, but also as they contain lowest average rents.
86% of those subjected to stamp duty payments for the first time will be in the Northeast or the Northwest. 12 out of the 14 postcode regions where house prices are under £125,000 are in these regions.
Where will increases in Stamp Duty Land Tax be felt most?
Capital pains
Outer London landlords will be bracing themselves, with the research showing that they will see the greatest increase in stamp duty payments due. Locations such as Tunbridge Wells, Dartford and Romford will see Stamp Duty Land Tax rise more than 300%, in comparison to 200% in Inner London.
If the estimates in the study are correct, landlords in the capital and in the Southeast will need the longest to repay greater stamp duty charges.
Bad news
Christian Faes, CEO of LendInvest, noted, ‘the stamp duty hike spells bad news for landlords-and their tenants. Put simply: when taxes rise, someone has to pay. Our latest BTL Index shows that the likely payer is ultimately going to be the tenant, with higher rents. The Stamp Duty Land Tax hike will cause rental yields to fall for landlords, putting pressure on them to raise the rents they charge.’[1]
Faes went on to say that, ‘it’s not just in Inner London where landlords’ taxes will soar, that we can expect to see landlords and tenants squeezed financially. The Index shows that all across England and Wales, we will see many landlords factoring several thousands of pounds of stamp duty tax into their budgets for the first time. Towns like Sunderland, Blackburn, Wigan and Oldham could be particularly badly impacted: here, rental yields are comparatively good but average house prices are below £125,000 meaning SDLT will be imposed for the first time.’[1]
Concluding, Mr Faes said, ‘the Treasury’s decision to inflict this tax hike is part of their longer term plan to professionalise the buy-to-let market and make Britain a country of homeowners. While the mission has its merits, there are no quick fixes to the nationwide housing crisis. Until there are more houses on the streets that people can buy at reasonable prices, landlords have their place and their tenants must be protected.’[1]
[1] http://www.propertyreporter.co.uk/hero/stamp-duty-blackspot-areas-revealed.html