UK stamp duty changes not a deterrence
Add BT as a preferred sourceTHE UK government's Autumn Statement and Spending Review from Chancellor George Osborne in in November 2015 brought an unexpected stamp duty rise for buy-to-let investors.
From April 1, 2016, a new Stamp Duty Land Tax (SDLT) will be charged on second homes and buy-to-let investments valued over £40,000 (S$81,497) in England and Wales. Investors will have to pay a 3 per cent surcharge on top of the current progressive stamp duty. The new tax will impact investments of between £200,000 and £800,000. These changes are underpinned by a goal to support the long-term health and stability of the UK housing market. It not only shows the government's commitment to increasing supply for hopeful first-homeowners but also means that further growth of this lucrative market will be sustainable.
This surcharge ensures that only those who can sensibly afford to buy-to-let will be making these investments. Investors with experience in other buy-to-let markets will know that the UK's stamp duty rates are not too high from a global perspective either - Berlin charges 6 per cent and Australia 4-5 per cent. A higher rate in the UK just reinforces the market so that only credible and reliable borrowers are taking part. Furthermore, the additional stamp duty should be put into perspective. An analysis of historical property price growth across England and Wales over the last 20 years (211 per cent growth) provides a useful context to measure the potential impact of this new surcharge. In London, where property prices have climbed 82 per cent over the last decade and 446 per cent over 20 years, this additional 3 per cent becomes even less significant. Even in undervalued Manchester and Birmingham, past performance reinforces the significant price growth forecast in these markets.
