UK to increase stamp duty on buy-to-let, second homes

Madrid

BRITISH Chancellor of the Exchequer George Osborne will increase the stamp-duty rate for purchases of buy-to-let and second homes to reduce competition for first-time property buyers. Shares of small banks that provide loans to landlords declined.

Buyers of second homes and buy-to-let properties in the UK will, from April, be subject to stamp duty sales tax that's three percentage points higher than those who are buying a home to live in, Mr Osborne said during his Autumn statement on Wednesday evening.

The additional revenue raised from the increase will be spent on the construction of new homes and improving existing ones across the country.

"More and more homes are being bought as buy-to-let and second homes and many of them are cash buyers," he added.

"People who are buying a house to let should not be squeezing out people who are trying to buy a home for their families."

Demand had already been undermined by higher stamp duty rates introduced last year, which climb to as much as 12 per cent of the cost of the most expensive homes.

Following that tax rise, an investor buying a £5 million (S$10.6 million) home paid almost £364,000 more in tax than if they spent the same amount of money on 10 apartments costing £500,000 each. "Many buy-to-let investors underpin some of the bigger developments in particular," said Jeremy Leaf, former chairman of the Royal Institution of Chartered Surveyors.

Other measures announced by Mr Osborne during the Spending Review address the problems for home buyers in London, where prices have risen 40 per cent since the beginning of 2013.

Small British banks which concentrate their efforts on lending to buy-to-let landlords plunged. Aldermore Group slumped 5.4 per cent in London trading, while OneSavings Bank fell 7.3 per cent and the Paragon Group of Companies declined 5.3 per cent. BLOOMBERG