The Property Ombudsman

What the Autumn Statement means for buy to let

On Wednesday 25th November, Chancellor George Osborne announced a spending review for 2016 which saw several changes take place. Less than two weeks on, the full details have still not been released and much of the announcement has been left open to interpretation but here we’ll share our run-down of the changes and what they mean for investors.

Continuing with the Northern Powerhouse vision

The concept of creating a stronger economy for the UK by joining up the most powerful cities in the North has continued to remain a strong focus from the government.

The latest announcement saw a further £400 million worth of investment pumped into the Northern Powerhouse; £150 million of which is set to introduce an “oyster” style ticketing system for transport across much of the North.

As we already know, Manchester is a key driving force behind the Northern Powerhouse concept, with other cities such as Leeds, Liverpool and Sheffield also seeing major changes to their economy, thus effecting the housing market. Investors looking at buy to let are even more likely to turn their attention to the North following on from this announcement, as heavy investment and transport changes will boost rental demand even further.

Housing supply

The lack of housing supply has raised concerns for some time and the Chancellor has vowed to sell £4.5 billion worth of government land and property in order to create more space for new homes. This also includes making use of underused courts and old style Victorian prisons to make way for new housing.

The government are looking to double their housing budget which is predicted to see them build 400,000 new homes by 2019, making it one of the biggest affordable housing programmes in several decades. This acts as positive news for all of those looking to get on the housing ladder, including first time buyers and investors.

Stamp duty at 3% for investors and second homes

One of the main changes to be announced was the change to land tax. In the Autumn Statement 2014, stamp duty saw an overhaul which benefitted much of the population, by replacing the old “slab” style system with fairer tax measures. One year on, there has been another shake up to the stamp duty system.

From 1st April 2016, buy to let investors and those purchasing a second home in the UK will be expected to pay an extra 3% surcharge on top of the current stamp duty rates on properties worth over £40,000.  

While the announcement may have come as a surprise to some, here are some important points to consider regarding the new rules for buy to let:

  • Interest rates on mortgages are predicted to remain low, meaning the market will still see sustainable growth and high returns on cash invested.
  • Stamp duty in the UK is still considerably lower than other countries, even with a 3% surcharge.
  • Stamp duty could be offset by capital growth over a relatively short period of time
  • Buy to let remains a buoyant healthy market, and the returns gained from property still far outweigh other investment choices, such as shares, ISAs and bonds.

Graham Davidson, managing director of Sequre Property Investment comments –

“Property investment is ultimately about long term growth and consistent rental profit, and this increase in stamp duty for investors is a nominal part of the process for many who are looking at investing for the future. Savvy investors who monitor the market closely will be well aware that capital growth in the northern market is steaming ahead. The entry prices are also far lower and the additional stamp duty could be offset by capital growth over a relatively short period of time. Where many individuals have concentrated solely on returns, capital growth will now become just as important.”

“Investors have a window of opportunity to invest in buy to let property between now and April 2016 and to avoid the additional 3% surcharge, a factor that many individuals are already taking full advantage of.” 

For more information on the latest announcements or to speak to a member of our team regarding Sequre’s exclusive hands-off buy to let opportunities call 0800 011 2277.

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