George Osborne’s recent announcement that stamp duty on buy-to-let properties and second homes is to rise by 3% in April 2016 looks set to spark a rush of buyers trying to complete before the changes take place. The move, which was put forward by the chancellor in his autumn budget statement recently, has been widely criticised, and many believe that its introduction could see rents rise and new-build developments stalled.
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The Institute for Fiscal Studies condemned the move and stated that the “disproportionate” rise will depress the property market in the long term. The IFS, an independent research institute, went on to say that they believed that the move would not only lower house prices, it would also cause problems for future developments as well.
The introduction of higher stamp duty charges will devalue properties as prospective landlords and homeowners will be less willing to pay premium prices when they will also be hit with increased fees. This means that property developers will be less incentivised to build new homes, as their returns will be far lower and the properties more difficult to sell.
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As many as 50,000 people could try to complete property purchases before the new charges come into force in April next year, and there are also concerns that prospective landlords will get ‘creative’ in order to avoid the charges altogether. Many couples are already considering splitting the ownership of their properties, while others will undoubtedly be looking at the prospect of living in their new property for a short period before placing them on the rental market.
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Despite the criticism to the new proposals, the chancellor remains confident that the 3% increase will bring in an additional £1 billion to the Treasury by 2021. It has also been announced that up to £60 million of the funds raised by the proposed stamp duty tax increases will go towards helping those who are struggling to get onto the property ladder.
Areas where second homes are most popular have seen property prices soar out of the reach of ordinary, local people and any additional help from the Treasury will be welcomed by those affected. The Government’s Help to Buy scheme is also to be extended to 2021 in England, an additional 12 months longer than planned.
In the capital, buyers will be able to obtain loans worth up to 40% of the properties’ value providing they can get a 5% deposit together for the purchase. Across the rest of the country, loans of up to 20% of the overall property value will be made available to those who meet the necessary criteria. All of these loans will be kept interest free for five years.
This means an extra £6.9 billion for housing from the Government in total, £2.3 billion of which will be allocated to the starter homes programme. Another £4 billion is to be made available to local authorities and housing associations in the hope that more homes will be built for those who wish to gain access to the property market via shared ownership.
If you enjoyed this blog post then perhaps you would like to read “What Is A Buy To Let Mortgage and Is It Right for Me?”
Feature image credit: Birmingham News Room via Flickr.