For buy to let landlords, now is the time to look at acquiring new assets as property investors are soon to be affected by legislation changes.
In his Autumn Statement last month, Chancellor George Osborne announced a surcharge would now be applied to stamp duty for buy to let landlords purchasing income-generating properties.
The 3pc surcharge on stamp duty, not applicable on primary properties, will come into effect April 1, 2016. Many landlords are therefore contacting estate agents about their options to buy new properties before incurring this extra fee.
Surcharge to take effect April 1st 2016
According to Osborne, the changes to stamp duty are designed to make life easier for first-time buyers, and will not apply to purchases made by this demographic.
However, for the average buy to let buyer, these changes could amount to a significant rise in the amount of stamp duty land tax (SDLT) payable. For example, on a property sold at the UK national average price of £186,350, the rate of stamp duty would rise from £1,227 to approximately £3,067.
However, there are some exceptions, as the rate rise will not be applicable to those who buy mobile homes (including caravans) or houseboats. Subject to certain terms, companies or investment firms that own 15 residential properties or more may also be exempt.
In addition to the rise in stamp duty on buy to let properties, Osborne also announced plans to heighten the rate of rate tax relief on buy-to-let mortgage interest as of 2017, and reducing wear-and-tear allowances as of April 2016. In spite of this, there are still substantial gains to be had by investing wisely with the help of knowledgeable estate agents with experience in buy to let properties specifically.
The housing market in East Sussex for example enjoyed a prosperous 2015; research from Knight Frank revealed that 13 towns within the area saw impressive price growth, with Lewes in particular enjoying the strongest recovery since the recession.
There is a number of other well-performing submarkets to examine as well. The average price of property in popular Seaford is now £281,843, slightly more expensive than that of nearby Newhaven, £213,343.
Prices in Seaford have risen 7pc year-over-year, and an impressive 15pc from 2007. Local prices here and elsewhere such as Peacehaven are expected to remain strong, and so interested buy to let landlords should contact a local estate agent to acquire property here before the stamp duty changes come into effect.
The Treasury has yet to provide a detailed breakdown of the change in process, beyond naming the date the surcharge will come into effect. With four months to go, investors are encouraged to take advantage of residential investment opportunities sooner rather than later.