The Autumn Statement has been dubbed by industry experts as a wasted opportunity to scale back punitive buy-to-let reforms that will hit landlords and tenants.
Ahead of the statement, members of the buy-to-let community were hoping that Chancellor Philip Hammond would water down or scrap the stamp duty land tax surcharge introduced in April this year, and the changes to buy-to-let tax relief that will be effective from April 2017.
The surcharge has seen buyers of second homes and buy-to-let properties pay an additional 3 per cent to the Treasury, while the tax relief changes will cause landlords to lose increasing amounts of tax relief every year until 2020.
Mortgages for Business managing director David Whittaker says: “Unsurprisingly, the chancellor demonstrated his commitment to the stance taken by his predecessor by ignoring the calls of landlord groups to roll back tax changes, some of which have yet to take effect.”
Hope Capital chief executive Jonathan Sealey says: “We all had high hopes that the chancellor would tackle the one thing that many believe is killing the market, but disappointingly stamp duty was again conspicuous by its absence.”
The effect of leaving these reforms unchanged will devastate landlords and tenants, according to the industry. Their combined impact on the buy-to-let and private rental sector could lead the market to stagnate, buy-to-let investors to sell up and rents to increase.
SPF Private Clients chief executive Mark Harris says the chancellor’s lack of changes to stamp duty “is no real surprise but is still an issue that needs addressing because it is not just about rich people. Punitive stamp duty charges higher up the chain stall the overall market – and prevent people moving up and down”.
The National Landlords Association said in February this year that the reforms would prompt 500,000 landlords to sell properties before February 2017.
Fleet Mortgages chief executive Bob Young thinks some landlords will sell in the short term because of the tax changes but most are unlikely to be put off.
He says: “As a buy-to-let landlord you have few choices. You can sell the properties and pay the capital gains tax due, which is a bummer. Then, what do you do with the money? Stick it in the bank and hope to get a 1 per cent return? You may as well stick it under the bed.
“You can go on very nice holidays and buy a big car, but you’ve got no investment for the future. So why would you sell? You’d keep it and suck up the cost in the meantime. Very few people do buy-to-let for an instant profit, and they’re foolish if they do.”
Mortgage Advice Bureau chief executive Peter Brodnicki says leaving the tax surcharge and tax relief changes untouched will lead to higher rents, as will the imminent ban on letting agent fees.
He says: “Given that the private rented sector is a key provider of housing in the UK – some would say filling the gap that the Government has left wide open – it seems ludicrous to place even greater fiscal demands on those who contribute towards this key element of the property ecosystem, which ultimately could lead to a lack of supply in this crucial area if it becomes unprofitable.
“Stamp duty is a draconian system which, even though revamped in 2014, is still poorly thought out and is surely ripe for an overhaul.”
But the market is divided on whether such an overhaul is likely, despite the announcement in the Autumn Statement that the Government has hiked its profit forecast for the SDLT surcharge by 81 per cent to £6.9bn, while admitting being unprepared for the number of deals timed to dodge the extra tax.
Documents published as part of the Autumn Statement say the 3 per cent surcharge on buy-to-let and additional properties was originally expected to raise £3.8bn between 2016/17 and 2020/21. However, Young says the Government has no incentive to reform either tax.
He says: “I don’t see a hope in hell of either thing changing.
“The underlying issue for the Conservative government hasn’t changed. It wants to stop the flow of properties from the owner-occupied sector to the private rental sector because it can’t build enough properties.”
Vantage Finance managing director Lucy Hodge hopes for reform of stamp duty but deems it unlikely for some time, if at all.
She says: “They would have egg on their faces if they went back on it too quickly. They want to see how it pans out and its impact on their coffers before they make any changes.”