It has been two months since the Chancellor announced the incoming 3 percentage point surcharge on buy-to-let or second properties and yet it continues to dominate debate in the market, which reveals the level of concern that surrounds the proposals.
The Government’s intention is clearly to free up housing stock for the owner-occupied sector but, as the CML argues, it is not certain that the measures imposed will achieve this. Moreover, why should it come at the expense of the private rented sector? As the trade body says: “If the surcharge proposal is designed to promote homeownership, we think there should be better evidence as to why this requires a reversal of growth in the private rented sector.”
It could transpire that landlords retain their portfolios but hike rents to counteract the fact that buy-to-let will be less profitable. If the Government’s policy is to increase homeownership then this is a baffling measure as it would likely mean renters have less money to save for a deposit.
The proposals are in the consultation phase at the moment but there are unlikely to be many changes to the proposed framework.
While it is futile to call for a policy reversal, there are measures the Government could implement to reduce the likelihood of unfavourable and unintended consequences.
As things stand, some borrowers may get caught by the new rates when buying their main residence if there is an overlap between selling their home and buying a new one. The CML suggests this could be avoided by allowing borrowers to defer payment of stamp duty for 18 months, which it says would be “fairer and more efficient”.
A sensible solution, but it goes to show how hastily this policy idea has been cobbled together. It also suggests that the Government does not really understand what effect this will have on other parts of the market.
The holes in the policy are obvious but, worst of all, the Government has given the industry very little time – just a month – to digest the details and offer amendments or alternatives. If this is going to be its approach to all housing issues, we are in for a very bumpy ride.