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Leader: Dear Chancellor… Not all tenants want to buy

If there was any doubt about what the Government’s strategy for the housing market was, it was made plain in last week’s Autumn Statement: to boost the proportion of owner-occupiers at the expense of the buy-to-let sector.

In the summer Budget, George Osborne announced a tapering of landlord tax relief to the basic rate of tax starting in 2017. Last month, he said he would give the FPC the power to contain the sector, although the Treasury has not revealed what powers would be at the committee’s disposal. Then, last week, the Chancellor announced increased stamp duty rates for those purchasing buy-to-let properties or second homes from April. These rates will be 3 percentage points above the current stamp duty rates. The Government will consult on the details, which include whether to provide an exemption to corporates or funds owning more than 15 residential properties.

Landlords are understandably worried, with one on the forum Property Tribes warning that the cumulative effect of the summer tax changes and increased stamp duty rates would “send a tsunami” through the sector.

The response of the mortgage community, however, has been more measured, seeking to dismiss suggestions that the changes will kill off the sector.

While at this stage we cannot accurately predict the total effect of these policies, some things are very likely to happen. There is little doubt that, from April, buy-to-let will become a less attractive investment for some, with smaller landlords, or those without a decent amount of cash behind them, likely to look for returns in other asset classes. That said, a surge in activity is likely as landlords look to avoid the stamp duty hike.

Will rents rise? Probably. And the long-term supply of rented housing is likely to fall in the medium term.

It is frustrating that the decision to press ahead with these changes was made before we had studied the effects of the tax relief cuts. While the Government may not have killed off the buy-to-let sector, it has certainly made life more difficult for tenants. It needs to learn that some people prefer to rent because it suits their lifestyle, so to penalise them is grossly unfair.

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  • Steven Balmer 2nd December 2015 at 9:59 am

    There are more pressing concerns such as the inability to offset interest from mortgage costs as this is a legitimate expense. Why should corporates or equity funds, which have a history of failing to pay appropriate tax, get a pass from these stamp duty changes? Surely it is corporates who let for profit exclusively and should be less affected by changes in tax and have greater ability to offset risk across a portfolio. This is as opposed to individuals who do not necessary let for profit but a myriad of different reasons, such as migration for work or having to rent when they outgrow a property but can’t buy another. Seems that this Tory government is still listening to lobbyists who want more investment in banks and equities and want to kill off an attractive proposition for the masses and making it a elite profit or investment driven strategy only.