SDLT hike will hit families and young professionals

The government's new stamp duty hike for investors will make it harder than ever for renters to get on the property ladder, according to a legal expert.

1 April 2016 will see a 3 per cent surcharge applied to Stamp Duty Land Tax for anyone looking to buy a house who already owns one property.

For some landlords the hike will see their bill tripled. Stamp duty on a house costing £275,000, for example, will to rocket from £3,750 to £12,000.

Chancellor George Osborne introduced the measure last autumn to stop first time buyers being 'squeezed out' of the market by buy-to-let landlords. However, some critics say the new rate will have the opposite effect.

Julian Rogozinski, a real estate lawyer at Cassell Moore, has predicted not just a shortage of properties available to rent, but also a huge rise in rental prices, and fears the housing market could stagnate.

'Home ownership is a key milestone in the development of a family and the government's open commitment to achieving this is to be respected,' he explained.

'But the SDLT surcharge, and its far-reaching impact across all residential property sectors, does not achieve this. It adversely impacts on those owners operating on a very small scale, often with only one other home. And the impact will be felt nationwide - and met with an angry backlash.

'We're going to see increased rents for tenants and a reduction in house purchases for those wanting to retain ownership of their existing home,' he continued. 'That's because many buy-to-let landlords will simply pass on the cost of the increased stamp duty directly to those who end up renting the property.'

Meanwhile a reduction in the numbers of landlords may push rents up as demand exceeds supply. 'It's a worrying time for renters who are already struggling to get their feet on the first rung of the property ladder,' said Rogozinski.

The higher SDLT rates were announced in 2015's Autumn Statement, alongside promises to deliver 400,000 affordable homes by 2020/21, an extension of the Right to Buy for housing association tenants, an acceleration of housing supply, and the introduction of London Help to Buy.

For those purchasers that already own at least one other residential property, they will only avoid being caught by the new rates if it can be shown they are replacing their 'main residence'.

Bigger fish

There is, however, a proposed exemption on the increased rates available for those with 15 or more properties. As Rogozinski pointed out, the system will let the 'bigger fish in the buy-to-let sector pass through the net'.

'The question here is: "Has the government got this right?",' he added. 'The government claims that the proposed changes are part of its commitment to supporting home ownership - yet one must query what impact those with one buy-to-let property, or a "second home", are doing to adversely impact on the growth of home ownership?

'With the rise of student loans, house prices and general costs of living, settling down for families has not been an option available for many under 26 years old.

'Rather, many younger professionals have chosen to invest their hard earned savings wisely to purchase a small buy-to-let property that will get them on the ladder, and produce a modest income while they concentrate on their career. Now these people are being penalised for that choice when it comes to buying their main residence.'

Rogozinski has questioned whether the government really intend these changes to support home ownership.

'[If they had] they would have targeted those buy to let investors operating on a large scale, whose market monopoly and bulk residential purchases are arguably having the biggest impact on reducing the availability of home ownership,' he remarked.

'Yet those with at least 15 residential properties will actually be exempt from the changes - an exemption that was clearly intended to support house builders across the country. A multiple residential home ownership exemption from the SDLT surcharges should rightly be available to the house building sector.

'Yet the government is not segregating the buy-to-let market from the house building sector in its policy and that is where it fails. The exemption will allow those bigger fish in the buy-to-let sector to pass through the net and continue to build on their portfolio free from the SDLT surcharges.'

Rogozinski's comments come after the Association of Residential Letting Agents (ARLA) reported a 'storming of the UK housing market' ahead of the April deadline as they look to get in before the stamp duty hike hits home.

David Cox, the managing director of ARLA, said: 'Buy-to-let landlords determined to complete purchases before the changes come into force in April are storming the UK housing market, meaning the lull we'd usually see is less significant.

'This could well be the calm before the buy-to-let storm. After April, we're very likely to see the number of buy-to-let properties on the market begin to decrease, and this will most certainly have a detrimental effect on renters across the country.'