Strutt & Parker reaction to Autumn Statement

GEORGE Osborne's Autumn Spending Review took place last month with key changes to the economy announced.

In brief:

• Stamp duty land tax: Higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000) that fall under buy to let properties and second homes, from April 1, 2016.

The higher rates will be three percentage points above the current SDLT rates.

• Starter Homes: 200,000 Starter Homes will be sold at a 20 per cent discount compared to market value to young first time buyers, with a £2.3 billion fund to support the delivery of up to 60,000 of these, in addition to those delivered through reform of the planning system.

• Capital Gains Tax: From April 2019, the payment window of any CGT due on the disposal of residential property will be shortened to within 30 days of the completion of the disposal.

This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.

Andy Martin, Senior Partner at Strutt & Parker, said: “The introduction of this new tax is yet another limiter to the Buy-to-Let market, in addition to the ones we saw on landlords in the July 2015 summer budget – and has the potential to weaken this element of the market from April 2016 when it comes into effect.

The fundamental issue of London’s growing population and limited housebuilding has not really been tackled head-on by these new measures. In fact, many new build development schemes have only got off the ground because of the willingness of investors – whether domestic or overseas – to buy off-plan and effectively forward-fund these schemes.

Some of the Government’s demand side measures, aimed to help first time buyers, will help demand from that segment but typically owner occupiers and first time buyers are generally unwilling to buy off-plan, when BTL investors have traditionally been far keener to get involved.

Therefore we believe that this measure is likely to damage development – leading to a shortage of supply and further upward pressure on rents and capital values. Prime London in particular has the potential to be disproportionately impacted.”

New three per cent rates of SDLT for buy-to-lets and second homes The government are planning to consult on the policy detail, including whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.

It will not apply to purchases of caravans, mobile homes or houseboats; nor to corporates or funds making significant investments in residential property.

The Government has yet to release a detailed briefing paper on the subject.

Simon Merton, Head of Strutt & Parker’s Moreton office, said: “The reality is that this news makes buying a second home look less appealing. According to our data, 7.2 per cent of homes purchased in the third quarter of 2015 were second homes, 5.2 per cent were for investment and the remaining 87.6 per cent were for primary residences, so it is a significant part of the market. For anyone who is thinking of selling their property aimed at the second home market, I would encourage owners to come to the market sooner rather than later at a sensible price so we can try to complete the transaction before the new stamp duty kicks in April. A few details of this proposal are still to be ironed out, so if you’re unsure on how these new measures will affect you, please get in touch.”