For fears of wider issues
Increasing Stamp Duty Land Tax (SDLT) on second homes and Buy-to-Let (B2L) investment properties is part of the government’s Five Point Plan to increase homeownership.
However, lenders rally together to communicate to the government that the decision was hasty and will have a wider effect on the housing market as a whole.
Increasing home ownership in the UK
The government’s Five Point Plan to help low-cost home ownership for first time buyers includes:
- the up-and-coming 3% extra tax charge on buy-to-let investment properties
- a plan to build 400,000 more affordable homes by 2021
- extend the Right to Buy scheme
- Introduce London Help-to-Buy scheme
- Speed up house-building
The first initiative to add extra SDLT to second homes and buy-to-let investments aims to use the estimated £60 million additional tax to build affordable housing in areas where second-home ownership has become a problem.
The economic conditions in the past few years has made it viable for investors to purchase property for rental purposes, using the low-cost loans available plus, a greater level of surplus income due to increased employment and pensioners drawing their 25% tax-free pension fund from age 55, to reinvest in property.
Lenders think the decision will backfire
The Council for Mortgage Lenders and the Intermediary Mortgage Lenders Association (IMLA) have been in contact with government officials to urge further thought into the additional SDLT charge.
Their fear is that the plans will have an adverse effect on the wider housing market, forcing landlords to increase their rents, whilst also not necessarily in the short term creating more affordable homes.
“They have no view about how this tax will impact on the market as a whole, let alone the buy-to-let market.” Peter Williams, IMLA
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