"Buy-to-let landlords and second homeowners were expecting another tax squeeze from the Chancellor. But what they got was a whack with a hammer."
- Peter Stimson - MPowered Mortgages
The government has announced that the stamp duty surcharge will rise from 3% to 5% from tomorrow, impacting the profits of landlords and likely to see many landlords pull out from investing in BTL and compounding the already challenging supply/demand disparity seen across the PRS.
Richard Donnell, Head of Research and Insight at property website Zoopla comments: “Changes to stamp duty land tax, together with higher property prices, has seen stamp duty raise over £11.5bn in 2023/23. It’s a tax that falls most heavily on buyers in southern England with London and the South East accounting for over 50 per cent of annual tax receipts from stamp duty.
"The extra 2% cost on buying second homes and investment property will reduce demand from second home buyers and investors. Second-home buyers are already responding to last year’s Budget which allowed councils to charge double council tax for second homes. This is resulting in a higher level of selling by second homeowners. In areas with above-average second homes, we have seen four times more homes come to the market.
"This announcement also comes with changes announced previously which will see first-time buyers pay more from next year. A return to previous stamp duty thresholds from April 2025 will result in an additional 20 per cent of first-time buyers being liable to pay stamp duty and a further 14 per cent will be required to pay a partial amount.
"The impact is felt across London and the South East in markets with average house prices over £425,000. This will increase costs for buyers by an average of £5,600 in London and £1,390 in the South East. In parts of London with home values over £600,000, FTB could pay an additional £15,000 in stamp duty. Buyers will want to take this off the price they pay for homes, keeping price rises in check.”
Tim Bannister, Rightmove's property expert says: “Increasing stamp duty on additional home purchases by 2% means that, based on the average asking price for a home (£371,958), a landlord could face an additional charge of more than £7,000 from tomorrow when buying a property.
"In the short-term, some landlords may need to pause for thought, but in the longer-term it becomes yet another charge that landlords wanting to invest in buy-to-let will have to become accustomed to and factor into their decision making. Overall, we need more homes in the rented sector not fewer, but in recent times we have seen record levels of stock leaving the rental market.
"There was no mention of retaining the current residential property thresholds for paying stamp duty, which means we expect that the typical first-time buyer will be over £3,500 worse off come 1st April based on current prices. After paying fees, carrying out any surveys, and stretching their budget with high mortgage rates, this will be an unwelcome additional charge next Spring.
"We may now see a rush of buyers, particularly those purchasing for the first time, either bringing their plans forward or trying to get their deal done before charges go up. It currently takes a lengthy 152 days on average to complete a property transaction once a sale is agreed, which would mean agreeing a deal tomorrow to complete on time. While this is an average and many will be hoping to complete more quickly, it highlights that those who are hoping to avoid higher charges will need to act quickly.
"It’s still early days for the government and it’s encouraging to hear its wider commitments to housebuilding, but we are hoping for more support for first-time buyers and making the existing thresholds permanent would have been a start.”
Ben Beadle, Chief Executive of the National Residential Landlords Association, said: “Hiking stamp duty on homes to rent when 21 people are chasing every rental property makes no sense.
“Analysis by Capital Economics has found that increasing Stamp Duty on rental properties from three to five per cent will see a net loss of half a million homes to rent over 10 years. This will not help the huge number of tenants for whom homeownership is still a distant dream.
“The Chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up.
“What tenants needed was a Budget to boost the supply of new, high-quality rental housing. What we got is a recipe for less choice and higher rents.”
CEO of Yopa, Verona Frankish, commented: “With no stamp duty relief extension granted today many homebuyers will be in for a fright should they look to purchase from March of next year.
"Whilst many first-time buyers will still benefit from a stamp duty free purchase should they remain within the previous £300,000 threshold, many existing homebuyers won’t be so lucky.
Those existing buyers purchasing over the value of £250,000 are set to be hit by the maximum increase in tax which will see an additional £2,500 added to the already high cost of home buying and ownership.”
Director of Benham and Reeves, Marc von Grundherr, commented: “It’s a case of trick not treat for homebuyers following today’s Budget, as they’ve once again been shown the cold shoulder, with the government refusing to extend current stamp duty relief thresholds.
Whilst this won’t deter homebuyers from pursuing their aspirations of homeownership, it will add to the cost of purchasing for the vast majority, particularly those climbing further up the ladder.”
Jon Cooper, director of mortgages at Aldermore, comments: “While it is positive that the Chancellor did not use their Budget announcement to roll back Stamp Duty relief for first-time buyers as was speculated, the choice to increase additional Stamp Duty on second homes from 3% to 5% will have an impact on our housing ecosystem.
“By placing increased pressures on landlords, there will also be increasing costs for renters, not least because we anticipate many landlords might withdraw from the market in response.
“To help repair the housing market in the UK we need to build more homes so that there is less pressure on supply; while there were steps taken in the Budget to support smaller homebuilders, until we take real action to reform planning then it will remain a challenging environment for young people looking to get on the ladder.”
Richard Pike, chief sales and marketing officer at Phoebus, said: "The instant rise to 5% on stamp duty for landlords could well be a death knell for many wanting to expand their rental portfolios. At a time when many landlords are selling up and leaving the market altogether, it will make things more challenging both for buy-to-let lenders and for those tenants who either don’t want to or can’t afford to buy their own homes."
Paul Barham, Partner, Forvis Mazars comments: "The additional charge to SDLT on the acquisition of second homes was increased from 3% to 5% effective from 31 October 2024. Whilst the theory is this will free up more properties for single-home purchases, the general direction of travel is that owning a second home is becoming increasingly expensive. Time will tell whether this increase reduces demand for second homes and/or increases the availability of homes for those looking to buy their main home."
Allsop’s Head of Research Seb Verity said: “We need some honesty from the government about its long-term vision for PRS. The direct impact of swapping accidental or buy-to-let landlords for professional firms will likely be above-inflation-level rental growth due to reduced supply and the dominance of income-driven business models, with significant financial repercussions for tenants.
“The only way to minimise the impact of this structural change is a significant down-regulation of demand. But if we aren’t going to see a big drop in migration, fewer domestic students, or fewer low-income tenants relying on mainstream rental housing, and//or a rapid increase in housebuilding, then some form of incentive to easily move tenures from private rental into ownership would seem to be logical, nay essential.”
Ryan Etchells, Chief Commercial Officer at specialist lender Together, said: “What we really needed today is innovative thinking around stamp duty, not changes that can scupper movement in the housing market. For example, the Chancellor’s decision to hike Stamp Duty surcharge for second home-owners from 3% to 5% will be yet another deterrent to landlords from entering the private rental sector.
“Tax and regulatory changes over the last few years have already seen hard-working landlords - many who have spent their time, effort and money providing places to live for millions of renters - simply leave the market.
“Unfortunately, the Chancellor’s latest move will only add to this problem by putting off new landlords from buying properties to meet the demand from tenants. This will diminish available rental housing stock, which could have the effect of pushing up rents for tenants in the future.”
“In reality, the Government should have been bolder and scrapped stamp duty altogether and, instead, charge a new annual property tax of 0.75%. This would have raised billions annually for the Exchequer, at the same time putting money back in the pockets of homeowners to spend, boosting local economies.”
Peter Stimson, Head of Product at MPowered Mortgages, commented: “Buy-to-let landlords and second home owners were expecting another tax squeeze from the Chancellor. But what they got was a whack with a hammer.
“Not an increase in general taxation or the Capital Gains Tax they pay when selling a rental property, but a whopping 2% uplift in the Stamp Duty payable when buying a home to rent out.
“A sector rendered fragile by successive tax raises and interest rate rises is now likely to be clinging on by its fingernails after today's announcement.
“Fewer than one in 10 mortgage applications made this year were for a buy-to-let loan, less than half of what it was just a few years ago.
“That share is now likely to plunge further as would-be landlords run the numbers and decide they just don’t stack up.
“The changes come into force from tomorrow, so there’s a real danger that thousands of purchases that were already in the pipeline will now be abandoned.
“But while hammering buy-to-let landlords is almost a national pastime for Chancellors of all political stripes, the severity of Rachel Reeves' decision took many people by surprise.
“The irony is that it’s not just landlords who will feel the pain. A third of Britons don’t own their own home, and for many of them, renting privately is the only option.
“With rents already rising and the supply of rental properties about to be further disrupted, rents could now climb even higher. Far from solving the housing crisis, this, at least in the short term, could well exacerbate it.”
Simon Gerrard, Managing Director of Martyn Gerrard Estate Agents and Past President of the National Association of Estate Agents (Propertymark), said: “For all the Labour government’s rhetoric about building new homes and correcting our broken property market, it is somewhat disappointing that the chancellor has not gone further to support those hoping to get onto the property ladder.
"Despite enjoying relief from stamp duty, first time buyers are facing monumental challenges due to affordability in the UK’s housing market, as well as wider cost of living pressures, and there is far more the government could have done.
“If the government were serious about fixing the housing market, it could introduce tax reforms that would actually help people to buy a home. For example, reversing stamp duty so that it is paid by the seller, and scrapping it altogether for pensioners who are downsizing.
"This would mean that stamp duty would no longer be a tax on aspiration, but it would be an incentive for empty nesters to vacate family-sized homes, allowing second steppers to move up and increasing the number of first-time properties available for first time buyers. Breaking the bottleneck that is currently keeping the housing ladder at a standstill must be a priority, and tax policy must reflect this."
Nick Sanderson, Audley Group CEO commented: “The new government’s Budget crept by with only one mention of stamp duty - an increase for those buying second homes. No mention of Stamp Duty reform for downsizers which could do so much to get the market moving. A disappointing blow but it’s the silence on wider housing reform that is more haunting.
"Housebuilding targets and overhauls to the planning system are empty promises without the devil that is in the detail. Progressive and decisive action is needed if Labour are to get a handle on the issues that plague the housing system, and implement real change.”
