An interesting development; it has been announced that large investors will, in fact not be exempt from the previously announced stamp duty surcharge to be brought into effect in a matter of weeks. The 3% stamp duty, to be applied on additional homes, was initially believed to only affect those investing in less than 15 properties yet, in the recent budget announced by Chancellor George Osborne, it has been made clear that even those with a larger property portfolio will be subject to the stamp duty.
Of course, in contrast to previous statements of optimism within the private renting sector, the news is heralded as a concerning development for the build to rent sector, with concerns raised over the profitability of such endeavours for investors. Expected to represent a considerable deterrent to those pursuing build to rent investments as their primary mode of investment, and, as highlighted by the British Property Federation’s Chief Executive, Melanie Leech, it may also restrict the sector’s ability to: “Deliver a significant number of new, quality affordable homes.”
And while those purchases incorporating greater than six different residential properties can indeed be regarded as a non-residential investment, simultaneous reforms made to stamp duty for commercial properties is expected to provide a boundary for those looking to sneak around the stamp duty implemented. With this development now making it night on impossible for investors to avoid the additional charges, dampened spirits present the problem of a negative outlook on the performance of the sector and associated supply, whilst demand for private rented households has been clocked in at an approximate 1m over the course of the next five years.
Responding to outcries from the wider sector, Berwin Leighton Paisner’s Head of the Corporate Tax Team, Elizabeth Bradley stated: “The chancellor has acknowledged the need to build more homes but the extension of the extra SDLT rate on buy to let to large investors will discourage investment in the private rented sector.”