Recent changes to the Stamp Duty for second homes could affect the UK rental market, raising investor concerns.
- Stamp Duty rates for second homes increased from 3% to 5% following the recent Budget, which might impact rental investors.
- Propertymark warns of potential exits from the private rental sector due to tax increments, affecting rental supply and rental costs.
- Advocacy for tax relief is suggested to mitigate these changes’ effects, particularly focusing on the 3% surcharge reconsideration.
- Capital Gains Tax adjustments were made, though residential rates stayed the same, providing relief amidst other fiscal changes.
Following the recent Budget announcement, there has been significant concern within the property sector, primarily due to the government’s decision to increase the Stamp Duty rates for second homes from 3% to 5%. This adjustment, effective from 31 October 2024, is believed to potentially discourage investment in the private rental sector, decreasing the overall supply of rental accommodation significantly.
Propertymark, a key trade body, has raised alarms over the possible repercussions of these changes. It anticipates that many investors may choose to exit the market, which could lead to a decrease in available rental properties and subsequently cause rental prices to rise. They advocate for the reconsideration of this decision, especially the 3% surcharge, which has historically been a deterrent for potential investors in rental properties.
Furthermore, there were adjustments to Capital Gains Tax (CGT). While the Budget increased the lower CGT rate from 10% to 18% and the higher rate from 20% to 24%, rates for residential properties remained unchanged. This came as a relief to many in the sector who were concerned about further financial strain.
Stuart Collar-Brown, president of NAVA Propertymark, expressed his apprehensions following the Budget’s announcements. He commented on the combined impact of increased Stamp Duty and local council tax hikes on second homes, suggesting that these measures might cause investors to offload properties sooner than anticipated. This could amplify rental shortages and lead to higher rent costs across the board.
The Budget has undoubtedly generated mixed reactions within the property community. While the stability in CGT rates for residential properties offers some comfort, the increase in Stamp Duty on second homes is seen as a potential setback for maintaining healthy stock levels in the private rental sector. The fear is that with fewer homes available to rent, rental prices may inevitably climb.
The recent Budget adjustments pose a complex challenge to the private rental market, necessitating thoughtful consideration of tax policies.
