The SDLT change for Buy to Let landlords opens the way for Institutional Investors in Private Rentals market.
Private rented sector expert David Lawrenson of LettingFocus.com comments on the Chancellor’s latest attack on buy to let landlords – raising by 3% the Stamp Duty Land Tax they will have to pay.
This latest change to Stamp Duty Land Tax comes hard on the heels of George Osborne’s other recent shock for landlords – the gradual removal of landlords’ ability to deduct interest at their highest rate of tax. (This meant that landlords would only be allowed deduct interest equivalent to the basic rate, which will leave hundreds of thousands of landlords having to pay tax, even though they might already be making losses on their let properties. This has made them a unique group for tax.)
Landlords may be wondering why they have been singled out for this uniquely harsh treatment.
After all, it hardly seems like joined-up government from Osborne. First he allows people to take cash from their pensions and naturally, many folks said they might put it directly into residential property investments.
Then, the sudden about-turns. All of a sudden Osborne is a landlord’s worst enemy – almost desperate to lose their million odd votes. But why the change?
Well, we think he has been got at from two sides.
On the one hand, pressure group (and Nationwide Building Society’s Foundation funded) Generation Rent have been increasingly supported by Conservative voting Mums and Dads, moaning that their offspring cannot buy a pad in South Kensington or Islington and were going to have to slum it by buying in and commuting from Sidcup or Isleworth instead. And it was all the fault of the pesky landlords.
On another hand, the institutional investors such as Aviva, Legal & General and overseas corporates have long eyed a piece of the UK private rented sector action. Unable to compete with the far more efficient “buy to let Mom and Pop landlords” they have urged for a playing field where they are hugely more advantaged.
They have now got their wish. (It seems they won’t be affected by this change).
And, after all, it is hard to be cross with as amorphous and distant a landlord as Legal & General or Aviva or some foreign concern registered in the Bahamas, perhaps.
And with Jeremy Corbyn lurching ever more leftwards, where are Conservative voting landlords to go anyway?
So, Osborne has taken his chance to hit what for many people is an unpopular group lacking in support and funding.
At LettingFocus, we have always predicted that the regulatory and tax environment facing landlords would get tougher. Though landlords outside the capital have long battled with struggling house prices and static rents that have barely kept pace with inflation for years, it is inside the capital where things really count. The big increases in house prices and future capital gains for landlords in most of London in the last 5 years has led Mr Osborne to act.
Landlords who have already built a portfolio may be less depressed as there may now be less competition from new entrant small landlords, (though we think the institutional investors will now see the green light and will really ramp up their game).
But whichever way you look at it, this seems like a huge attack on small scale landlords