12th Apr 2016

Residential investment – how big a deal is 3% extra SDLT?

When the Chancellor George Osborne first announced his plan last November to impose an extra 3% stamp duty land tax (SDLT) on the purchase of additional residential properties, there were unsurprisingly howls of anguish from all quarters.

The measure is designed to try and redress the perceived imbalance between those wanting to buy their first home and those wanting to invest in additional residential properties, and it will undoubtedly have an effect. Witness, for example, the stampede to get deals done by the deadline on 31st March 2016 before the new rules took effect (which ironically will have caused a short term spike, increasing prices and reducing available stock – exactly the opposite of what George intended!)

Logically, one can expect a period now when the level of deals to buy holiday homes and buy-to-let residential properties will fall but, in the long term, will this be sustained? I think not. Property, be it commercial or residential, is still one of the most attractive investments, particularly for those who are prepared to take a mid to long term view. If historic capital increases are anything to go by, it will not take long for that 3% to be swallowed up for properties in good locations.

For the larger investors (those buying more than 6 residential properties in the same transaction – e.g. a number of flats in a block) there is still the choice to be made between electing for Multiple Dwellings Relief and paying residential rates of SDLT (at the new 3% extra rates) or treating it as a commercial transaction and paying non-residential rates of SDLT (again, at the new rates and in accordance with the new “slab” rather than “slice” system which George slipped in under the radar without prior warning on Budget day). It’s worth doing the maths as, depending on the numbers of properties and their values, the SDLT variations can be significant.

George can, and probably will, continue to mess with SDLT – it’s an easy target - but for me it’s a case of the old proverb “Plus ca change, plus c’est la meme chose” (the more it changes the more it’s the same thing). It wasn’t the first time conveyancers’ nerves were shredded up to the deadline before SDLT changes and it won’t be the last, but will those increases have the desired effect? Time will tell, but I have my doubts.

Written by Richard Wheeldon of Berwins Solicitors.

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