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George Osborne will extend a planned stamp duty hike on purchases of additional property to include those who buy more than 15 properties, the chancellor said in his 2016 Budget. Under the original plans, large-scale purchases of property would be exempted from the additional tax over concerns it could curb the much-needed investment in housing projects. Developers often rely on buy-to-let investors to fund construction.
From 1 April 2016, an extra 3% levy will now be applied to standard stamp duty rates on all purchases of property which is not intended to be the purchaser's main home, even institutional investors backing big developments. The Treasury says it will raise more than £600m, some of which will go on a new £115m scheme to help the homeless.
The move will hit landlords and buy-to-let investors and is intended to stop them crowding out first-time buyers from the housing market. The government wants to increase the homeownership rate and has a number of schemes to support first-time buyers onto the property ladder, including Help to Buy and shared ownership, to mitigate high house prices.
Landlord groups were hoping Osborne would abandon his plans to increase stamp duty as part of a package of tax increases on the buy-to-let sector. Some landlords said in surveys they would now quit the sector and warned the tax rises would end up reducing the supply of rental properties, and so drive up rents. Moreover, higher transaction costs on property investment may also deter foreign investment in the UK, weakening Treasury revenues.
"The chancellor's decision to go ahead with plans to introduce a further 3% increase in stamp duty on buy-to-let properties and second homes is the latest in a series of short-sighted policies aimed at the property market," said Lawrence Hall of Zoopla Property Group, an online listings firm.
"Based on the current value of an average UK home standing at £290,902 according to Zoopla, prospective landlords and second home owners will now see an increase in stamp duty from £4,545 to £13,272 on the average property purchase. The government is once again attempting to influence demand by certain buyer groups and its targeting of the private rental sector is particularly troubling following its change to the tax treatment of rental income last year.
"The higher stamp duty on buy to let properties will ultimately make rents more expensive which in turn eats into people's ability to save up toward a deposit. This policy is misguided as in an attempt to reduce demand by some buyers, it ignores the fact that the private rental sector provides an essential service for millions of adults who are happy to rent, especially in their 20s and 30s. By hitting the rental sector with higher taxes and lower reliefs the chancellor is making renting more expensive and getting on the ladder even harder for Generation Rent."