Home sales are being put on hold or abandoned amid a shock rise in stamp duty charged on second properties hitting buy to let landlords and those buying holiday homes.
The stamp duty charged on these purchases is rising from 3 percent to 5 percent with immediate effect, which would add £7,000 to the typical purchase cost.
Separately, first-time buyers and others face a big increase in stamp duty as a result of the decision not to extend property purchase tax concessions implemented by the last Conservative government.
This means that the tax-free threshold for all homebuyers is set to return to £125,000 from £250,000 and for first-time buyers to £300,000 from £425,000 from April.
Industry experts suggest that the typical first-time buyer will now face an additional bill of £3,500 in order to get a foot on the property ladder.
They are also predicting a property sales rush ahead of that deadline next spring as buyers try to push through purchases before being hit by punishing stamp duty charges.
Property expert at Rightmove, Tim Bannister, said: “Increasing stamp duty on additional home purchases by 2 percent means that, based on the average asking price for a home (£371,958), a landlord could face an additional charge of more than £7,000 when buying a property.”
Looking at people buying a first home, he warned: “We expect that the typical first-time buyer will be over £3,500 worse off come 1st April based on current prices. After paying fees, carrying out any surveys, and stretching their budget with high mortgage rates, this will be an unwelcome additional charge next Spring.
“We may now see a rush of buyers, particularly those purchasing for the first time, either bringing their plans forward or trying to get their deal done before charges go up.
“It currently takes a lengthy 152 days on average to complete a property transaction once a sale is agreed, which would mean agreeing a deal tomorrow to complete on time. While this is an average and many will be hoping to complete more quickly, it highlights that those who are hoping to avoid higher charges will need to act quickly.”
Mortgage broker, Jack Tutton of SJ Mortgages, said sales are already falling through as a result of the the immediate increase in stamp duty on second properties.
“Within an hour of the Budget, we had two landlords withdraw from their purchases despite being close to completion,” he said.
“The decision that Labour has taken to increase stamp duty for second properties by 2 percent with less than 12 hours’ notice has, and will, cause many properties chains to fall apart putting the property market on its knees.
“I am sure more will follow, as landlords cannot stomach yet another increase in the tax they need to pay. The government are also likely to miss out on a lot of tax receipts as a result of these broken chains and a reduction in housing transactions.”
Kelsey Phillips, Head of Specialist Lending at Arose Finance, told Newspage: “Within minutes of the Chancellor announcing the additional surcharge, our investor clients were on the phone to estate agents renegotiating purchase prices lower.
“The immediacy of this tax hike will be painful for clients in the middle of completions and may cause some chains to collapse. Going forward, increasing the levy to 5% will undoubtedly restrict investment demand and make buy-to-let significantly less attractive to non-professional investors.”
Stephen Perkins, Managing Director at Yellow Brick Mortgages said many investors in the middle of buying property are now “shredding their plans”.
He added: “I can see less buy-to-let investment, less renovation projects and, as the landlord sell-off continues, rents on remaining properties will soar.”
Rohit Kohli, Director at The Mortgage Stop, complained: “The less than 24-hours notice is causing chaos across many transactions as landlords are actively considering their options.
“This isn’t just going to hit landlords but many homebuyers who have a buy-to-let or let-to-buy transaction in their chain are also at risk.”
Ben Perks, Managing Director at Orchard Financial Advisers, complained the changes “may have just killed off the buy-to-let market”.
Justin Moy, Managing Director at EHF Mortgages, said: “This is a serious game changer for the property investor, making bricks and mortar far less attractive and the knock-on effect won’t take long to see.
“Fewer private landlords will provide less social housing, generating higher rent and more strain on the social state for housing.”
