Buy-to-let inquiries boom as landlords swoop on stamp duty break!
Updated: Jul 16
Buy-to-let landlords have swooped into the property market to take advantage of the stamp duty tax giveaway.
In a temporary move intended to stimulate the property market in the wake of coronavirus, Chancellor Rishi Sunak last week announced that buyers in England and Northern Ireland would pay no stamp duty on the first £500,000 of their purchases until March 31.
Landlords and others purchasing a second home still pay 3pc of the entire value of the property in additional tax, but the tax break means that their bills could fall by as much as half. The savings have persuaded many to return to the market.
Estate agents said the biggest rush of demand had been for homes worth less than £500,000. An investor buying a home worth half a million pounds will now pay £15,000 rather than £30,000 in stamp duty. Buyers in the most expensive parts of the country – primarily London and the South East – will benefit most.
Rentround, a letting agent comparison website, said the number of landlords contacting its agents across the country had risen by 22pc. In north and east London, inquiries have risen by 31pc, higher than anywhere else in the country.
David Galman of developer Galliard Homes said inquiries for new build homes from buy-to-let investors since the stamp duty holiday was announced jumped by 40pc compared to the previous week.
Over the weekend, Galliard agreed seven sales in its Westgate House development in Ealing, west London, four of which were to investors. “In every single transaction, we included a clause that if the development’s completion goes beyond March 31, we will pay the difference in stamp duty,” said Mr Galman.
The tax break for investors comes in stark contrast to the government’s recent buy-to-let policies, such as introducing the stamp duty surcharge on second homes in 2016 and cutting down landlord tax relief. “It is a game-changer,” said Mr Galman.
The holiday is primarily driving small-time investors who are looking to buy just one or two properties – a group that had all but disappeared in the last few years, said Mr Galman. “It’s the doctors, the dentists, the professionals who perhaps have inherited some money to put into a deposit.”
Spencer Fortag, of Dockside Property Services, a Kent estate agent with a sister company in London, said since the stamp duty holiday was announced: “It’s just gone bonkers.”
The number of inquiries from first-time investors has jumped by 20pc and now accounts for one in three investor inquiries, up from one in four before the holiday was announced, said Mr Fortag.
The discount some buyers will receive on one property is the equivalent to a deposit on an additional home. “I was chatting to an investor on Saturday who had amassed enough money to buy another property, now the holiday means they can buy two properties in Kent with the same pot of money,” said Mr Fortag. “And the fact that you’re saving between £10,000 and £15,000, that can shift your returns by one or two percentage points."
The holiday is particularly significant for overseas investors. Inquiries from India, China and the UAE, which account for half of Dockside Property Services’ inquiries, are up by a third compared to this time last year, Mr Fortag said.
Foreign buyers have a triple concentration of time pressure. As well as the stamp duty holiday deadline, they also face the introduction of an additional two percentage points of stamp duty across the entire value of their purchases in April 2021. Plus, right now, many have a currency advantage, said Mr Fortag.
The so-called “Bank of Mum and Dad” is also making moves. James Holmear, of housebuilder Redrow, said the waiting list for the its Frenchay Gardens project in Bristol jumped by 30pc after a surge in inquiries on Thursday and Friday. Much of this interest has been from investors, including parents buying for their children who are studying at the university.
“The extra cash in their pockets due to the stamp duty holiday has tipped them over the edge to make the decision to invest,” said Mr Holmear.
But the new interest has a price cap. After the £500,000 mark the savings become smaller in proportion to a property’s price tag.
Martin Bikhit, of Kay & Co, an estate agent that is part of Warren Buffett’s Berkshire Hathaway empire, said: “We have seen buy-to-let investors return to the market but only on properties valued sub £1m and in most cases £500,000.”
Meanwhile, in the cheaper parts of the country, such as the North East, the holiday has a minimal impact. Here, it will save investors £280 on the average purchase, compared to £7,240 in London, estate agents Hamptons International found.
Max Armstrong of North East Property Investments, a portfolio management service, said investor interest had not increased since the announcement, adding that the market had been buoyant since mid-June.
“Lots of people have been piling in from outside of the region,” said Mr Armstrong. “We have not bought anything for five weeks as prices have been too high.”