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The Chancellor’s clampdown on buy-to-let investors by announcing a 3 percent additional stamp duty surcharge on buy-to-let properties and second homes in last week’s Autumn Statement, will be ineffective in its supposed aims.

My views on this were featured this week in Financial ReporterWhat Mortgage,  Mortgage Introducer, and The Economic Voice, amongst various other publications.

It is, of course, commendable that the government wants as many people as possible to own their own home.

However, there are three key reasons why the 3 percent stamp duty surcharge will be ineffectual in its objectives of raising cash to help first-time buyers and paying for more affordable housing.

Stamp duty surcharge ineffective

First, when you look at the anticipated revenue generated by this initiative – £1bn by 2021 – this is minimal when the size of the UK’s affordable housing crisis is taken into consideration.

As such, many people view this initiative as somewhat of a political stunt.  The government is attempting to charm the politics of envy with the main targets of this move – buy-to-let landlords and second homeowners.

Second, the stamp duty surcharge could spark a ‘rush-to-buy’ trend between now and April, with people vying to avoid paying the extra levy.  Indeed, this will lead to elevated prices in the short term as a result.

In addition, in the medium to longer-term, it is my view that this move will not deter overseas or UK-based buyers from investing in property.

Even with the 3 percent surcharge, the majority of investors will still consider property investment in the UK as an appealing and secure investment option, particularly in areas such as London, the South East, and Manchester.

Likewise, as the investment is a characteristically long one, the 3 percent will be absorbed by most investors over the entire investment period.

Finally, third, renters could see their rents increase further after this initiative comes into effect in April, as landlords pass on elevated costs to tenants.  In turn, making it harder for first-time buyers to get on the property ladder.

Therefore in order to assist Generation Rent, the government needs to reconsider its options.  Increasing stamp duty will not provide a solution to the UK’s housing crisis.  Planning restrictions and building additional homes would be a far more effective way to tackle the situation.

About Mike Coady

Mike Coady is an expat expert based in Dubai and is on hand to help with all of the above and more.

Mike is an award-winning money coach and industry leader in the financial sector.

Qualified to UK Financial Conduct Authority (FCA) standards, a member of the Chartered Insurance Institute, a Fellow of the Institute of Sales Management (FISM), a Fellow of the Institute of Directors (FIoD), and featured as a highly qualified Financial Adviser in Which Financial Adviser.

To book a discovery meeting with Mike Coady, schedule a time HERE.

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Blog published by Mike Coady.

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