In April 2016, landlords saw a 3% stamp duty tax hike for additional property purchases. The purpose of this tax increase in theory was to deter property investors from buying more properties, and to make the market more welcoming for first-time buyers. In fact, the impending tax hike saw a large number of property purchases made by investors and landlords in Q1 2016, however, it seems that the tax hike did little to stop landlords from making additional property purchases and adding to their buy-to-let portfolio.
It has been reported that the Treasury collected 18% more stamp duty from residential property purchases in 2016 when compared to the amount received in 2015. This equates to the Treasury receiving £8.82bn in stamp duty payments, demonstrating that landlords are still investing in their property portfolio.
Interestingly, the amount of stamp duty collected would have been down year-on-year if not for the 3% tax boost, which suggests that investors are primary contributors to stamp duty payments.
In the last half of 2016, a fifth of all property sales were bought as additional properties, accounting for £962m in stamp duty payments; along with this, investors accounted for 21% of the tax income during this period. The Office for Budget Responsibility has reported that these figures are much higher than expected, as they had forecast to only receive £660m in tax for the 2016-17 financial year.
It’s obvious that investors are in a better position to make additional property purchases and that the tax hike is only a minor inconvenience. Fewer than 40,000 of the 119,000 additional properties bought in 2016 were done so with a mortgage, the rest were made as cash investments.
It is believed that the Treasury has made £1.19bn from tax on additional property purchases since the 3% stamp duty tax duty was introduced in April 2016.
While it’s clear that 2016 was a successful year for property sales and purchases despite stamp duty fears and the uncertainty surrounding the Brexit vote, 2017 will see the introduction of new legislation that will once again impact on the profits of landlords.
For example, the ban on letting agent fees in England (and potentially Wales), increased tax payments, along with other new legislative measures serve to eat into landlord profits, leaving some to wonder if the buy-to-let sector is facing a crisis.
At CPS Homes, we are an experienced letting and estate agent that understands the changes to the buy-to-let industry are a cause for concern to many landlords. However, we believe that these fears are blown out of proportion, especially in Cardiff, which has a thriving property market. However, we are always available to answer any queries landlords and investors may have.
If you’re looking for a new property to add to your buy-to-let property portfolio, or if you’re looking to make that first big step onto the housing ladder, we can help. We have hundreds of homes for sale in all neighbourhoods of Cardiff. You can find a list of available properties online, or to find out more information, you can email: firstname.lastname@example.org, or pop into one of our three Cardiff-based branches.