There is no doubt that 2016 was shaped by a distorted market for the property world, amid the influx of buy-to-let investors rushing to beat April’s stamp duty land tax (SDLT) hikes, followed by BREXIT uncertainty. What we now need to see is a re-balance of the property market for 2017, and this should start in the private rented sector.
Buy-to-let investors have already been hit by last year’s SDLT hikes on second properties and are now facing the loss of mortgage interest tax relief come April 2017. Under these upcoming changes, landlords paying a higher tax rate will no longer be able to claim the current rate of 40% of their mortgage interest back before paying income tax. Instead, this figure will be reduced to a flat rate of 20% by 2020, meaning that tax is due on the full rental income.
This move to tax landlords on their revenue, rather than profits, alongside additional SDLT charges, could dramatically hit landlords’ ability to turn a profit and will force many to increase their monthly rents.
And yet, this month’s Housing White Paper saw Phillip Hammond outline his ambitions for a build-to-rent scheme, as he made calls more affordable homes to rent in the private rented sector (PRS). If Philip Hammond is serious in his call for affordable homes for rent, it is essential that he now offers support for landlords in providing quality, affordable housing stock for the PRS.
I would call for the government to waive the additional 3% stamp duty charge for landlords who are adding to the net supply of housing stock, by bringing new affordable homes for rent to the market, or reviving rundown and empty properties.
Likewise, I would like to see a similar changeround on the planned changes to mortgage interest tax relief, or at least a re-think on which properties this tax hike should apply to.
The government should be working with, not against, landlords to help stabilise the market. This will not only benefit landlords and tenants, but will help to stabilise the property market as a whole, and offer a much needed boost to the wider economy.
For more advice and guidance call Helen on 0151 709 9638.