Budget stamp duty hike on second homes another nail in the coffin for buy-to-let sector - IFA Magazine
In light of the recent changes to stamp duty on second homes announced in today’s budget, Rachael Griffin, a tax and financial planning specialist at Quilter, commented: "The increase in the stamp duty rate for second homes to 5% starting tomorrow is set to further impact the buy-to-let market. This new rate will impose a substantial financial burden on buyers in England and Northern Ireland who are looking to acquire extra properties, such as rental or vacation homes. By increasing the initial costs, the Labour government is attempting to dissuade people from investing in second homes, with the aim of alleviating some of the demand that has led to soaring property prices in sought-after locations."
“This policy is expected to discourage second-home purchases since the higher tax burden makes investing in properties less appealing. With fewer buyers interested in purchasing secondary homes, we might see a decline in demand in the buy-to-let market, which could affect the availability of rental properties. In regions where buy-to-let and vacation home markets are thriving, this decrease in buyer interest might lead to a slowdown in property price increases, as diminished demand may limit growth in these areas.”
It looks like Labour has missed an opportunity to consider a more comprehensive reform of stamp duty in the UK. A more innovative and constructive approach could have focused on promoting downsizing for older homeowners. By eliminating extra stamp duty fees, this initiative could encourage them to move to smaller properties, which would open up bigger homes for growing families and help achieve a better balance in the housing market across the UK. The recent announcements also indicate that the increase in the stamp duty exemption for first-time buyers to £425,000 will end in March 2025, dropping to £300,000. This change may lead to a surge in home purchases among first-time buyers, but many might still struggle to afford homes due to persistently high mortgage rates.
If you're thinking about buying a second home, it's crucial to plan your finances carefully. You'll want to balance the potential long-term gains from investing in property with the increased costs associated with transactions, especially if your main objective is to earn rental income or see a rise in property value. Although this change in policy focuses on promoting primary residences and improving housing affordability, it introduces new challenges for potential investors who now face a more expensive property market.
