Stamp Duty hike will hurt demand for homes – Zoopla

Stamp Duty

Stamp Duty Increase Will Decrease Home Demand

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Zoopla warns that the rise in stamp duty for rental properties and second homes, which started at midnight, is expected to lead to a drop in demand.

Chancellor Rachel Reeves revealed during yesterday's Budget that the rate will be raised from 3% to 5%.

Richard Donnell, who leads research and insights at the portal, notes that adjustments to the stamp duty land tax, along with rising property prices, have resulted in stamp duty generating more than £11.5 billion for the fiscal year 2023/23. This tax impacts buyers in southern England the most, with London and the South East making up over half of the yearly revenue collected from stamp duty.

The additional 2% fee for purchasing a second home or investment property is likely to lower interest from buyers in these categories. Second home purchasers are already reacting to last year's budget changes, which let local councils impose double council tax on second properties. Consequently, more second homeowners are putting their properties up for sale. In regions where there are many second homes, we've seen a surge in listings, with four times as many homes hitting the market.

This announcement includes earlier changes that will affect first-time buyers starting next year. Beginning in April 2025, the stamp duty limits will revert to previous levels, meaning that an additional 20 percent of first-time buyers will have to pay stamp duty, while another 14 percent will need to pay a reduced amount.

The effects are being experienced throughout London and the South East in areas where the typical home price exceeds £425,000. For buyers, this means an average increase of £5,600 in London and £1,390 in the South East. In certain areas of London where properties are valued at over £600,000, first-time buyers could face an extra £15,000 in stamp duty. As a result, potential buyers may seek to lower the sale price of homes, which could help to stabilize price increases.

Donnell found some relief for the private rental market in Reeves' choice to leave Capital Gains Tax on properties unchanged.

He notes that it's encouraging that the capital gains tax for landlords has remained the same, which is already set at 24 percent for those in higher tax brackets.

Since tax alterations were made in 2016, the supply of private rental properties has remained unchanged. Landlords are increasingly selling properties, influenced by tax policies, stricter housing regulations, and rising mortgage rates. It's important to retain as many landlords as we can to ensure renters have options, especially since choices are becoming limited. Keeping landlords in the market is crucial to avoid sharp rent increases that can disproportionately affect individuals with lower incomes.

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