Remaining calm amid stamp duty uncertainty

Should Investors be so worried about recent changes to stamp duty?

The cost of stamp duty is increasing for buy-to-let investors but Sanjit Dhanjal, managing director of Opulent in an article written for the New Statesman, remains optimistic about the future of the UK property market and questions just how much of an impact the increased levy will make to property investors. With the chronic undersupply of property here in the UK will potential capital apprecition outweigh any increases in stamp duty?

As of 1 April this year, anybody wanting to purchase a second home, either as an investment or to inhabit, will be hit with an additional 3 percentage point premium in stamp duty land tax. Thanks to the somewhat ambitious plans put forward by the Chancellor, George Os- borne, in his Autumn Statement, buy-to- let investors are set to pay the price in order to increase the availability of property for first-time buyers. But is it all doom and gloom for buy-to-let investors? Or could the recent changes bring about opportuni- ties for the more experienced investor? There’s no doubt that the changes with stamp duty will have a significant effect on the buy-to-let market, particularly at the amateur end. Anyone not seriously committed to, or experienced enough in buy-to-let investing will soon exit the market, if they haven’t done so already. But to understand the real effect of the increase in stamp duty, we need to under- stand whether or not the UK is still fertile ground for property investment. The UK economy is the strongest it has been for some time, having shown eco- nomic growth in each of the last quarters since 2013. In the context of a darken- ing global economic outlook, in recent months the UK has posted steady growth, with low unemployment and low infla- tion. So from an economic standpoint, all seems well.

Perhaps the most significant factor behind property price growth in the UK, is the distinct undersupply of new homes coming on to the market. As a nation we are living longer, and subsequently oc- cupying our houses for greater periods of time. With the population of the UK ex- pected to grow by ten million over the next 25 years, demand for property in the UK doesn’t look like cooling off any time soon. The National Housing Federation (NHF) has estimated that approximately 240,000 new homes need to be built each year to keep up with increasing demand.

Currently, we are building approximate- ly 130,000 homes each year – nowhere near the target number. The fact remains that we are simply not building enough houses, which is fuelling property price growth. This problem is unlikely to be rectified in the near future, meaning pric- es look set to continue to rise for the next seven to ten years. Mr Osborne can con- tinue to penalise investors as much as he wants: the truth is, without rectifying the supply and demand problem, he is only likely to be skirting around the issue with- out actually resolving it. As a result, rental yields will rise; and for the so called “Generation Rent”, it means that in some parts of the UK they will be forced to rent for their whole lives. De- mand for rental property will always exist and it will continue to gain momentum, thus creating good conditions for success- ful property investment.

So while a three percentage point rise in stamp duty is not ideal and could mean a greater initial outlay for investors, giv- en the current state of the UK economy and the government’s inability to build enough houses, we believe it won’t take too long for investors to make three per- centage points up through increased rent- al yields and greater capital appreciation. With an increasing amount of volatility currently surrounding the equities mar- ket, it’s no wonder more and more people are using property as a way to secure their and their children’s future. l Opulent works with investors from all over the world, helping them to navigate around the recent changes introduced by the Chancellor. Our fully qualified team of advisers can help investors build a future and create a high yielding, high growth property portfolio. Opulent takes property investment seriously.

For a consultation with one of our experts about your existing portfolio, or a portfolio you are thinking of creating from scratch get in touch with us now at www.opulentinvest.com, call us on: 020 7205 4345 or email us at: [email protected]

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