[insight] Never mind Black Friday, what about Black Wednesday?

Posted by Graham Turrell on Fri, Nov 27, 2015 @ 05:36 PM

This Wednesday the UK Chancellor announced yet another body-blow for the small landlord in Britain, by hiking Stamp Duty (SDLT) on investment property and second homes with a 3% surcharge on all property purchases over £40,000 from next April.

death_of_amateur_landlord.jpgIn today's world landlords are regrettably an easy target politically, being as they are, blamed for everything from social injustice to being responsible for property prices growing out of the reach of first time buyers.

Surprise! This targetting from what has traditionally been the property owners' political party, began by surprise in this years Budget when it was announced that buy-to-let mortgages would no longer be treated as a standard business expense. The realisation dawned slowly that for the first time ever, landlords could soon be receiving income tax bills greater than their profit. Something no other business suffers from.

The likely result is that rents will rise disproportionately to income as a result of the mortgage tax, and that property prices will surge as we see the rush to beat next April's SDLT increase. This harms both tenants and would-be first time buyers - the very groups that the government is seemingly trying to help.

All this is bound to cause further anti-landlord sentiment (who will be blamed on both counts), and who knows what further politically expedient anti-landlord moves will be next from the government?

Is this the death of the amateur landlord? We foresee that many landlords will be disposing of some or all of their investment properties when reality starts to bite in two years time and this new legislation starts to really take hold. This will be at just about the time when interest rates rises are likely to become a real issue for cashflow and survival. Many landlords that do survive all this will be discouraged from buying further residential investment property as purchase costs multiply with the stamp duty hike.

So the rules of amateur property investment are changing. Smart investors will see the signs and adapt in time. Others frankly will "die". It's certainly going to make potential investors think twice about buy-to-let. Fortunately there are always other practical ways to invest in property, which will come to the fore as restidential property is no longer seen as the only or obvious option.

See also /blog/property-insight-the-illusion-of-being-in-control-of-your-property

I'll talk more about this massive property sea-change in other posts so (if you haven't already) stay up to date and subscribe to the blog now by clicking the image below...

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Tags: Property Insight, Property Investment