Most landlords not deterred from investing after SDLT rise

While the looming threat of a capital gains tax (CGT) hike had landlords worried in the lead-up to last week’s Autumn Budget, the increase in stamp duty on second homes seems to be a lesser concern.

A survey from estate and letting agents Benham and Reeves found that nearly one-fifth (19%) of landlords had paused their buy to let investment plans due to the potential CGT increase. Also, 22% of respondents indicated they would have downsized their portfolios, and a worrying 10% would have even considered leaving the sector entirely if the CGT rise had materialised.

And since the hike didn’t happen, 84% of landlords say they will remain in the PRS but won’t make any investments.

The survey found 4% would invest and 12% said they would reduce their portfolio size.

‘Whispers of a capital gains tax hike’

Director of Benham and Reeves, Marc von Grundherr, said: “It’s clear that whispers of a capital gains tax hike in last week’s Autumn Statement were a considerable concern for around one in five landlords.

“And, had they come to fruition, we could have seen a worsening of the current rental crisis as more landlords chose to call time on their buy to let investment.

“The fact it didn’t materialise has been well received, not just by domestic landlords, but also foreign investors, who are more than happy to pay as it only applies to the net profit they generate.”

He adds: “When you also consider that this rate has actually been reduced from the previous rate of 28%, many actually view themselves as better off in the current market.”

Avoid a CGT hit

The survey also found that while landlords were relieved to avoid a CGT hit, the rise in SDLT to 5% has affected expansion plans.

Half of those intending to grow their portfolios (47%) will now do so on a smaller scale, while 53% remain undeterred.

Among landlords maintaining their portfolio size, a small proportion (11%) have abandoned plans to expand due to the stamp duty increase.

Mr von Grundherr said: “It’s clear that whilst they didn’t escape completely unscathed, a 2% hike in second home stamp duty costs is a slightly bitter but manageable pill to swallow.

“The buy to let sector remains one of the safest and most consistent avenues of investment despite the government’s best efforts and the vast majority of landlords continue to recognise this.”

He added: “The additional upfront cost now required by way of stamp duty is one that can be mitigated within a very short time period and so we don’t believe it will have much of a detrimental impact on the rental sector.”

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