Stamp duty changes for property investors welcomed

Chancellor George Osborne gave a boost to the UK’s property investors today (Wednesday March 23) when he announced reforms to the Stamp Duty Land Tax rules applied to bulk purchases.

If the buyer chooses, the rate of Stamp Duty Land Tax on purchases of multiple residential properties will be determined by the mean value of the dwellings purchased, subject to a minimum rate of 1%, rather than their aggregate value as is currently the case.

This is seen as a positive move that will reduce a barrier to investment in residential property, promoting private rented housing supply, as well as encouraging investment and exports as a route to a more balanced economy.

The British Property Federation immediately welcomed the move which is has long campaigned for. ‘This is impressive backing for a long standing BPF campaign to have stamp duty on residential portfolio trades reformed,’ said Ian Fletcher, director of policy at the BPF.

‘It will provide an important boost for the private rented sector and we hope will tip the balance in encouraging institutional funds into building homes. Using the average price is fairer and a welcome measure of support for those in need of rented housing,’ he added.

The Royal Institution of Chartered Surveyors has also campaigned for changes to stamp duty and Real Estate Investment Trusts (REITs) in order to support investment in house building.

‘As an organisation we have been calling for these changes for several years and have worked closely with the Treasury and other industry bodies to help support this new approach to rented housing. The bulk purchase rule change is particularly welcome as it will mean that stamp duty is charged on an average price per unit rather than the total transaction cost,’ said chief economist Simon Rubinsohn.

‘More people are now choosing to rent their home, particularly young professionals and those who are looking for flexible accommodation. Changes to REITs and stamp duty will help encourage large investors including pension funds into the sector providing a revolution in how rented homes are supplied. Changes to these systems will lead to more high quality properties which are a genuine alternative to owning a home,’ he explained.

‘The most recent RICS lettings market survey showed that rents are continuing to rise as there are a lack of homes available for rent. Increased investment as a result of changes to stamp duty and REITs will help increase the range and affordability of rental properties,’ he added.

Stuart Law, chief executive of Assetz, also welcomed the move which means that investors will pay tax based on the individual property prices rather than the total purchase price. ‘This will provide a significant boost to the private rental sector by encouraging more professional landlords and larger institutional investors to build up their portfolios, boosting the supply of much needed homes for rent,’ he explained.

The Chancellor also said in his speech that the government will announce the outcome of its review of the SDLT relief for first time buyers in the autumn of 2011. And he announced measures that target specific avoidance schemes, including new measures to address the abuse of Stamp Duty tax rules, which will be effective from tomorrow (March 24).