Interesting times for the property market. The chancellor has
confirmed zero stamp duty for all property purchases below £500K.
However, yes, the 3% BTL premium still applies.
The treasury estimates this will affect 90% of transactions; this
could be the time to incorporate by transferring your personal
property into a Ltd company, thereby being able to offset the mortgage
interest from the rental income.
There was talk previously of the holiday being effective from October.
This thankfully has been scrapped, as the implication of this would
have been a delay in transactions until the date come into effect;
which would have meant a lull in the market for a few months.
The immediate application of this policy is a great move by the chancellor.
There is however the other issue of this stamp duty holiday creating a
chink in the marketplace. It will be very difficult to sell a
property for say £525K; properties priced at this level would be
expected to drop.
A gradation would have avoided this rather than a step at £500,000.
However, if you make a policy too complicated it cannot be understood
and acted upon very simply.
Previously, when the stamp duty was 1% below £250K and 3% above, it
proved very difficult selling a property for £275K. I recall having a
potential purchaser suggesting creative means to try and bring the
price down, however, the vendor who was a lawyer would not hear of it.
As an investor it may be a good strategy to start to target properties
priced at around £525K to £550K, as these vendors would will be
sitting just outside of the boundary. They will miss the furore which
will be generated by this holiday; potentially giving the buyer a
5-10% discount.
This would now be the time to start to use the kids to purchase their
first properties as first time buyers, they will be completely exempt
when purchasing a property up to half a million.
It will be interesting to see the impact of this policy on auction
deals. This will be the closest way to assess the impact of the
holiday. Especially, when the bid’s reach passes the ceiling. In
effect, when someone bids £501K they will be bidding £25K more, as
once they go past this cliff edge the 5% duty will kick in.
A ‘normal’ buyer may develop a psychological barrier at this point,
leaving the coast clear for perhaps the seasoned investor, who can see
the greater value in a deal than just an increase in the costs by
£25K.
