The UK’s fledgling Build to Rent sector has been dealt a blow with the announcement that large investors will not be exempt from a new extra stamp duty surcharge that is introduced in a few weeks’ time.
From 01 April there will be an extra 3% stamp duty payable on additional homes and it has been hoped that those investing in more than 15 properties would be exempt, and Chancellor George Osborne had indeed hinted at this.
However, in his Budget announcement he confirmed that large scale investors in buy to let properties will pay the extra 3% which will apply equally to purchases by individuals and corporate investors.
Melanie Leech, chief executive of the British Property Federation, said the move would hit the private rented sector. ‘The government’s decision to not include an exemption for investors who are purchasing large portfolios of properties for rent is extremely disappointing, and deals a huge blow to the build to rent sector,’ she pointed out.
‘This is going to be a significant deterrent to the institutional investment currently poised to settle in the purpose-built rented sector, which has the opportunity to deliver a significant number of new, quality affordable homes,’ she added.
The failure to give relief from the additional stamp duty levy for large investors could inhibit the development of a much needed institutional private rented sector, according to Lucian Cook, Savills UK head of residential research.
‘While purchases of six or more residential properties can be treated as a non-residential transaction, the reform of stamp duty on commercial properties is likely mean greater entry costs for large scale residential investors one way or another. Our recent analysis suggests there will be demand for another one million private rented households in the next five years despite policies to boost home ownership,’ he explained.
Investors could be put off, according to several experts, including Steve Sanham, development director at HUB. ‘A threshold on how many homes the stamp duty surcharge applies to is also crucial for institutional landlords and investors. The aim of delivering more homes will not be achieved if investors are put off from creating large developments of new homes to begin with,’ he said.
Elizabeth Bradley, head of the corporate tax team at international law firm Berwin Leighton Paisner, also believes investors will be discouraged. ‘Much of the British property industry will be very disappointed with the Budget changes,’ she said.‘The Chancellor has acknowledged the need to build more homes but the extension of the extra SDLT rate on buy to let to large investors will discourage investment in the private rented sector,’ she added.