UK property: Landlords rush to cash in on buy-to-let stamp duty holiday

Sales to landlords hit the highest level for four years last month, as investors cash in on a tax break that saves buyers up to £15,000 on a £500,000 property. The extra competition is squeezing out first-time buyers, especially those with small deposits who are struggling to get mortgages from lenders nervous of a crash next year. Mortgage brokers are warning the stamp duty holiday is turning into a “tax break for the rich”, as young buyers, furloughed workers and the self-employed struggle to take advantage.

Demand for buy-to-let slumped after the Treasury introduced a 3 per cent stamp duty surcharge on second homes and investment properties, and scrapped higher rate tax relief on mortgage payments.

Investors still pay the 3 per cent surcharge but benefit from the temporary stamp duty holiday and are now rushing to complete before it ends on March 31, 2021. Some 15 per cent of sales agreed in November went to landlords, the highest figure for four years, according to the Hamptons Monthly Lettings Index.

Just over half of these purchases were in cash, another record, while the average price paid was £180,000.

Aneisha Beveridge, head of research at Hamptons, said buyers are disproportionately larger landlords expanding portfolios: “In many cases, they are buying up homes from smaller landlords.”

The Chancellor is expected to increase the capital gains tax charge on the sale of second properties next year, and many landlords may be offloading properties to reduce the tax hit.

Pressure is growing on the Chancellor to extend the stamp duty holiday, as delays with surveys, conveyancing and mortgage lending mean many will fail to complete in time.

The Yorkshire Building Society estimates up to 240,000 transactions will overrun, leaving buyers with an unexpected tax bill.

Strategic economist Nitesh Patel said many buyers will pull out and called for a stamp duty taper: “This would give a threemonth grace period to sales which are already agreed with a mortgage in place.”

Total property market transactions in November were up 19.3 per cent on a year ago, according to latest figures from HM Revenue & Customs.

Anna Clare Harper, chief executive of asset manager SPI Capital, said transactions have been dominated by second time buyers looking for more space after the lockdown.

Private Finance mortgage consultant Chris Sykes said the stamp duty holiday is starting to look like a tax cut for the rich: “Arguably the holiday will have benefitted those already in strong positions.”

Sykes said the stamp duty holiday has also hurt first-time buyers by driving up house prices. “They are now in an even more difficult position.”