The government’s attack on the buy-to-let sector means 9% of potential investors have cancelled their plans to buy property while around one in seven (14%) existing landlords say they will sell one or more of their BTL properties because of new rules, according to research by an online investment platform.
rplan.co.k says around one in four of those UK adults who were considering a buy-to-let property investment have been put off by the Government’s plan to introduce a 3% additional stamp duty and cut tax relief on their finance costs.
Under the changes, the stamp duty on buying a £250,000 buy-to-let property will rise from £2,500 to £10,000 from April, while that for a £400,000 property will more than double from £10,000 to £22,000. Also, from 2017, the tax relief currently allowed on finance costs such as interest payments on mortgages and loans to buy furnishings will be gradually reduced over four years.
The research found that those planning to invest in buy-to-let were going to use savings and investments worth an average of £43,592 to buy a property. Instead, 39% of these adults will use the money to save in a cash account, 30% will invest in an ISA, 20% will put it into their pension and 13% will put it in other stock market investments.
Stuart Dyer, rplan.co.uk’s CIO, said: “The British have strong faith in property as an investment and many see it as a means of providing a pension income. But the government clearly has a policy to dis-incentivise BTL and the sharp increase in landlord mortgages revealed by the Bank of England credit survey will probably be a last rush before the gate slams shut.
“Having a BTL property can also mean an over-exposure to one asset class for many investors, who should strongly consider the alternative of investing in a diversified portfolio for the long term, especially if this can be achieved through a tax-free ISA wrapper.”