Tax and Stamp Duty changes - what this means for the property industry

Words by Andrew Stoddart - Vida Architecture Words by Andrew Stoddart - Vida Architecture

As of this month changes the tax and stamp duty charges for landlords has changed, but what does this mean for the property industry?

Andrew Stoddart

Andrew Stoddart

The 3% stamp duty on second homes makes it financially more difficult for landlords to purchase further property as they will have to raise more funds than they did in the past even on property that is valued less than £250,000. This means that the 1% that a purchaser has to raise trebles for someone looking to expand or begin a portfolio if the property is less than £250,000 but remains the same as before if over.

So this is not a disastrous prospect for the average homebuyer as this does mean although the demand for more housing is bigger than ever unless you are prepared or financially able to buy there will be less landlords able to provide housing for those that want or have to rent if the property is under the 3% stamp duty mark.

The other major factor of the changes is that of tax, previously a landlord was only taxed on the profit they make from rent, but now they are taxed on the annual turnover. In simple terms this means that they have to pay more tax even though they are not making any more money than they were before.

This has caused landlords to rethink their portfolios; many are selling off a large proportion of their stock as they will be paying too much in tax to justify the cost of maintaining it. The other option they have is to raise the rents on property that tenants are already struggling to afford which could price them out of the market and an empty property is never good for a landlord.

So what could this mean for you? It could mean that the market is flooded with property with no one to buy it so is there any point in building more? I think yes there is, the property market may be flooded with ex rentals but new housing is still very much in demand, don't forget that the government have targeted 250,000 new houses per year, a target that is not being met at the moment.

So the housing is still needed and there are still two large demographics that are ready to buy. Yes the new financial implications may not appeal to a career landlord but let's not forget someone looking to invest in one rental property as a good investment may not be effected quiet so much, the country has the largest amount of pensioners with money to burn and a rental property may be just what they are looking for to gain a small return and keep their money safe in bricks and mortar.

There are also a large amount of first time buyers just desperate to get their feet onto the property ladder, they have been saving and are ready to start their home owning journey. They may not be looking for a ‘forever' home but once they are on that ladder the only way is up.

This could also mean there is opportunity to redevelop providing the right housing for all of that demand. There is something to consider, as the market may be full of rental properties the prices in the mid-sized sector may go down however the property that will not reduce will be the 1 and 2 bedroom properties that are ideal for the target market of first time buyers.

So don't be too disheartened by the changes, yes they may make things a little bit more difficult as buy to let purchasers are a huge section of the market, however if you make good decisions it is a great market to be in. I suggest you make sure that your project fits the bill, think about:

• What sort of property to build
• Where you are building it
• Who you are building it for

With all that in mind you can make sure your architect can work with you to create a profitable return on your investment and you can avoid the risk of losing money on expensive builds that the market is saturated with.

Andrew Stoddart is the Managing Director at Vida Architecture. For more information please visit