The Daily Telegraph - Saturday - Money
The property losers
This week’s Autumn Statement was a further disappointment to buy-to-let investors after an expected reversal of the policies crushing the sector did not materialise. Some investors had hoped for a reprieve in the form of a cut to stamp duty or the scrapping of a new tax regime for buy-to-let landlords due to be introduced next April.
But the Chancellor, Philip Hammond, left both untouched.
George Osborne’s assault on the buyto-let market was comprehensive: he raised stamp duty, cut income tax relief and preserved high capital gains tax rates for property investors.
His sacking by Theresa May had raised hopes that his successor, Mr Hammond, might reverse some of these changes – but none materialised.
This means that from April landlords will no longer be able to deduct their mortgage interest costs from their rental income before calculating their tax bill. Landlords say the changes will lead them to sell properties or raise rents.
Chris Cooper, 55, owns 15 properties throughout the country. He said he was worried that landlords were not prepared for the new tax.
“I’m starting to think there are a lot of people out there who don’t understand what it means. It’s hard to understand the idea of taxing someone more than they actually have,” he said.
“I’ve instructed my agents not to accept applications from housing benefit recipients because I just see trouble coming with that. I’ve already increased my rents to market rates.
“I’d had tenants in for years, they’re looking after the property, and you’d rather keep that rent 10pc or 15pc below market rates than risk voids – but now we don’t have a choice.”
The stamp duty surcharge, which adds 3 percentage points to the stamp duty payable by anyone who buys an additional property, will also remain – it is making more money than the Government predicted.
In a document released as part of the Autumn Statement, the Treasury said receipts from the surcharge had been “much higher than expected” since its introduction in April. As a result it has revised its prediction of how much the tax will generate from £3.8bn to £6.9bn.
This is despite the Government underestimating the number of buyers who rushed transactions through ahead of the change.
Buy-to-let borrowing rose by 300pc in the first three months of the year as buyers rushed to complete purchases.
However, the data suggests that buyers have not yet been deterred by the extra tax.
Landlords are also concerned about the change to letting fees announced in the Autumn Statement. The move means that agents will no longer be able to charge tenants high upfront fees to rent property. Citizens Advice, the charity, said fees averaged £337 and had risen by 60pc in the past five years. Baroness Grender, a Liberal Democrat peer who called for the ban, said the costs were variously called registration, credit check, reference check, renewal, name change or exit fees. She has condemned “almost all of them” as “arbitrary and disproportionate”. Landlords and letting agents say that, as with the mortgage interest relief changes, the costs will end up being paid by tenants. Mr Cooper said: “I think that many agents will probably load them on to the landlord, so the landlord’s costs increase, and they may end up passing them on to the tenant.”
But charities and tenants’ groups welcomed the change, saying it would help renters by removing hidden charges and making it easier to move.
Betsy Dillner of Generation Rent, a campaign group, said landlords could cut costs by moving to cheaper agents.
“Tenants are a captive market for letting agents who can charge fees that bear no relation to the true cost of their service. The letting agent’s costs should be paid by their customer anyway – the landlord.
More good news for first-time buyers came in the shape of investment for affordable housing.
New spending on housing will total £3.7bn, including £1.4bn for affordable housing. London has also been granted £3.1bn for affordable housing.
Government figures released last week showed that the number of affordable homes built in England in 2015-16 was the lowest in 24 years.
The high cost of housing has driven families to find imaginative ways to afford a home.
Victoria Cordara, 39, rents a property in Bury St Edmunds from her parents. She is one of thousands of renters for whom high prices made saving for a deposit impossible.
The Chancellor confirmed that Help to Buy will continue. While the mortgage guarantee scheme will end this year, the “equity loan” scheme will be available until 2020.
Timeline: How buy-to-let was hit July 2015
The end of buyto-let tax relief is announced in the Summer Budget, to be phased in over a four-year period.
November 2015
The stamp duty surcharge is announced in the Autumn Statement.
March 2016
Capital gains tax is cut. The chancellor, George Osborne, cuts rates from 18pc to 10pc for basic-rate taxpayers and from 28pc to 20pc for higherrate taxpayers – on everything but investment property.
From April 2016
Stamp duty surcharge comes in. Anyone who buys an “additional property” has to pay an extra 3 percentage points in stamp duty.
From April 2017
Landlords will no longer be able to deduct their mortgage interest costs from their rental income before calculating their tax bill. A 20pc tax credit will instead be available.
However, Help to Buy Isas have been less popular than the Government planned. The accounts allow first-time buyers to save into an Isa and then receive a 25pc Government bonus towards a deposit.
The Government has revised down the expected cost of these bonuses from £2.1bn to £1.2bn. The Isa has been plagued by a series of problems, including confusion over when the bonus is available.
The Isas can be used only on properties worth less than £250,000 outside London and £450,000 within the capital.
The Autumn Statement dealt another blow to buy-to-let investors, writes Olivia Rudgard ‘You’d rather keep rent below market rates – but now we don’t have a choice’