Investors keen to complete purchases before 3% stamp duty rise27 January 2016
Buy-to-let investors who want to purchase a rental property in London have less than three months to complete the deal or face a reduction in gross yield of up to 0.2%.
Changes to tax rates announced by the government last year will force purchasers of second homes to pay an additional 3% stamp duty from 1 April.
The new surcharge means properties sold for between £251,000 and £925,000 will be subject to 8% stamp duty land tax, which rises to 13% for second homes worth between £925,001 and £1.5m and 15% for investment properties worth over £1.5m.
This means investors who want to buy into the new Embassy Works development, a collection of 37 luxury studio, one-bed and two-bed apartments – plus two duplex penthouses – in the heart of the Nine Elms regeneration area, face paying more than £27,000 in stamp duty for a one-bedroom property compared with £13,250 if the deal is completed before April.
New calculations show that if the higher tax burden is not factored into the purchase price of a buy-to-let property, landlords will lose out on about 11 months income, taking into account borrowing costs and based on the average loan to value of 68%.
Explaining the move during his combined Spending Review and Autumn Statement last November, Chancellor George Osborne said: “This extra stamp duty will raise almost £1bn by 2021 – and the government will reinvest some of that money in local communities in London and places like Cornwall which are being priced out of home ownership.”
About 60% of property bought by landlords in 2015 was in London, south-east England and the eastern counties.
The changes to stamp duty come as the number of homes available to rent shrinks. Levels of stock have decreased 5% year on year and it is likely that the growing imbalance between supply and demand will continue to support rent increases, particularly in London.
Since the New Year, Garton Jones has experienced a spike in enquiries from buy-to-let investors keen to complete deals on high value buy to let properties in both Nine Elms and Westminster.
Of particular interest is SkyGardens. This impressive 35-storey high development in the heart of Nine Elms was named Best Housing Project at The Sunday Times British Home Awards.
With enclosed gardens high above the capital and fashionable Chelsea across the river, residents will have fantastic transport links, ultra-modern interiors designed by Yoo, which boast Philippe Starck as its creative director, plus spectacular views extending towards Westminster, the City and Canary Wharf.
Garton Jones managing director Kieran Chalker acknowledges the new stamp duty rates could disrupt the London property market as landlords and second homeowners rush to beat the April deadline.
He says: “We are focused on generating new instructions for clients wanting to sell and buyers wanting to invest before they have to pay the extra 3% stamp duty.”
If you want to launch a London property on the market, Garton Jones is waiting for your call. We have a long list of buy-to-let investors wanting to complete deals before April when it is forecast that values in central London could dip as investors take their time to come to terms with the new stamp duty rates.
To achieve the maximum value for your property in central London, please contact the team at Garton Jones on 02038 116 332 or fill in the form below.