The increase in Stamp duty in the UK, investors will be passed on to tenants

How does the real estate market in the UK for these or other innovations that are going to implement the UK taxation of real estate sector, you can understand how market players are to these changes.

A radical change in taxation for landlords “Buy to let” in the UK, who only just announced and will come into force in April 2016, has led to a market reaction – there was a surge of requests for loans during the last week.

Another change in the taxation of homeowners, which was announced last summer, reduces tax breaks for those who pay mortgage payments, and with effect from April 2017, has also sparked reaction among market participants – this was the reason for the growth in the number of Landlords, which began to change the form of ownership, creating a Limited Liability company.

According to reports from mortgage lenders, the number of legal entities applying for a mortgage loan to buy residential property in the UK increased by 213% per year. Only 56800 mortgage loans will be issued to companies in 2016, this is a significant increase in the share of companies in the market in comparison with 2014, the total number of loans practically did not change.

After the first autumn statement on increasing Stamp duty for investors, the Treasury of the United Kingdom is currently conducting consultations in order to exclude from the new tax rules investors who have more than 15 targets for investment in your portfolio, to stimulate institutional investors to reduce, but rather increase their investment portfolios.

However, investors are very afraid of the coming changes in the scale of Stamp duty. Now the average purchase price for investment in the real estate market in the UK is £220726. With increasing Stamp duty of 3% to the buyer of such real estate will need to pay £6622. Many homeowners admit that all of these costs they will have to shift to the shoulders of tenants. According to preliminary estimates, the increase in rent will increase by an average of £55 pounds a month, which will undoubtedly fuel inflation in the rental market, which now amounts to about 8.3% per year. Of course, to shift the tax burden to tenants, was not the original intention of the Treasury of the United Kingdom, however, the consequences will be exactly as and this will further alienate the classic tenant from his dreams to his real estate property, as the chance to save money for a Deposit it will be even less.

In connection with the upcoming changes in the next six month we will be able to see the changes in the property market in the UK – first, will continue the transition of the business to a limited liability company. Second, between now and April 2016, we will be able to observe the activity of investors who will try to make as many transactions prior to the entry into force of the new law is to increase the Stamp duty.

The tightening of conditions for investors “buy to let” in the UK will not be able to contribute to the main task of the government – the market is saturated with affordable housing. The only way to solve the housing problem is to eliminate the deficit by large-scale construction. Private rental market – a very important and key component of the UK property market and to keep it healthy means to ensure the health of the housing market in the United Kingdom.

® Alice Morgan G. 02.12.2015

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