Buy to let investors urged to act before stamp duty benefit wanes

21 July 2020 | Renting

Buy to let investors urged to act before stamp duty benefit wanes

A specialist buy to let mortgage broker is urging prospective investors to buy sooner rather than later if they want to maximise their saving via the stamp duty holiday. 

Mortgages for Business says that, in the medium term, the recent cut in stamp duty may turn out to benefit sellers as much as buyers – and that landlords should take advantage of their comparative preparedness to strike on undervalued properties before those merely moving up the property ladder are ready to do the same.

“Landlords may not appreciate they need to act while they are well-placed to move in a way that owner-occupiers are not. We know property investors have been remortgaging with a view to picking up some bargains.  Owner occupiers have not been doing the same.  Landlords have been preparing since the start of the lockdown, remortgaging to enlarge potential war chests with an eye on bagging bargains in the future” explains Steve Olejnik, managing director of Mortgages for Business.

“Landlords are currently very well-placed to seize the day.  But that advantage won’t last forever.  That’s why smart investors will start expanding their portfolios immediately, rather than waiting and then scrambling to try to do deals at the last minute.”

An analysis carried out by Mortgages for Business, based on data from April and May this year, found landlords who were remortgaging were primarily doing so to build an investment war chest.  The broker found 30 per cent of property investors were taking out a buy-to-let remortgage with a view to expanding their portfolio and growing their cash reserves.  

“Currently, sellers aren’t trying to grab the money that buyers had tucked away to pay for stamp duty – cash that was earmarked for the taxman. But the closer we get to [the end of the stamp duty holiday in] March 2021, the more sellers are going to start making bids to grab the money that buyers had originally allocated to the government” adds Oleynik.

“By the start of next year, the stamp duty holiday will have made sellers much more determined to get a good price – where they might have been more inclined to offer discounts.  Landlords should be aware of that.”

The government has lifted the threshold at which stamp duty kicks in from £125,000 to £500,000 in England and Northern Ireland. The new threshold, which also applies to landlords, will run until the end of March 2021.  

Although property investors must continue to pay a three per cent stamp duty surcharge on purchases, they will pay no further duty on the first £500,000 of the property’s value.  For a landlord buying a £500,000 property, this halves the rate of duty payable – from £30,000 to £15,000.

This post has originally been featured in Letting Agent Today.