Investors are speculated to be in a frenzy to buy rental properties in the effort to beat the tax increase in April.
According to Express UK, market experts say that there will be an added 3 percent stamp duty charge to take effect in April. From then on, it will be mandatory for landlords to pay the surcharge on top of stamp duty, which makes the costs of "buy-to-let" property more expensive. The short notice was given last November by Chancellor George Osborne in a November's Autumn Statement, giving prospective rental property investors just nearly four months to rush investments ahead of the change.
So how much change are these investors worried about? According to Express UK, the extra stamp duty will increase the tax bill of buying a buy-to-let property. For example, a £200,000 buy-to-let home will have a £7,500 tax bill after April. Currently, it is only £1,500. That would be a £6,000 increase and it will consume 14 months' worth of income from landlords.
The publication states that buyers are even cautious not to wait for April to make the investment. Real estate agents reportedly say that most of them are in a hurry to buy before the middle of February, aiming to complete the deal before April.
Express UK quotes former RICS chairman and London estate agent Jeremy Leaf, "Because of the tight timeframe, there is more risk in buying a property in a chain because of the chance of fall-through of the sale, leaving even less time to complete a transaction. Landlords may opt for new-build instead where there is no such risk and they have certainty of sale."
And there is a domino effect to this buying frenzy. The former RICS chairman said that sellers are taking advantage of the situation by raising property prices. According to Halifax, the property prices have increased nationally to 1.7 percent in December following the announcement.
