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|Government’s BTL clampdown plans are deterring investors|
|Thursday, 18 February 2016|
Around one in four of those UK adults who were considering a Buy To Let property investment have been put off by the Government’s plan to introduce a 3% additional stamp duty and cut tax relief on their finance costs, according to research by the online investment platform rplan.co.uk.
The research shows that 9% of UK adults have given up on aspirations to own a BTL property because of the government’s plan while 30% of UK adults are still considering whether to do so. Around one in seven (14%) existing landlords say they will now sell one or more of their properties because of the new rules.
Under the changes, the stamp duty on buying a £250,000 BTL property will rise from £2,500 to £10,000 from April, while that for a £400,000 property will more than double from £10,000 to £22,000. Also, from 2017, the tax relief currently allowed on finance costs such as interest payments on mortgages and loans to buy furnishings will be gradually reduced over four years.
Those planning to invest in BTL were going to use savings and investments worth an average of £43,592 to buy a property. Instead, 39% of these adults will use the money to save in a cash account, 30% will invest in an ISA, 20% will put it into their pension and 13% will put it in other stock market investments.
The 3% stamp duty on any property bought as a BTL or as a second home will be introduced in the new tax year starting in April. Latest figures in the Bank of England’s Credit Conditions Survey have revealed a rush to buy BTL properties before the new tax is introduced: lenders reported that demand for secured lending for house purchase increased slightly in 2015 Q4 and was expected to increase in 2016 Q1 but within this, demand for buy-to-let lending increased significantly in Q4.
Stuart Dyer, rplan.co.uk’s CIO, said: “The British have strong faith in property as an investment and many see it as a means of providing a pension income. But the government clearly has a policy to dis-incentivise BTL and the sharp increase in landlord mortgages revealed by the Bank of England credit survey will probably be a last rush before the gate slams shut.
“Having a BTL property can also mean an over-exposure to one asset class for many investors, who should strongly consider the alternative of investing in a diversified portfolio for the long term, especially if this can be achieved through a tax-free ISA wrapper.”
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