Threat to rents

Threat to rents

Mar 30, 2016
LendInvest BUY-TO-LET Index shows THREAT TO RENTS after Stamp Duty rise
Carmen Murray Carmen Murray

LendInvest, the UK’s largest online marketplace for property, has released its latest quarterly research Index on the UK Buy-To-Let market that tracks changes and trends in landlord rental yields and capital gains since 2010.

This quarter the LendInvest Buy-To-Let Index focused on the financial impact on landlords - and their tenants - of the additional 3% Stamp Duty Land Tax (SDLT), which will be payable by all buyers of buy-to-let properties and second homes from Friday 1 April 2016.

Findings include:

London & Southeast landlords need longest to repay higher SDLT

  • Landlords in Inner London and Harrow will need equivalent of 20 months’ rent or more to repay higher SDLT

Landlords in 13% of country to pay SDLT for first time

  • Average house prices in 14 out of 105 postcode areas are <£125,000, meaning future buy-to-let purchases will be subject to up to £3,750 SDLT for first time

Darlington, Halifax and Doncaster among worst affected by first-time SDLT payment

  • Areas with most properties subject to SDLT for first time and lowest average rents
  • Average SDLT rises from £0 to up to £3,750 (or 8.3 times average monthly rent)

86% of first-time stamp duty payers in Northeast or Northwest

  • 12 out of 14 postcode areas with average house prices under £125,000 are in NE and NW
  • Landlords in areas including Sunderland, Blackburn, Durham, Hull and Wigan could have to pay up to £3,750 on new purchases on which they paid £0 previously

Inner London landlords need twice as many months of rent to repay higher SDLT than some Outer London counterparts

  • WC, SW, W and EC London take over 22 months to repay higher Stamp Duty versus 12 or 13 months in Romford and Dartford

But, Outer London landlords hit worse by overall percentage increase in SDLT due

  • Landlords in Tunbridge Wells, Dartford, Romford will see SDLT rise more than 300%, vs <200% in Inner postcode areas

Christian Faes, Co-Founder & CEO of LendInvest, said: ”The stamp duty hike spells bad news for landlords - and their tenants. Put simply: when taxes rise, someone has to pay. Our latest BTL Index shows that the likely payer is ultimately going to be the tenant, with higher rents. The Stamp Duty Land Tax hike will cause rental yields to fall for landlords, putting pressure on them to raise the rents they charge.

“It’s not just in Inner London, where landlords’ taxes will soar, that we can expect to see landlords and tenants squeezed financially. The Index shows that all across England and Wales, we will many landlords factoring several thousands of pounds of stamp duty tax into their budgets for the first time. Towns like Sunderland, Blackburn, Wigan and Oldham could be particularly badly impacted: here, rental yields are comparatively good but average house prices are below £125,000 meaning SDLT will be imposed for the first time.

“The Treasury’s decision to inflict this tax hike is part of their longer term plan to professionalise the buy-to-let market and make Britain a country of homeowners. While the mission has its merits, there are no quick fixes to the nationwide housing crisis. Until there are more houses on the streets that people can buy at reasonable prices, landlords have their place and their tenants must be protected.”


View findings (with embeddable links) here:

Impact of new stamp duty tax by average house price (interactive map)
Impact of new stamp duty tax by average house price in London (interactive map)

Catch up on our latest quarterly findings on average rental yields, capital gains & return on investment  

Note

  • ‘Inner London’ comprises postcode areas: E, EC, W, WC, SE, SW, N and NW.
  • ‘Outer London’ comprises all other postcode areas within Greater London remits.
  • Data sources: Zoopla and Land Registry