Rachel Reeves’ first Budget as Chancellor included a surprise increase to the stamp duty surcharge instead of the much-mooted increase to capital gains tax (CGT).
The surcharge, payable on the purchase of second homes, was increased by two percentage points to 5%.
The original surcharge of 3% was introduced by George Osborne in 2016.
More interest in the Northern property market
Analysis of industry figures for our recent report The Factors Driving the Buy-to-Let Market in Northern England reveals a notable shift in the geographical concentration of buy-to-let (BTL) acquisitions following its introduction.
The share of mortgages written for property purchase in the North of England increased, while Southern regions have seen a decline; probably of no shock to anyone.
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In 2014, a majority of 46% of BTL purchases were in London and the South East. In the decade since, that proportion has fallen to 32%. Meanwhile, the North East, North West and Yorkshire and the Humber saw their share grow from 22% to 35% in the same time frame.
Our own lending data provides an example of the policy’s contribution to the 66% drop, between 2016 and 2023, in the proportion of BTL purchases in Greater London – a landlord looking to buy a property in the area, averaging a hefty £739,166, would face a stamp duty bill of £46,633.
If the same ‘brave’ landlord took a trip up the M6 to the North West, their stamp duty bill would drop to around £6,816, and even less if they invested in the North East, where the purchase of a typically priced property would incur stamp duty of just under £6,000.
Northern investment is good, but could cause supply imbalances
The North/South divide is a long-standing issue in England, so it’s refreshing to see the North experiencing increased investment in property that will support the region’s workforce.
Enabling businesses to be agile and respond to market changes, flexible accommodation is an often-overlooked aspect of the infrastructure needed to support economic prosperity.
That said, of course, London is one of the most dynamic and transient housing markets globally, attracting workers and students from across the UK and beyond, so the need for rented homes is as great as any other part of the country.
Need creates demand, and when demand is not met by supply, it creates inflation – the rate at which rents have increased in the capital has outpaced all other regions.
While build-to-rent developments can contribute to UK-wide housing shortages, they aren’t a panacea, and we see a market still heavily reliant on private landlords.
Without them, tenants face an unwelcome mix of further rent rises and fewer homes to choose from.
Avoid discouraging landlords from the housing market
The government is set to consult on new energy standards for rental properties and the Renters’ Rights Bill is currently making its way through Parliament.
While these measures are intended to have a positive impact on the sector, something we support, there is a risk that landlords will be deterred by a complex regulatory landscape, alongside taxation that many other small businesses are not subject to.
It is vital that politicians consider the potential impact of policies, however well-intended, and recognise the role that private landlords can play in addressing our housing shortages.
Doing so will help to create an environment that encourages landlords to stay in the sector. This will contribute to a fair and accessible rental market, something that is crucial for a balanced and thriving housing market.
