Stamp duty changes - from feast to famine?

Like many I listened to last week's Autumn Statement with mouth agape, especially when the buy-to-let stamp duty fly in the ointment was announced. Having returned a Conservative Government, I suspect many landlords would have thought their demonisation might have been put on hold, however it appears that George Osborne also believes this group is responsible for many of the housing market's woes and therefore deserves to be punished further.

Harpal Singh
1st December 2015
Harpal Singh, Broker Conveyancing

As if the cutting of higher rate tax relief on mortgage interest payments wasn’t bad enough he has now effectively kicked the chair out from under landlords who might wished to have added to their portfolios in the coming years. Stamp duty levels will now be considerably more for all landlords except, at the moment, companies that already have 15-plus properties within them. There is an obvious attempt here to move the private rental sector into a more corporate, professional business and this has led to these moves against smaller landlords.

What the Chancellor might not have initially grasped with such a shocking decision is the number of smaller landlords there are in the UK, all helping fill a housing gap and need. One wonders, even with this new round of house building incentives announced, where those tenants who do not, or cannot, buy will go should landlords vote with their feet and seek to exit the sector. While I might understand why Osborne has gone down this route, there is a real danger that he has gone too far in the home-ownership direction and the consequences could be dire.

Looking at my own sector, conveyancing, I immediately uttered the words, ‘There may be trouble ahead’, because this type of deadline – all purchases will need to be completed by the 31st March next year so as not to pay the more punitive stamp duty costs – is going to heap huge pressure on conveyancing firms. This will not just be from landlords looking to complete, but also the chains of property they are involved in (both investment and residential), and the fact this coincides with possibly the busiest time of the year anyway, just before Easter.

All this is going to add up to major headaches across the board because, as far as I can see, the urge to save tax will be great and therefore landlords who may well have been considering adding to their portfolios during 2016 have a much bigger incentive to do that earlier in the year. We are therefore going to have an incredibly busy four months, again through a period which is traditionally quiet, where all market stakeholders such as advisers, lenders, distributors, conveyancers, etc, will be under pressure.

But, what comes after that? Will we go from feast to famine finding ourselves in another year with a defining springtime moment? Indeed, in the mortgage market we will have two in 2016 – this stamp duty deadline and also the introduction of the Mortgage Credit Directive. This year it was the General Election and in 2014 it was the introduction of the MMR. It looks likely to be a year of two halves again with a large amount of activity crammed into that first quarter.

For advisers with buy-to-let clients the need to deal with a specialist conveyancing firm which has the resource, skills and commitment to get that deal completed, is going to be high. Essentially, without this, your clients are going to have little chance of completing before the deadline – even now four months away, and with the pressure buy-to-let lenders will face, I suspect many completions may not happen. And what happens if they don’t? Will they fall through which will bring with it its own issues for conveyancers who provide a ‘no completion, no fee’ option as many of our firms do. Perhaps, in fact I think this is a certainty, buy-to-let conveyancing fees will be increased and those ‘no completion...’ deals may be jettisoned.

So, the countdown has truly started. I am already hearing anecdotal evidence from local agents that they have been inundated with information and viewing requests from investors since the Statement all looking to purchase before the deadline. This is likely to continue up until the point where those investors feel a deal can’t be completed in time, or in all likelihood, even beyond that point. The industry therefore needs to be on its guard and to communicate effectively especially when it comes to client expectations. Of course, we want the business but given the timeframe and the pressures it’s up to us to be realistic about what can be achieved, by whom and by when. Good luck to everyone.

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