Stamp duty

Industry suggests ways to stimulate the BTL sector

Chancellor of the exchequer Sajid Javid recently rejected claims that he'd advocated shifting stamp duty from the buyer to the seller.

Javid denied such a proposal, stating in a tweet that “bold measures” were needed for housing, but that this wasn’t one of them.

In light of this, Bridging & Commercial set out to find other ways in which the BTL sector could be stimulated.

How else could stamp duty be reformed?

Some 51% of landlords believe that future government U-turns on stamp duty increases on additional properties and cuts to mortgage interest tax relief could invigorate the BTL sector.

Craig McKinlay, new business director at Kensington Mortgages, suggested that the government should remove the 3% extra stamp duty surcharge for additional properties as he believed it hampered investment.

“Many landlords are doing [BTL] for pension planning and should not be penalised for prudent and responsible long-term investments that mean they will not be a burden to the state/their families in later life.”

David Cox, chief executive at ARLA Propertymark, claimed that there should be tax incentives for landlords, as well as the roll back of mortgage interest relief.

In addition, he thought that reforming the court system, opening up the database for rogue landlords and improving enforcement would encourage the sector.

Reviewing the price bands

Marc von Grundherr, director at Benham and Reeves, claimed that there needed to be a review of the stamp duty price bands.

“Previous changes really hurt all parts of the market and not only would reducing these encourage homebuyers, but also investors.

“My radical suggestion to claw back reductions in stamp revenue would be to change the capital gains tax.”

He stated that the government wanted to encourage longer-term tenancies and was already considering three-year minimum terms and changes to Section 21 notices.

“Therefore, to support this strategy, I would suggest [it offers] incentives [for the] long-term outlook by changing capital gains tax,” Marc added.

“Start by raising it to 50% if the property is sold within a year, phasing it down to 40% after two years, 20% after 10 years and down to say 5% after 20 years.”

He stated that this was a tried and tested method which worked incredibly well in places such as Malaysia with regard to long-term investment.

In Malaysia, the capital gains rate is 30% when a property has been sold within three years of acquisition, while this reduces to 20% and 15% in the fourth and fifth years.

“…The government could also look at introducing a new stamp duty on sellers if they sell within a three-year period — this again would aid the government’s drive for longer-term thinking.”

Affordability assessments

“There’s little to no standardisation between lenders when it comes to assessing affordability,” claimed Dilpreet Bhagrath, mortgage expert at Trussle .

“There are also huge discrepancies when it comes to rental stress tests and rental calculations for affordability, making criteria inconsistent from lender to lender. 

“Lenders should look at making rental calculations for affordability more aligned. 

“This will create a more straightforward process for landlords when it comes to getting a mortgage for a rental property.  

“As the new tax system is being phased in, the changes will continue to take place and, with an uncertain market, we expect more changes in the future. 

“It’s worth treating a BTL property with a business plan which accounts for all tax implications and stamp duty charges, so you can keep on top of how any changes might affect you.”

Investing in technology

Martijn van der Heijden, chief strategy officer at Habito, said that, according to the company’s own research, for many landlords it was the traditional mortgage application process that was stifling the sector.

“With an average time to offer of about 21 days for landlord deals, compared to our own which offers instant decisions and an offer in less than half that time, we show the opportunity for technology to transform this sector.

“…Policies from government which support customer-centric, technology-based innovation in the sector will lead to a greater number of applications and less barriers for customers.”

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