Wealthy buyers may avoid new stamp duty rates

Updated
Autumn Statement
Autumn Statement



Thanks to a loophole, wealthy foreign investors may be able to avoid paying George Osborne's new increase in stamp duty, it has been revealed.

On Wednesday, in his spending review, Osborne announced that, from April 1, landlords and second-home owners will have to pay three percentage points extra on each stamp duty band.

It means the stamp duty on a £150,000 house will go up from £500 to £3,800; on a £300,000 house it will be £12,800, up from £5,000 today.

The aim was to make it easier for first-time buyers to compete with investors and get themselves on the housing ladder.

But, says Alan Ward, chairman of the Residential Landlords Association, it's more likely that landlords will simply put rents up to compensate.

"The biggest losers from today's statement are tenants who will now find it even harder to get the accommodation they want at a price they can afford," he says.

"The extra stamp duty on buy to lets will exacerbate an already serious shortage of properties in many areas reducing choice and driving up rents."

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Meanwhile, says Jim Coupe, managing director of Skipton International bank, the move is unlikely to put foreign investors off.

"While this is clearly not a welcome decision, most expat investors view UK property as a long term investment and hence a 3% rise over the lifetime of a property should be seen in that context," he says.

"Despite the move, property in the UK is regarded by many as a very attractive, secure investment and we do not foresee a rise in stamp duty deterring the majority of investors."

On top of this, many wealthy foreign investors will be able to avoid the hike, as corporates or funds making 'significant investments' in residential property will be exempt. Investors, therefore, can simply put their money into property investment funds holding multiple properties.

Stuart Law of Cheshire-based property company Assetz Capital tells the Daily Mail that he's already setting up such a fund.

And, he admits, such schemes could push property prices up in cheaper areas.

"You might find that these buyers decide not to spend £10 million on a Mayfair townhouse," he says. "They might instead use that cash to purchase a block of flats up North and avoid the stamp duty rise."

Piling on the problems, there's a danger of a mini-boom as investors rush to snap up properties before the April 1 deadline.

Osborne Delivers Autumn Statement
Osborne Delivers Autumn Statement




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