Buy-to-let could be in for a booming year

Arguably one of the worst kept secrets (in a world where leaked government announcements seem to be an everyday occurrence) is now out of the bag. Up to 234,000 buyers who have already agreed a sale could be exempt from paying stamp duty should the Chancellor confirm his three-month extension to the scheme in the upcoming Budget. This equates to a total estimated saving for those buyers of £984 million, according to the latest analysis from Zoopla.

The research also showed that nearly 750,000 homebuyers in England are set to benefit from the stamp duty holiday, collectively saving almost £5bn. Of that figure, 600,000 buyers who agreed a sale from May 2020 onwards will not pay any stamp duty as a result of the holiday, saving an average of £4,660 each or £2.8bn collectively. A further 140,500 people buying homes costing more than £500,000 will benefit from a reduction in the amount of stamp duty they pay – saving £15,000 each or £2.1bn in total.

These figures highlight the impact this initiative has provided throughout the housing market for a range of borrowers. Although the overriding sentiment from the industry to this extension appears to be that the cliff edge is merely being moved, not removed. I concur to a large extent, but there is the argument that this cliff edge may be lower and less daunting than if the 31 March deadline had remained.

When it comes to the buy-to-let sector, I imagine such an announcement will be met with a shrug of the shoulders by landlords rather than any gleeful rubbing of their hands together. As outlined in recent research from Pepper Money prior to any extension, 65% of advisers said they expected no decrease in purchase activity once the SDLT holiday ended (the 31st March deadline that is), with 61% expecting business levels to remain the same and 4% anticipating an increase. In addition, 69% of advisers expected an increase in buy-to-let remortgage business this year as many thousands of five-year fixed rates are due to expire.

It’s not yet clear if the extension will apply to all purchases, or if it will be on a tapered basis and apply just to those sales agreed before a specific date. However this pans out, it will largely remain business as usual for landlords, developers and investors and any stamp duty extension will have little impact on their plans. Yes, it is a nice bonus for those who may have struggled to get a transaction over the line but the medium to longer-term viability of such an investment far outweighs a short-term tax gain for the vast majority of landlords.

As outlined by Paul Adams, sales director at Pepper Money – ‘set against a challenging economic backdrop, buy-to-let could be in for a booming year. Demand for rental property continues to be high, and landlords are responding to this demand by returning to the market and growing their portfolios’. I couldn’t put it better myself and I for one am optimistic that activity levels will remain strong throughout 2021. But let’s not stop talking about stamp duty – I need to keep building the pot, you never know when the tax man will come knocking!