The BTL budget boost
Buy-to-let has received a shot in the arm as a result of some proposed changes announced in the Budget a fortnight ago.
The changes will mainly benefit aspiring portfolio landlords who are looking to grow their property empires and signify that the Coalition Government is firmly on the side of the landlord.
All indicators so far from the Coalition Governemnet indicate they see that a solution to the housing shortage will be led by the private sector landlord.
Bulk purchase tax relief
This proposed change in the charging of Stamp Duty will bring a massive saving to landlords making bulk property purchases.
Currently, landlords will have to pay stamp duty (SDLT) up to 5% on aggregate purchases over 1 million pounds. This means that even where the average value of each buy-to-let property is relatively small, the transaction tax value will be high putting a portfolio landlord at a financial disadvantage compared to an individual purchaser.
The proposed changes in the budget will mean that SDLT will be charged on the average value of purchases. Therefore, in the case of a landlord who was buying a portfolio of 10 buy-to-let’s at say 100 thousand pounds each would have paid 5% on the million pound portfolio purchase equal to 50,000 pounds. Under the proposed averaging method, tax would be levied on the average cost of the property. This equates to 100 thousand pounds per property and means that the landlords SDLT bill would fall to 10,000 pounds.
Commenting of these changes the BPF (British Property Federation) who have been campaigning for these changes for many years said the Budget "went further than even the most optimistic within the industry could have predicted".
Stimulus to landlords to convert to REITs
The other proposed measure contained in the budget that aims to stimulate the buy-to-let market is the liberalising of the REIT market by scrapping the 2% start up charge for companies looking to convert. The Chancellor is also looking in the 2012 budget to scrap the requirement of REIT companies to have to be listed before converting. This will potentially make the capital gains friendly vehicles available to many more landlords. Great!
The most important change
The most important change of all from the Coalition is the lack of policy initiatives! The last ‘lot’ were always threatening landlords with meddling, licensing, regulation and taxes. All measures guaranteed to tie up landlords and inhibit buy-to-let investment activity.
Just as in the rest of the economy if politicians and policy makers butt out. Landlords and property investors will continue to do what they have been doing since deregulation of the sector back in 1988 with the Housing Act.
That is increasing the number of properties to rent at no cost to government and the taxpayer.
Seems like pretty good deal to me!