The government announced that as from April stamp duty rates for the purchase of investment property in certain circumstances will be higher with another 3% being added to the rate at which would normally apply.

Although it is understood that this legislation is still to be discussed by the government in March guidelines issued by the government have confirmed that the higher rates of stamp duty land tax will only apply to purchasers of residential properties which are purchased to let. The stamp duty on non-residential properties will not change due to the introduction of these higher rates. This means that a purchaser of a non-residential property will never pay the higher rates of stamp duty even if it is later converted into residential property.

Non-residential property includes commercial properties such as shops or offices, agricultural land, bare land even where the land may subsequently be used for residential purposes, forests, any other land or property which is not used for the residents, 6 or more residential properties bought in a single transaction and a mixed use property (1 with residential and non-residential elements).

Mixed use transactions that is, the purchase of residential and non-residential properties together in a single transaction is currently considered a non-residential transaction for stamp duty purposes. The government does not intend to change that treatment.

There are likely to be other amendments to this legislation however this is apparently being introduced to ensure that buy to let investors pay extra stamp duty if they are looking to buy property which may normally have been sold to first time buyers. This really continues the theme that the government wants to try and encourage home ownership rather than many first time buyer properties being snapped up by buy to let investors who know that these properties will be popular to let and produce a realistic return on capital invested.

The residential lettings market is very buoyant and it is not always that tenants who may have the income to purchase a property but lack the deposit.

Since the 2007/2008 crash lending institutions seem to be more wary of possible fluctuations in the property market and it appears that they feel that lower percentage mortgages are a safer bet for them in that if property prices should reduce then they are likely to ensure that the borrowers do not go into negative equity.

All this is very well but if there should be a lack of new properties coming available to let then that in itself will create a shortage and the possibility that market rents could increase based upon supply and demand.

It is important to realize that nowadays with job opportunities for potential first time buyers coming up not just in this country but all over the world they want the flexibility to be able to move without having to sell a property.

The rented accommodation market now forms an important investment for many people and by investing their money in property and making homes available to rent eases the burden for local authorities, housing associations and other private rental providers.

J E ANDREWS FRICS MARLA
DOOLITTLE & DALLEY LLP – COMMERCIAL DEPARTMENT