Landlords received a surprise hand-out from Chancellor Jeremy Hunt when he cut the higher rate of Capital Gains Tax from 28% to 24% in today's Spring statement.
The government says this will encourage landlords and second homeowners to sell their properties, making more available for a variety of buyers including those looking to get on the housing ladder. “If we reduced the higher 28% rate for residential property, we would increase revenues because there would be more transactions,” Hunt told MPs.
As expected, in his ‘Budget for Long Term Growth’ the Chancellor abolished the Furnished Holiday Lettings tax regime which gives extra tax reliefs for costs incurred furnishing holiday lets that aren’t available to private rentals, in a bid to remove the incentive for landlords to offer short-term holiday lets rather than longer-term homes. This will take effect from April 2025.
When announcing the abolition of multiple dwellings relief, he explained that this stamp duty relief for those who buy more than one property in a single transaction, although intended to support investment in the PRS, had not been found to do so and was being regularly abused.
However, the government says property transactions with contracts that were exchanged on or before 6th March will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1st June.
Lucian Cook (pictured), head of residential research at Savills, believes the abolition of multiple dwellings relief is likely to temper investment among landlords, while the targeted cut in capital gains tax may tip the balance for a few who have questioned their ongoing investment in the sector.
“That won’t do much for rental supply, in combination with changes in rental regulation,” says Cook, “but neither will it necessarily make it substantially easier for people to get on the housing ladder.”
He adds: “Without any specific measures to help first-time buyers, it may well accelerate the restructuring of the buy-to-let sector to bigger, less mortgage-dependent landlords, as much as opening up stock to those looking to get a foot on the housing ladder.”
Ben Beadle, Chief Executive of the National Residential Landlords Association, says: “The Chancellor has once again ignored calls to revitalise long-term investment in quality rented homes in favour of tinkering at the margins for short-term gain.
“Increasing taxes on holiday lets and cuts to Capital Gains Tax will make no meaningful difference to the supply of long-term rental properties. Meanwhile, those reliant on housing benefits still do not know if their benefits will be frozen from next year or not.
“With an average of 11 tenants chasing every home for private rent, social housing waiting lists at 1.3 million, almost 110,000 households in temporary accommodation and the number of first-time buyers slumping, the Budget needed to tackle the housing crisis once and for all. What we got was a deafening silence.
“This was a missed opportunity to make providing new homes to rent and buy the priority it desperately needs to be.”
Nicky Stevenson (pictured), MD at estate agency Fine & Country, says:: “Reducing the higher rate of Capital Gains Tax should inject some extra energy into the housing market by increasing the number of properties for sale.
“Teetering landlords unsure about whether to take the plunge and sell their property will be encouraged by this announcement.
“This should offer hope for first-time buyers who are the foundation of the property market, but have been hit particularly hard by high interest rates.”
Paresh Raja (pictured), CEO of Market Financial Solutions, adds: "Cutting property CGT rates will be welcomed in some quarters. But elsewhere, after years of tightening regulation in the buy-to-let market, the Government has indeed now moved to put the squeeze on holiday lets.
"Ensuring there are ample properties available for local homebuyers in tourist hotspots makes sense, but it is regrettable that the solution is always to target investors and penalise landlords rather than boosting supply through greater investment into housebuilding.
“That there was so little by way of stamp duty reforms, housebuilding commitments or ways of incentivising landlords to invest in their properties - particularly for energy efficiency purposes - was disappointing.
“Ultimately, after two years of rising interest rates, today's Budget would have been an opportune moment to bring about a string of policies and reforms to boost the property market. It feels like a missed opportunity."
Roger Mortlock (pictured), CPRE chief executive, adds: "The government’s plan to scrap tax breaks for short-term lets is a step in the right direction. But these changes should be applied to all second homes – a major cause of the rural housing affordability crisis.
"Air-BnB-style short-term lets have led to ghost towns and villages in some parts of the country, driving people out of the communities that depend on them. A secure and healthy home is a foundation for a decent life and one that many people in rural communities are being denied."
Ben Edgar-Spier (pictured), Head of Regulation and Policy at Sykes Holiday Cottages, says: “Holiday let owners have been unfairly scapegoated in the guise of controlling rising house prices and availability.
“Short term rentals truly are the economic lifeblood of many parts of the UK, driving spending, providing direct employment and supporting local businesses alike. It’s therefore illogical to penalise these short-term let businesses over those with empty second homes - which contribute nothing to local economies - when you consider these benefits."
Jeremy Raj, (pictured) National Head of Residential Property at legal firm Irwin Mitchell, adds: "With housing starts in the doldrums and rents, mortgages and residential properties as unaffordable as ever, it was striking to note how little of today’s speech related to housing and planning.
"It’s hard not to conclude that the Government now feels that issues within the residential property market will not be a favoured battle ground for them in the coming General Election, other than sloganeering about the green belt and commonhold."
Tags:
Comments