‘At last the Government is taking serious steps towards helping the private sector provide more houses to let. The crucial issue for any investor is adequate returns. Today's announcement that stamp duty will be levied on the average cost of properties puts large scale investors on the same basis as single buyers,’ said Rosalind Rowe, PwC real estate partner.
‘Reducing SDLT will reduce the per unit cost of acquisition and reduce funding, which, when coupled with a REIT investment wrapper, could make residential property an attractive investment asset class,’ she added.
According to Christopher Down, chief executive of Hearthstone Investments, changing the method by which stamp duty is levied on bulk purchases of residential property removes a significant barrier to residential investment by pension funds and other large institutional sources of capital.
‘Finally, institutional investors are on an equal footing to small and buy to let investors, able to trade the same types of property without a disproportionate SDLT bill. Previously, the purchase of a residential property worth £220,000 by a private investor would have resulted in a stamp duty bill of £2,200. An institutional investor acquiring a large portfolio of these homes would have paid five times this amount per property, some £11,000,’ he explained.
‘It is therefore hardly surprising that large scale investment in residential has been so muted, despite moves by the HCA in recent years to encourage change. We greatly welcome the government removing this barrier to entry as part of a joined up policy approach to future housing provision,’ he added.
But David Whittaker, managing director of Mortgages For Business, said the devil will be in the details. ‘In theory, this is just the sort of the thing the government should be doing to help the professional landlord. In practice, we need more details to determine whether this measure is an effective incentive,’ he said.
‘It’s important to establish whether this new structure will be imposed purely on properties bought in bulk in a single location, such as a block of flats, or if it will include a situation where a landlord buys multiple properties in different locations. It’s a vital distinction, which needs clarification,’ he explained.
‘However, the signal is a positive one for the rental sector at an extremely crucial time and we’re pleased the government is beginning to take this section of the housing market seriously,’ he added.
It is a move that the British Property Federation and the Royal Institution of Chartered Surveyors have been calling for for years.
‘The bulk purchase rule change is particularly welcome as it will mean that stamp duty is charged on an average price per unit rather than the total transaction cost,’ said RICS chief economist Simon Rubinsohn.
‘More people are now choosing to rent their home, particularly young professionals and those who are looking for flexible accommodation. Changes to these systems will lead to more high quality properties which are a genuine alternative to owning a home,’ he added.
‘This is impressive backing for a long standing BPF campaign to have stamp duty on residential portfolio trades reformed,’ said Ian Fletcher, director of policy at the BPF.
'It will provide an important boost for the private rented sector and we hope will tip the balance in encouraging institutional funds into building homes. Using the average price is fairer and a welcome measure of support for those in need of rented housing,’ he added.
