Landlords were understandably nervous in the run-up to Labour’s first budget since coming to power. Post-announcement you may not be feeling much better.
The Renters’ Rights Bill, which had its second reading earlier this year, already proposes several changes to how you do business. You might be worrying about the additional responsibilities and costs that will entail (more on that in our next blog).
Higher costs generally – whether it’s increased maintenance costs or mortgage costs from remortgaging at higher fixed rates than previously – are also impacting landlords and profits, despite November’s long-awaited cut in the base rate to 4.75%.
An unexpected rise in stamp duty
Pre-budget it had been widely rumoured that landlords would be impacted by a hike in Capital Gains Tax when selling a rental property. While Capital Gains Tax rates were raised in the budget it was only on CGT due on stocks and shares, increasing from 10% to 18% at the lower rate and 18% to 24% at the higher rate. This brings it equal to the higher rates already paid on property. There was no increase in capital gains tax on residential property itself.
Instead, landlords were blindsided by an unexpected increase in stamp duty for those purchasing buy-to-let homes, which rose from 3% to 5% the very next day after the budget was revealed.
Rental shortages and price rises
This could make purchasing additional properties for landlords hungry to expand their portfolio more expensive than in the past. That, in turn could impact the availability of rental properties with analysis from Capital Economics suggesting that the increase could see a net loss of half a million homes to rent over 10 years. The RICS has also warned about the impact on supply and the threat that will push already high rental prices up even higher.
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA) said the move “makes no sense” when 21 people are chasing every rental property. He also said that the Chancellor “failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up.”
Affordability will remain limited
The Chancellor addressed affordability in her first budget, with rises in the legal minimum wage for all ages to deal with the cost of living. The increase was highest for younger adults, with the government aiming for a standard adult rate.
However, with affordability already an issue for many tenants the potential rent increases that the stamp duty hike could cause may lead to further uncertainty in the market and a higher risk of rental arrears from tenants unable to pay. And that could further hit landlords’ pockets hard. Managing your portfolios effectively to maximise your rental potential will continue to be vital post-Budget.
We Can Help
At Progressive Lets we are experts in the rental market in the Peterborough area and help landlords find and manage properties within a 50-mile radius. Get in touch to find out more.
