You know the one about the butterfly flapping its wings in the Amazon rain forest? Or more pertinently, the end of double tax relief on owner-occupier mortgage interest (MIRAS) back in 1988/9? Well, adding 3% SDLT (stamp duty land tax) on buy-to-let purchases might have a similar effect on the property market. Apart from anything else, it is market intervention, which I thought wasn’t a particularly Tory thing to do.
If you are asking: what is a commercial property trainer/mentor/adviser doing concerning himself with the residential market? Well history tells us that the residential market broadly leads the commercial market in its ups and downs. So it matters a good deal to my clients, whether they realise it or not.
Many people prefer to rent rather than buy the place in which they live. For many, getting/having a mortgage is either not appropriate or not desirable. They are in temporary/contract work; they are students; they want to live in an area before they buy; or perhaps they just don’t want the burden of owning. For all those people, the availability of a good stock of well-maintained and managed residential property, large and small is vital.
“Well-maintained and well managed”? What about all the terrible stories we see on the TV about water dripping down walls and extortionate rents? That is again a supply and demand problem that the extra 3% SDLT isn’t going to improve. A ready supply of well-maintained and managed stock would help. And of course, the vast amount of well-maintained and managed stock doesn’t make headlines.
If the demand from buy-to-let investors dries up or even reduces, the availability of rentable houses and flats also diminishes. Demand will outstrip supply and the price (rents) will go up. That’s not too complicated to see. Added to which the same newsworthy “unscrupulous landlords” in the will have less reason to improve their stock.
The Government’s intention may be that a penal rate of SDLT will increase the availability of properties to owner occupiers and thus cause a fall in the price, helping as it does, first time buyers. Sorry, a key component of the buy decision is that the value of the property is going to increase afterwards? And which house builder will carry on building at the smaller end of the market when what they build sells for less than last year?
Of course many a fortune has been made and lost trying to second-guess a market but we can only hope that this innocuous little market intervention will not have the sort of unintended consequences that the end of double mortgage interest tax relief had.