Property investment halved since Stamp Duty rise

The number of investment properties being bought in the UK has halved since April 2016 when an additional 3% stamp duty was put on buy to let properties and second homes, new research has found, reports PropertyWire.

But the percentage of gifted deposits rocketed immediately after the stamp duty change came into force last April and remained strong for the following six months, according to the research from mover conveyancing services firm My Home Move.

Property Trends: What to Expect In 2017

Figures dating back to 2014 show that the once buoyant investment market has halved in size since April 2016, as landlords and additional home buyers have turned their backs on paying the additional 3% stamp duty charge. This could open up significant opportunities for those investors still willing to get involved in UK property.

Doug Crawford, the firm’s chief executive officer pointed out that the extra 3% charge was introduced by the Government to stop buy to let landlords snapping up properties usually bought by first time buyers but in reality, people who buy additional homes aren’t just landlords with vast portfolios of properties, but parents looking to help their children while at university, or retirees wanting to buy themselves a holiday home.

He believes that the tax has affected individuals looking for a second property far more than landlords. “If anything, the changes have resulted in money being redirected into gifted deposits, particularly for second steppers and middle movers,” he said.

The research shows that in the months leading up to the Stamp Duty changes, gifted deposits accounted for around 8.4% of all purchase transactions but once the law changed there was an increase to around 9.3% with second steppers and middle movers becoming the largest group to benefit.

“It would appear from the data, that while investors were choosing to back off on buying additional properties, the number of gifted deposits was rising at a rate of around 1%, the equivalent of an additional 3,000 properties bought using a gifted deposit in the six months after the stamp duty change.”

“I suspect it is parents, those who ordinarily would have bought a second home, who have redirected their savings towards their children to help them onto, and up, the property ladder. The Bank of Mum and Dad has once again had to step in to help those struggling financially to move beyond their first home, a situation caused by the lack of housing stock and inflated property prices,” he added.

However, not all areas of the UK are suffering from the rise in Stamp Duty. Properties in Manchester city centre are selling 70 per cent faster this year, as the number of investors and first-time buyers climbs.

JLL says that in 2017 to date, it took an average of just nine days for a city centre property to go from being listed on the market to having a final offer agreed and conveyancers instructed – compared to 30 days in 2016.

Indeed, with schemes like Nuovo and Castlegate on JLL’s books, that demand has seen the agency complete £4.5 million worth of sales already this year.

Every third first-time buyer banks with Mum and Dad

The shift in gear is indicative of how attractive the market is right now, with both first-time buyers and buy-to-let investors able to purchase homes without being subject to the chain that usually hinders home movers and second steppers. Of the homes sold by the team in 2017 so far, meanwhile, only one has been bought at less than its asking price.

Louise Emmott, residential director at JLL, says:

“The new year often acts as a time of change for people, so we expect to see the residential market heat up around this time, but the step-change in transaction speeds which we’ve seen over the past few weeks is unprecedented. The fact that most sales are being agreed at or above the asking-price is a further sign of the huge demand in the city centre market both from owner occupiers and investors looking to capitalise on rising rent prices as city centre living continues to grow in popularity.”

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