An additional stamp duty charge on residential property investments has been slammed by the British Property Federation for its potential to stifle the UK’s emerging build-to-rent sector.
As of tomorrow, investors in buy-to-let properties or second homes will face a 3% stamp duty surcharge. The government said the proceeds will be used to build affordable housing.
The British Property Federation (BPF) has estimated that the tax will equate to the loss of a year’s income on a typical 10-15 year investment in a build-to-rent property.
George Osborne announced in this year’s budget that the charge would apply to institutional purchases, after earlier indications that these would be exempt.
The BPF said the tax would “undoubtedly” cause investors in build-to-rent properties to reconsider their commitment to the sector.
Ian Fletcher, director of real estate policy at the BPF, said: “Many institutional investors will find it difficult to fathom why something so good – adding to housing supply – is taxed so highly. Given that in many cases the tax will equate to a loss of a year’s worth of income, it is unsurprising that many investors are thinking twice about entering the sector.
“As well as the direct financial impact, what we cannot also afford is for this to knock the sector’s confidence when there are so many units coming out of the ground and the potential for many more.”