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Stamp Duty holiday fails to fuel buy-to-let spending spree by investors

Little sign that large numbers of new investors are snapping up buy-to-lets despite the Stamp Duty holiday, according to new report.

Richard Reed

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Despite the Stamp Duty holiday, there is little sign that large numbers of new investors are snapping up buy-to-lets.

That is the finding from the latest Hamptons Lettings Index, which shows that the share of homes bought by BTL investors rose by just 1% during the Stamp Duty holiday.

This is despite the average BTL investor’s stamp duty bill falling by £3,000 or 35%, from £8,500 to £5,500 – equivalent to almost three months’ rent.

At the peak of the buying frenzy in February this year – the month before the original end of the Stamp Duty holiday – investors bought 14% of homes sold in Great Britain.

However, over the course of the entire 15-month tax-break, investors purchased 12% of homes – up only slightly on the 11% average during the 12 months before the holiday.

And it was a far cry from the 17% recorded in Q4 2015 in the run-up to the introduction of the 3% Stamp Duty surcharge on second homes and investment properties.

Canny investors

The Hamptons index also shows that BTL investors are clearly canny buyers. The average price paid by a landlord over the past 15 months rose by just 1% to £181,000, despite house price growth of 10% over the same period.

However there was no sign of investors using the tax holiday to buy more expensive properties – 83% of investment purchases were under £250,000.

Meanwhile rents across rose 8.0% across the country in September year-on-year, meaning the average rent now stands at £1,109 per calendar month.

Southern England has continued to drive rental growth, with the average rent on a new home rising 14.8% in the South-West, 14.7% in the South-East and 10.8% in the East of England. September marked the sixth consecutive month when annual rental growth hit double figures in the South-West.

The share of homes bought by investors

London rents recovering

London rents have also continued to show signs of recovery. Although inner London rents fell for the 20th consecutive month, the 4.4% annual fall was the smallest decline this year, and smaller than the 22.1% decrease recorded in April when the market bottomed out.

In outer London, rents grew 3.2% annually in September, rising for the 13th consecutive month, keeping Greater London rents overall in positive territory, up 1.8% year-on-year.

Commenting on the results, Aneisha Beveridge, head of research at Hamptons, said: “The overall impact of the stamp duty holiday on investor activity has been relatively muted.

“The holiday resulted in a small uplift in the number of new buy-to-let investors, but despite their reduced bills, they were not outbidding owner-occupiers on any significant scale. But by the same token, their numbers haven’t tailed off since the stamp duty holiday ended either, with rising yields softening the return to more normal tax bills.”

She said despite the tax holiday, buyers paying the 3% surcharge had kept the tax take above 2019 levels.

“It is likely that over the course of the Stamp Duty holiday, those paying the 3% surcharge will have contributed close to half of all residential stamp duty receipts,” she added. “But our calculations show that only around half of people paying the 3% surcharge are buy-to-let investors, with the other half made up of second home purchasers or those buying a primary residence without selling their old one.”

October 11, 2021

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