How April 1st stamp duty changes will add thousands of pounds to buying a second home in Norfolk
- Credit: Archant
It's been a busy time in the property industry as people aware of the stamp duty changes snapped up properties as investments and second homes just after Christmas in a bid to rush through completions in time for today's deadline.
The effects of the changes are widespread and the ripples will be felt throughout the industry.
For a start, anyone wanting to buy a property as an investment or second home will have to pay more but what agents fear is the effect on the market.
What we have seen is an active market with many homes bought over the past few months but does it mean things may go a little quiet now?
With fewer investment properties for sale, those looking for a buy to let now will have to compete with first time buyers and so it could be less likely that prices will be dropped.
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It could even mean an increase in prices on these types of properties.
Then there is the effect on the rental market of all these investment properties, just completed, coming up for tenants - a glut of homes available could see a decrease in rentals achieved? Then, at the other vast end of the scale, what will the changes do to the second home market?
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People buying these homes are mainly competing with similar kinds of buyers so will we see more negotiation on high value properties?
Will it result in people hanging on to such homes and not selling them - meaning prices will be driven up even further as demand continues to outstrip supply? Interesting times...
Ben Marchbank, from Bedfords in Burnham Market, selling a vast number of high end properties to the second home buyer, said: 'I must confess that when the chancellor announced his intention to impose an additional rate of stamp duty on second homes and buy to lets, I did fear that it might represent a cloud on the horizon for Bedfords, and of course, it may yet prove to have an adverse effect upon the market.
'However, I am pleased to say that so far it does not seem to have deterred buyers at the top of the market, and we hope our experiences in March prove to be a bell-weather for the months to come.
'Our Burnham Market office agreed sales on three houses priced around £2 million in March and only one of those completed yesterday; the other two buyers acknowledged that they would be liable for a higher rate of stamp duty when making their offer. Perhaps if Mr Osborne hadn't hiked up the rate of tax, our clients might have secured a marginally higher price for their houses. We cannot know for sure.
'And it is not just the top of the market that is active; we have been registering new buyers and agreeing sales on second homes in all price ranges in the last few weeks. Traditionally, spring marks the start of a period of peak activity in the North Norfolk housing market and all the signs seem to indicate that 2016 will be no different to previous years, notwithstanding Mr Osborne's intervention.'
Nick Eley, from Watsons, said: 'The aim is to provide a window of opportunity for hopeful first-time buyers. Although in the long term it is predicted that rents could be pushed up further as landlords pass the extra costs of stamp duty on top of rent prices.
'Many investors have rushed to purchase properties before the deadline. The National Association of Estate Agents (NAEA) have reported demand for homes surged to a 12 year high in February. As the number of investors purchasing increased, the number of first time buyers fell to 24%, a decrease of 5% when compared to January.
'There are cases where people may temporarily end up owning two properties, such as retirees downsizing into a smaller property or parents purchasing a property for a child. The government has decided those in this situation will be given 36 months to claim a stamp duty refund, in the event that there is a period of overlap in ownership of a main residence.'
There a number of tax loopholes which buyers are using to beat the hike:
•Parents buying properties for the children can set up a trust structure so the child is a beneficiary of a trust, meaning they won't have to pay the extra tax.
•Landlords who expect to miss the deadline but don't want to abandon the sale are negotiating with sellers to arrange to split the extra tax cost between them.
•Investors who complete transactions now to beat the tax change are allowing sellers to stay living in the property until they find a new home.
•Landlords who incorporate properties they already own also have to pay the increased tax. Many are transferring their properties into a limited company now to avoid having to pay the extra 3% if they do this after April 1.
Philippa Rudd, head of conveyancing at Cozens-Hardy solicitors, said they had been working flat out to help push through completions for clients.
She said: 'This has meant a significant increase in volumes of work for those involved in the house moving business, especially for solicitors. We have had to ensure not just exchange of contracts, but also completion by close of business yesterday, March 31, to avoid the increase for those buyers affected.
'If one party in the conveyancing chain is affected by the increase, all parties in the chain had to move by the end of the month. We have been busy dealing with purchases of holiday lodges, buy-to-let flats, weekend cottages, second homes and investment properties of all sizes and values - from modest terraced houses to palatial properties in London.
'Everyone has been under pressure. Lenders have struggled to process mortgage applications in time and issue mortgage advances. Local authorities have been working flat out to issue our search results in time.
'This time of year is usually busy anyway, as people tend to put their homes on the market in the spring and like to move as the weather improves; but this March has been an exceptional time for us. Easter normally signals the start of our busy period, but this year we have been working round the clock.'