Fast rising house prices will compensate buy to let investors moving into the sector and the Government's stamp duty hike will not deter investors, according to one national estate agency.
Jackson-Stops & Staff says that the biggest losers from the 3% increase to stamp duty will be tenants, since landlords will simply pass on the additional costs they incur by pushing up rents.
The news from the estate agency follows reports that there has been a surge in buy-to-let purchases, with investors wanting to beat April's stamp duty hike. Now buy-to-let investors are being told that, with property price inflation, means they will be compensated for their stamp duty bill within a year or less.
The firm says that for a buyer in the Southeast, the average price of property will rise by £28,400 a year and with a stamp duty charge of £11,328 on an average property means the buyer will recover their extra tax within several months.
Most landlords will be keeping their investment rental property
The Association of Residential Letting Agents says that most landlords will be keeping their investment rental property for at least a year with 33% keeping the property for between 11 and 20 years. The average length of time for a landlord to keep their buy to let property is 20 years and three months.
The chairman of Jackson-Stops & Staff, Nick Leeming, said: “Our message is that when landlords do their sums they should look at house price direction because putting money in bricks and mortar is still one of the best investments. If prices continue then most landlords would have, within a year or less, earned back the money paid in stamp duty.
“The idea that stamp duty will be a deterrent is a fiction because it will not be a significant figure for most landlords.”
Indeed, the research from the estate agency is backed by the Nottingham Building Society which says that the new stamp duty rules have not deterred most buy-to-let investors. The building society says that from its research, just one in seven would-be and existing landlords have binned their plans to buy an investment property because of the stamp duty hike.
Their report also reveals that 40% of potential and existing landlords have opted not to add to or start their portfolio as a direct result of the tax change.
Strong interest for investment buy to let properties
However, across the country there is still strong interest for investment in buy-to-let properties despite fears that investors would lose interest with the rising cost of buying. The building society also reveals that 78% of people still believe that investing in property will be a fundamental part of their retirement planning.
The report also reveals that 35% of mortgage brokers have also reported seeing a surge in inquiries from people wanting to invest in buy to let, particularly in a bid to beat the stamp duty increase.