Purchases of buy-to-let properties and second homes have plummeted to their lowest levels since 2016, according to an analysis of HM Revenue & Customs data conducted by accountants Lubbock Fine.
The study examined transactions subject to the stamp duty surcharge, an additional charge levied on those acquiring buy-to-let or additional properties. The findings reveal a significant 14% decline, with purchases falling from 224,700 in the 2022/23 fiscal year to 193,700 in the year ending June 2024. This marks a stark contrast to the peak of 287,200 recorded in the year to June 2021.
The 3% extra stamp duty charge on additional properties was initially introduced by the government in 2016 as a measure to curb the housing market. Lubbock Fine attributes the recent decline in buy-to-let purchases partly to a sharp rise in interest rates and a series of tax changes that have made these investments less attractive.
Key changes affecting landlords include the elimination of tax relief on mortgage interest and a reduction in the expenses that can be offset against tax bills for property wear and tear. Additionally, cuts to private residence relief have increased the amount of capital gains tax landlords must pay when selling a property that was once their main home.
“We’ve seen a marked decrease in purchase activity for rental properties,” commented Andy Noton, a partner at Lubbock Fine. “Concerns that the new government will increase CGT at the next Budget or add to the red tape for landlords is encouraging more landlords to exit the market and fewer to buy.”
However, Noton suggests that the market could rebound if mortgage rates continue to fall. “Rents have continued to climb, so a reduction in finance costs could suddenly improve the economics for landlords,” he added.
The ongoing shifts in the property market underscore the delicate balance between government policy and investment behaviour, as stakeholders await further developments in fiscal policy and economic conditions.