It’s good news for buy-to-let investors at the moment; HSBC are calling for sellers to pay Stamp Duty and George Osborne’s budget has given investors a huge pat on the back with his controversial change in Stamp Duty Land Tax. The abolition of the 5% tax rate for multiple purchases over £1million will have a huge impact on Manchester’s buy-to-let market.
It’s a huge vote of confidence in private buy-to-let investors from George Osborne, but it doesn’t stop there. His new SDLT rules are a great boost to Real Estate Investment Trusts too. Anyone wanting to benefit from a future uplift in the property market without the hassles of personal ownership can invest in a REIT with ease.
The government will make REITs easier to set up and more accessible to private investors. We expect the REIT market to grow even faster than the private buy-to-let landlord market, with large portfolios of properties coming back onto the market for the first time in over 5-years.
The government are clearly supporting the private rented sector over the longer term, but what do the changes mean in reality? We’ve taken three case studies across Greater Manchester to see what type of property investment benefits most from George Osborne’s new tax rules:
PHILIP JAMES – CASE 1
John, first-time buy-to-let investor, Stockport
John has never bought a property portfolio before, but encouraged by the budget changes buys a small portfolio of 10 terraces houses in Heaton Mersey. The 2-bed Victorian terrace houses range in value from £92,500 to £117,500 with a total value of £1,150,250. Before the budget John would have paid 5% of the aggregate value, equalling £57,512. The new budget rules bring his average price underneath the 1% £125,000 bracket, reducing his tax liability to zero.
Houses: 10
Total value: £1,150,250
Prices ranging from: £92,500 to £117,500
Average Value: £115,025
2010 Stamp Duty: £57,512
2011 Stamp Duty: £0
SAVING: £57,512
PHILIP JAMES – CASE 2
Karen, long-term student investor, Fallowfield
Karen has been buying student houses across Fallowfield, Withington and Rusholme for over 15 years. She is offered a large portfolio of 23 student houses with a total value of £4,945,000. In 2010 Karen would have paid 5% Stamp Duty of the total value, equalling £247,250. The new 2011 budget rules reduce her liability to just 1% of the average value, a more palatable £2,150
Houses: 23
Total value: £4,945,000
Average Value: £215,000
2010 Stamp Duty: £247,250
2011 Stamp Duty: £2,150
SAVING: £245,100
PHILIP JAMES – CASE 3
Prakash, Private Buyer, Manchester City Centre
Prakash has sold his large family house in Didsbury and wants to downsize. He buys two city centre apartments on Deansgate; a large penthouse for himself and a 2-bed apartment for his pension. Before the budget Prakash would have paid 5% of the aggregate value, equalling £60,000. The new budget rules reduce his liability to £24,000, 4% of the average value, a saving of £36,000.
Apartments: 2
Total value: £1,200,000
Prices: £875,000 + £325,000
Average Value: £600,000
2010 Stamp Duty: £60,000
2011 Stamp Duty: £24,000
SAVING: £36,000
If you’re a buy-to-let investor or looking to enter the Manchester buy-to-let market we’d love to hear from you. Contact Sally Ann Smith on sally@philipjames.co.uk or connect with her on Linkedin
