Stamp Duty Holiday And Property Investment

What is the impact of the government’s stamp duty holiday for property investors?

Are there opportunities for property investors with the stamp duty holiday?

These are questions that I am often asked. Property investors want to know how they can take advantage of the UK government’s stamp duty holiday and whether it is a good idea to make a move right now.

There are a number of different facets to the stamp duty holiday that you need to be aware of and I will cover the most important ones for property investors in this post. I will give you my opinion on what I believe is the right thing to do during the holiday.

What is the Stamp Duty Holiday?

If you are not aware of the details of the stamp duty holiday in the UK. basically until 31 March 2021 stamp duty is suspended for the purchase of properties in England and Northern Ireland up to the value of £500,000.

To put this in perspective for you it is best to use an example. Let’s say that you purchased a property for £300,000 during the stamp duty holiday. You will save around £5,000 in stamp duty. As a property investor, you will have to pay a 3% stamp duty surcharge, but compared to the normal stamp duty rates this still represents a big saving.

What do the Experts think?

It will probably not surprise you to know that there are differing points of view about whether property investors should take advantage of the stamp duty holiday and purchase more properties.

Most of the experts appear to be positive about the stamp duty holiday claiming that it is a great opportunity for property investors who want to increase the size of their portfolio. Some experts believe that the stamp duty holiday will mean that it will be easier for property investors to obtain a mortgage for another property. The evidence so far seems to support this.

Since the first coronavirus lockdown period ended, UK house prices have continued to increase. In fact they have been up on the same periods in 2019. Time will tell if this trend continues. One thing that all of the experts agree on is that if as a property investor you want to take advantage of the stamp duty holiday then you need to move quickly.

Invest your Stamp Duty Savings in other areas

If you do purchase a property during the stamp duty holiday then you can use the money that you save for other purposes. For example, you could purchase a property that requires renovation work and put the money you saved on stamp duty towards this.

This is particularly important for those of you that are in the buy to let market. It is very important that as a landlord you offer the highest quality accommodation to attract the best tenants. This should always pay you back quickly if you choose a property in the right location.

These days’ tenants are a lot choosier than they used to be. Therefore, if you can invest in renovating the kitchen, bathroom, bedrooms and so on you should be able to charge high rental prices. The same goes if you are in the HMO market.

Of course, you could use the money you save during the stamp duty holiday to purchase a more valuable property. Instead of purchasing a medium sized house to let to a family you could spend more and invest in a larger house that you can convert into an HMO. By doing this you should generate more rent per month.

Other Property Investment Strategy Opportunities

There may well be opportunities for you with other property investment strategies that you can use during the stamp duty holiday. One of these could be investing in holiday homes. Check the market to see if there is an increase in holiday home properties for sale in your areas of interest. The buoyancy of the market may result in this.

Did you know that over 70% of the stamp duty receipts in 2018/19 came from London and the South East? This is true according to Zoopla. So it could be easier for you to invest in a property there than it was before thanks to the stamp duty holiday.

With people having to stay in their homes during the coronavirus lockdown periods, it may make them think that they should move to a nicer area such as the countryside. You may be able to find good properties in countryside areas that you can flip. Use the money that you saved on stamp duty to renovate the property to make it more saleable.

What about Buy to Let?

If UK house prices do fall then this does not mean that there will be a corresponding fall in rental prices. People affected financially by the Covid-19 pandemic may decide that they have to sell their property and look to the private rental market for somewhere to live.

Many experts believe that the private rental sector will remain strong no matter what happens with the coronavirus pandemic and unemployment. This is a view that I support as well. Therefore, it could certainly be a good time to increase your buy to let property portfolio.

Although the stamp duty holiday may seem like a real gift to landlords, not everyone shares this opinion. The NRLA (National Residential Landlords Association) believes that this is not a generous long term gift for landlords.

The NRLA says that if a landlord has an exit strategy of selling their properties then they will lose out with capital gains tax as stamp duty can be used to offset this. If a landlord pays less stamp duty to acquire a buy to let property during the holiday, when they sell the property they will have to pay a higher amount of capital gains tax.

Should you take Advantage of the Stamp Duty Holiday? My Opinion

stamp duty holiday property investment

So is it a good idea for you to take advantage of the stamp duty holiday? I am publishing this post in the middle of November 2020 and the UK is currently in a second lockdown for another 2-3 weeks. You will need to see if it is possible to conduct property transactions after that as there may be reluctance on the part of the seller to meet with you.

If you can purchase a property prior to the stamp duty holiday ending then in the main I would suggest that this is a good idea. You will save a considerable sum on stamp duty that you could use to increase your down payment for example.

If you read my blog posts regularly you will know that I always recommend that you keep abreast of developments with house prices in the UK and other factors. With the Covid-19 pandemic some of the experts are predicting that house prices will fall significantly in the next few months.

The UK government has just extended the furlough scheme until the end of March 2021 which will certainly help. So you need to keep an eye on unemployment numbers as these usually always have an impact on house prices.

There is always a risk with property investment. You can never be sure if house prices are going to go up or down. Because of the pandemic, you may find that there are people that are willing to sell their properties significantly below market value as they just want a quick sale. Maybe their earning potential is not looking good and they need to downsize for example.

So you need to have a good look at the market too. You should have established connections with estate agents in the areas that you operate in so give them a call and see what is available and at what price.

One thing that could happen is that the stamp duty holiday could create a bubble, which creates a slump afterwards. There has already been an increase in purchase transactions after the first lockdown. Another increase in transactions could follow in the first quarter of 2021 as people rush to make property purchases before the holiday period ends.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top