Buy New To Beat Stamp Duty Hike

Buying a new-build home could help would-be landlords and second home owners beat the stamp duty deadline, says property and interiors journalist Sharon Dale.

A friend of mine who is desperate to buy-to-let in Manchester is at her wit’s end after being gazumped for the second time.

She offered the asking price for a flat in the Green Quarter on a Thursday, had it accepted, instructed her solicitor and mortgage lender, and breathed a sigh of relief that her property hunting agonies were over. 

The following Tuesday, the seller accepted an offer of £10,000 more from another buyer. 

My friend had been gazumped and the estate agent informed her that it is common practice at the moment, thanks to the rush to buy before the new stamp duty rates come into effect.

Pictured, the Origin Development by Strata Homes in Featherstone, Wakefield. Properties start at just £199,950
She, like many other investors, is intent on trying to beat the April 1 deadline when those who buy additional homes will be forced to pay an extra 3% stamp duty. With just a few weeks to go, the pressure is on.

Vendors are inflating their prices and bidding wars are breaking out but there is a quick and easy alternative available to buyers and that is to buy a newly-built property.

Buying new also means there is no chance of a chain breaking down. Instead of being at the mercy of sellers who put up their prices, pull out at the last minute or attempt to do the dirty on you, you can do a deal with a developer very quickly.

All you need is your finances in place and a good solicitor who will push the paperwork through as soon as possible. You need to exchange and complete the purchase by April 1 so buying off-plan is not an option.

There are other major benefits of buying a new-build. There are none of the hidden horrors you find with second-hand homes. All new homes are covered by a ten-year structural warranty. They are also low maintenance and energy efficient, which is cost effective and helps attracts tenants.

Stuart Law, CEO at Assetz for Investors, suggests that those priced out of London and the South East should buy-to-let in northern cities. His top three are Manchester, Leeds and Liverpool.  If you buy in the suburbs look for good transport links and amenities.

Finally, for those who need a refresher on the impending stamp duty hike announced last November, here are the details so far.

A consultation period has just ended and the final policy will be confirmed at the Budget on March 16, although little is expected to change.
*There will be no stamp duty land tax on properties up to £40,000, or on caravans, mobile homes or houseboats. Those who buy a home to let but who don't own any other residential property will be exempt.

However, the extra 3% tax will be levied on the full purchase price for additional homes (this is anything apart from your main residence) costing between £40,000 and £125,000. At the moment the rate is zero.

The charge will also be added to the existing higher rates of stamp duty land tax, so there will be a 5% levy (instead of 2%) on homes that cost between £125,001 and £250,000, and so on.

Those buying a £125,000 property will have to add another £3,750 to their costs and the stamp duty bill on a £275,000 property will rise from £3,750 to £12,000.

The extra outlay can be offset against any eventual capital gains tax when the property is sold, although the Treasury may decide to withdraw this “buying and selling expenses” tax break in the future, who knows?

Publish date: 15/09/2017