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Is the LBTT Holiday a Controversial Opportunity for BTL Investors?

Posted by Edward Iffla on July 24, 2020
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In response to a publication by Propertywire, which highlighted a potential opportunity for BTL Investors, I thought I would share our views on the matter. The argument states that recent changes to the LBTT threshold gives the Investor a tactical edge. They can use their expertise to beat owner-occupiers in the new market conditions. In a politically charged country, where any potential benefits to Landlords and Investors are usually met with criticism, this is an interesting and controversial point worth exploring.

 

 

So what changes have actually been made? And how were they received? 

 

As you will be aware, Scotland’s Finance Secretary, Kate Forbes, recently raised the LBTT threshold from £145k to £250k. This will extend from July 15th 2020 to March 31st 2021. While many have seen this increase as a positive effort to boost the market in the short term, it has been met with criticism from some corners. Some commentators say that the market was already showing shoots of recovery prior to the government meddling. They argue that the LBTT holiday has come at a time when the government is badly in need of tax receipts. There are also grounds to say that a boom-bust scenario is now inevitable, culminating with the March deadline. The alternative? A likely dampening of the market in the short term before continuing as normal.

These opinions don’t represent the thoughts of the majority. Most in the industry identified the necessity of a market boost following the global turmoil of the past months. The changes are designed to increase housing market activity, boost the construction sector, and stimulate the economy. It certainly seems to have had that effect at the time of writing. In fact many argued that Forbes should have raised the threshold to match that set by Chancellor Rishi Sunak in England at £500k. This would stop a dip at the top end of the market in cities like Edinburgh. 

 

 

How does this benefit Investors?

 

  • In Wales, the change in threshold will not apply to the purchase of additional properties such as buy-to-lets or second homes. It will support people looking to purchase their first home or those seeking to move up the property ladder. As such, the landscape for investors in Wales will not have changed greatly. This is NOT the case in Scotland, England and Northern Ireland. In these nations investors will benefit from the stamp duty holiday. The additional property surcharge will continue, referred to in Scotland as ADS (additional dwelling supplement), and paid at 4% of the purchase price. Investors therefore will have a big release in capital to help fund their purchase.   

 

  • The mortgage brokers at ‘Mortgages for Business’ have recommended that investors buy quickly. Before the likes of second steppers are able to do the same. Typical broker advice right? Well, perhaps not. They actually make a very valid point. Investors are best placed to use their expertise to get a good deal before the market inevitably swells in early 2021. 

 

  • The Labour Party has condemned the Stamp Duty holiday. They highlight the advantage given to investors. The party labelled the chancellor’s changes as a ‘huge bung’ for second home owners. Labour said that including the group (investors) would cost the taxpayer £1.3bn, which could be better spent elsewhere. Whichever side you take on the changes, there can be no doubt that investors are now in an excellent position as a consequence. 

 

 

What about Edinburgh?

 

In Edinburgh, the market has surged since reopening and even more so following this announcement. Many have seen this as the perfect time to be buying. At Evergreen, we would still urge Investors wanting to act quickly to remain vigilant. The opportunity is there if you can apply your expertise in a market you know well. Continue to do your due diligence on any property you want to pursue. Remember, your solicitor, whilst having your best interests at heart, won’t care as much about your purchase as you do. This is particularly true if they’re extremely busy.  You could be one of 40 clients they’re dealing with. Thankfully, the Edinburgh market looks likely to remain as strong as ever for the foreseeable.   

 

By Edward Iffla, 

24/07/2020 

 

 

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