MARKET INSIGHT
RPA October UK Market Report
Did the UK Autumn Budget 2024 bring a spooky surprise for property investors?
November 1, 2024 • Author: Richard Bradstock
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She came, She saw, She conquered
Rachel Reeves Official Cabinet Portrait, July 2024
Source:
Wikipedia
Licensed under
Open Government Licence v3.0
The first ever UK budget delivered by a woman was, regardless of your politics, a historic moment however what interested us most was the implications of the UK Autumn budget for UK property investors.
Read on for a breakdown.
Capital Gains Tax on Residential Property Unchanged
In short, a win for property investors. NO CGT increases on residential property but instead, levied on non-resi assets such as shares.
Capital Gains therefore remains at 18% at the lower band or 24% for higher income band. Landlords currently looking to realise an investment should be encouraged to do so, whilst landlords and investors looking to hold for a long-term gain, can be assured of their investment strategy.
A Stamp Duty Surprise
Dubbed a ‘rabbit out of a hat’ moment by Savills’ Lucian Cook, the increased SDLT surcharge on second homes was a surprise for some. A 2% surcharge (increased from 3-5%) will be levied for those buying additional homes which, of course, will also be applicable to property investors who have more than one UK property in their name.
Stamp Duty Land Tax (SDLT) on a £400,000 Buy-to-Let Property:
New Rate vs. Old Rate
So, on a purchase of a £400,000 buy-to-let apartment, SDLT paid will now be £27,500 instead of £19,500.
This might have the unintended consequence of pushing property investors into buying regional assets in cities like Manchester and Birmingham where apartments regularly trade for sub £250k. Zoopla reported that already, London and the South East account for over half of annual receipts from SDLT, so we may see the price gap between the South and rest of the UK narrow, as investors pivot outside of the South East and prices calm somewhat, south of the Watford Gap. There are still wins to be had in both markets.
We may also see an increase in buy-to-let investors pivoting to commercial and mixed-use investments, i.e. a flat above a shop, as no changes in SDLT were announced for commercial property transactions.
The RPA View
And so, that’s really it folks. We hate to disappoint on Halloween, but the budget was just not the horror story some were expecting. Yes, undoubtedly, the 2% SDLT surcharge increases the amount of capital needed on the way in, but with no increases in CGT the exit still remains very much sweet. There is no doubt that UK is and will remain a solid, and safe investment for clients looking for long-term growth.
We encourage all of our clients with UK buy-to-lets to HOLD HOLD HOLD as yesterday’s budget will no doubt have the unintended consequence of contributing to a renewed and sharp increase in the cost of renting in the UK which is also another compelling reason for those looking to invest.
It’s also worth noting that the UK is far from the most expensive place to acquire buy-to-let. A handful of comparisons net a favourable comparison:
Stamp Duty around the world
6% Australia, property value above $130,000
4% Dubai
2-12% France
3.5% - 6.5% Germany
30% Singapore
Interestingly a graph produced by Savills last year shows the levels of duty in buying investment property around the world, of which the UK/London sits pretty. Note the cost of holding investment property is minimal compared to other countries.
We sign off with a reminder that successful investments are dictated entirely on the success of the exit and for property investors yesterday’s budget in no way put that in jeopardy.
If you have any questions, the team have been fully briefed and advised on what the Autumn budget means for our clients so do get in touch.
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About the author
Founder & Managing Director
richard bradstock
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals.
