Race is on the beat the latest stamp duty hike

When George Osborne announced an extra three per cent stamp duty on additional residential property purchases from April 1 this year, he put a rocket under those procrastinating about buying rental and holiday homes.

Now, with less than ten weeks to go, the race is on to buy before the so called “landlord tax” kicks in.

Those who buy a home to let but who don’t own any other residential property will be exempt and the new stamp duty rate doesn’t apply on properties up to £40,000, or on caravans, mobile homes or houseboats. However, the extra 3% tax will be levied on the full purchase price for additional homes costing between £40,000 and £125,000. At the moment the rate is zero.

The extra charge will also be added to the existing higher rates of stamp duty land tax. 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 looming deadline has accelerated the buy-to-let and holiday home market. The latest Royal Institution of Chartered Surveyors Residential Market Survey shows the spike in new buyer enquiries after the Chancellor dropped the bombshell in his Autumn Statement.

Patrick McCutcheon, head of residential sales at Dacre, Son & Hartley, says: “We’ve seen investor enquiries increase across all our offices and in some locations they have more than doubled. In the short-term, it seems the Chancellor’s plans have added a sense of urgency to anyone who might have been considering investing in a buy-to-let property or a second home. “

Will Linley, director of sales and letting agency, Linley & Simpson, agrees: “The surprise announcement has acted as a starting pistol in the race to secure buy-to-let properties before the tax increase comes into force. We are likely to see a surge in the next few weeks as investors mount a final push to agree sales.”

Those looking could be frustrated by a lack of suitable property. RICS say that demand has continued to outpace supply. Local buyers are also facing increasing competition from those in the south.

Stuart Law of Assetz for Investors, is advising southerners to head north for higher rental yields. “If you invest in the capital you would need a £400,000 mortgage to buy a £600,000 property. If the gross yield was 4% and the mortgage interest rate was 4% and the investor was a higher rate tax payer, they would have to pay £4,400 per annum to own the property.

“If the same investor bought two £100,000 properties in the North for cash at a typical 7% gross yield then the investor would receive £9,100 per annum on their cash, before tax, and still benefit from full house price growth in that location.”

Jane Booth is looking to buy her first investment property in Leeds or Manchester and says prices are being pushed up by panic buying in some areas.

She says: “I’ve just been gazumped but the estate agent has advised me to wait until after April 1 when the market should calm down. I could even be better off financially even if I do have to pay the extra stamp duty.”he can comfort herself with the thought that she will be able to offset the stamp duty, against any capital gains tax when she sells the property, unless the Treasury changes its mind.