The UK is set for the return and major expansion of buy-to-let in the housing market after plans were unveiled for tax cuts on bulk purchases of residential properties. The Coalition has identified buy-to-let as a way of solving Britain’s housing shortage and wants to attract investment into residential property by major institutions, such as pension funds, and landlords.
The Chancellor, George Osborne believes that promoting the private rental sector as a solid form of income for investors can increase homebuilding. The British Property Federation, which has campaigned for tax changes on bulk housing purchases, said the Budget “went further than even the most optimistic within the industry could have predicted”.
It is now proposed that stamp duty on the purchase of more than one property will be calculated by the average value of the properties, not the bulk value. This means that if an investor buys 100 properties worth an average of £200,000, it will pay stamp duty at 1%, equal to £200,000, rather than at 5%, equal to £1m. The measure will cost the Treasury £560m over five years.
George Osborne has also launched consultations on making it easier for residential investors to become a Real Estate Investment Trust (REIT), which would mean they do not pay Capital Gains Tax. In the 2012 Budget, the Chancellor is proposing to scrap the 2% entry charge that landlords must pay to become a REIT and ending the rule restricting REITs to stock market-listed companies. This will allow pension funds to turn property portfolios into REITs and potentially allow smaller buy-to-let landlords to benefit from tax advantages on capital gains.
The Chancellor also aims to stimulate investment through traditional housebuilders. As well as a £250m fund for first-time buyers, he will allow offices to be converted into homes without planning permission and auction public sector land for development.
