12-month hiatus on second property surcharge could help ‘jump start’ buy-to-let market

The government could ‘jump start’ the buy-to-let and wider housing market by introducing a 12-month hiatus on the 3% surcharge for second properties, David Hannah, principal consultant and founder of Cornerstone Tax has claimed.

According to Rightmove data from May, the portal registered a 22% increase in demand for lettings compared to the same point in 2019.

These statistics show that the sector is in fact almost back up to its pre-coronavirus levels in terms of tenants seeking homes. But supply lags behind this as property investors hesitate on purchases.

Stamp duty income down £470m in May

This comes as some economists predict that current economic uncertainty will lead to a reluctance to purchase homes – leading to increased demand for private rental property.

In the past few years incentives have been taken away, including stamp duty, tax reliefs on repairs and with capital gains tax, leaving many investors looking to reduce the size of their portfolios rather than expand them.

Hannah said: “In a time where the market is in the midst of a significant dip, increasing incentives could help jump start demand for property investment when there seems to be clear demand from renters.

“The statistics from Rightmove do show a positive outlook for the private rental market but the issue of supply and demand is one that has a much wider impact than just people not being able to find appropriate properties.

“It drives up prices and makes some areas unobtainable to people who have lived there for years.

“As the government should want to kick-start the housing sector post-COVID, a 12-month hiatus on the 3% surcharge for second properties would help to boost the number of property purchases as investments.

“Properly managed, this would help bolster the supply in the private rental sector, reducing pressure on councils and bringing rent in line with inflation.”