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Stamp Duty cut – is now a good time to invest in property?

Updated: Sep 14, 2020

Recently, I visited the Lake District to complete a 25km trail run in the Borrowdale valley. Starting in Keswick we headed straight for Cat Bells and continued to climb up to 650m.

When completing challenges like this I usually find that my thoughts drift off to different topics to distract me from the task ahead. This time, my attention turned to the Government’s recent Stamp Duty holiday, and in particular the general public’s reaction, with many asking; is now a good time to invest in property?


Who benefits?

Since the Chancellor, Rishi Sunak, announced a temporary holiday to Stamp Duty Land Tax (SDLT) on homeowners’ properties up to a value of £500,000, the UK has seen property prices surge with Rightmove claiming an annual rise in asking prices of 3.7% in July.

Landlords benefit too – previously an investor buying a £500,000 home would have needed to pay 3% on the first £125,000 (£3,750), 5% on the next £125,000 (£6,250) and 8% on the remaining £250,000 (£20,000), resulting in a total bill of £30,000.

Until 31 March 2021 however, they will only pay the 3% surcharge of £0 meaning £15,000.

Many investment companies have been using this temporary stamp duty cut as ammunition to persuade investors to purchase investment property NOW. However, a quick observation on recent price increases identifies no real savings whatsoever.

It’s important to remember that the Chancellor intervened for a reason. The residential market faces uncertainty and therefore needs to be approached with caution. On a brighter note, mortgages are extremely cheap at the minute and it looks like they will stay that way for the foreseeable.


So, is now a good time to invest in property?

We are in unprecedented times for the foreseeable future The UK has entered its deepest recession on record; the morning news announces thousands more job cuts by big businesses by the day, yet there seems to be a great buzz in the air.

Retail Gazette reports retail spending figures are back up to pre-Covid-19 levels [jb1]

This buzz has been created by state intervention. In a very short period of time businesses have been able to benefit from Bounce Back Loans (BBLs) and Coronavirus Business Interruption Loan Scheme (CBILS) along with VAT deferments too. Many people have actually seen their savings increase as they have struggled to spend their earnings during lockdown. Add this to the pause on the property market creating pent up demand and now the Stamp Duty holiday and you can see why the economy feels it is at an all-time high.

But as with all highs, there comes a low. The Government’s furlough scheme is due to end and more unemployment announcements will follow. In 6-12 months, the interest free period of the BBLS will have ended and people will be looking to find up to £850 extra per month to service the loan they have taken.

Reports from Mortgage Advisors tell us that banks are amending their mortgage products, requiring higher loan to values (LTVs) and introducing stricter lending criteria. This can only mean one thing – they predict property prices to fall.

So, is now a good time to invest in property? As no one can predict the timing of a boom or crash, one can only act in the moment. So, as long as you manage to secure a property at a good price based on the economic climate and not be encouraged by the presumably short lived mini boom. Alternatively, you can use this time wisely to evaluate your existing portfolio – in order to be able to pounce when the right opportunity arises!

I personally have re-mortgaged several assets in order to raise capital and have instructed a couple for sale too, meaning I am now in a position to act as and when I see fit.

I hope you found this to be both enjoyable and informative. If you would like to discuss anything in relation to the above, please do not hesitate to pick up the phone or alternatively leave your details below.






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