Fair Rents (Scotland) Bill or Artificial state manipulation of free market rent?10:34 AM, 6th November 2020
About 4 weeks ago 36
Lord Flight cc’d the Property118 Campaign Committee into an email to George Osbourne commenting on the restriction of Finance Cost Relief for Individual Landlords.
In his email to the Chancellor Lord Flight said …
“A lot of Buy to Let investment has been an alternative to saving for old age via pension schemes. Up until World War II investing in rented property was the main method of providing for an income in old age. Given the poor performance of the Stock Market over the last 20 years, it is hardly surprising that many people have opted for Buy to Let investment as an alternative source of retirement provisioning. But Buy to Let does not enjoy any of the major tax advantages of pension saving, i.e. tax credit on the amount invested and accumulation of income and capital gains tax free within the pension scheme. The only Buy to Let “tax advantage” has been the ability of the interest cost to be offset against an individual’s income to determine their tax rates/bill – the very thing which you have attacked.
The combined new 20% limit and additional 3% Stamp Duty on new Buy to Let investments may cause the very crisis in the Buy to Let market of which the Governor of the Bank of England has just warned. Many Buy to Let investors may seek to sell their properties where buyers will be few, given the new, additional 3% Stamp Duty. I attach a relevant article in the Telegraph last week warning that sales could put thousands of tenants’ security at risk.
I suggest the Government’s thinking that Buy to Let investment has “squeezed young buyers out of the market” is misconceived. Rather, it has served to provide substantial additional accommodation for young people, not yet able to afford to buy a property. The real problem here has been our nightmare planning arrangements, the new high rates of Stamp Duty applying to properties, in the Greater London area, and the hoarding of land with planning permission by developers.”
On a different, but related front, I also suggest the risks of a major crash in house prices in London and the South East has risen considerably, partly as a result of the penal rates of Stamp Duty applying to London properties. The recent announcements by the banks indicate that some 100,000 middle to senior ranking staff are likely to be made redundant over the next year or so. Many will be looking to sell their London properties and move to a cheaper part of the country. Younger buyers cannot afford to buy, particularly given the Stamp Duty costs for which they cannot borrow. Foreign purchases are declining as a result of the major increases in their taxation. If there is a crash in Greater London property prices, this will have a major impact on the banks and on the economy as a whole, for which the Government will be blamed. In short, the new penal rates of Stamp Duty, together with the aggressive fiscal attack on the Buy to Let market are “playing with fire” when other factors are changing the balance of supply and demand for properties.
I, therefore, urge you to think again about both Stamp Duty rates and the fiscal attack on Buy to Let.”
The Lord Flight was born Howard Emerson Flight on 16 June 1948 , and is a Conservative Life peer sitting in the House of Lords since 13 January 2011. He previously sat in the House Of Commons as MP for Arundel & South Downs.
He was Shadow Chief Secretary to the Treasury (2002 to 2004) in opposition.
He was Deputy Chair, Conservative Party.
Lord Flight has the following focus areas :
Policy Interests – Business, industry and consumers; Economy and finance; Education; Employment and training; European Union; Social Security and pensions
UK Areas – East Anglia; Greater London; West Midlands
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