Stamp duty hike will challenge PRS landlord investment plans

The higher stamp duty rates that came into effect this month will threaten landlord investment strategies, a survey reveals.

The lender Together found that 13% of the 11% of landlords who say they are planning to abandon the PRS this year, point to increased stamp duty rates as the main reason.

They say they feel that they have been priced out of property purchases.

The Labour government’s decision, announced by Chancellor Rachel Reeves in October, to raise the surcharge on second homes and investment properties from 3% to 5% has added significant costs to acquiring rental assets.

Property experts worry that future budgets might see even steeper increases, worsening the financial pressures on landlords already worried about Labour’s broader policy directions.

Landlords will consider extra costs

The firm’s chief commercial officer, Ryan Etchells, said: “Higher Stamp Duty may trigger some individual, private landlords to carefully consider how these costs will impact their property plans.

“The government must consider the knock-on effect this will have on providing good quality rental stock which is a vital component of the housing market.

“With affordability for first time buyers becoming ever more out of reach a growing number of the population rely on rental properties.”

He added: “Constant attacks on the sector will only force landlords out of the market, reducing the number of properties available and forcing rent upwards, further impacting the ability to save for a deposit.”

Need a viable PRS

Mr Etchells said: “Nearly a quarter of landlords told us that the Labour government should prioritise ‘reducing or reforming’ stamp duty on additional properties in order for the sector to be financially viable.

“That said, we have seen many amateur landlords decide to cut their losses and leave the market entirely, whilst many more are pivoting to the current climate.

“For example, we have seen many professional landlords looking to diversify their portfolios to spread the risk across residential classes as well as commercial sites.”

He adds: “They are now turning to student accommodation, social housing, holiday lets and mixed-use units to broaden income streams.

“In particular, we are seeing more houses being converted to houses of multiple occupancy (HMOs), as these can sometimes offer a better yield than a single residency.”

Plea to reconsider stamp duty

According to Together, nearly a quarter of landlords are urging the Chancellor to reconsider the higher stamp duty policy.

This sentiment is echoed by 15% of respondents who see the stamp duty rise as their greatest obstacle this year.

Beyond taxation, landlords have expressed apprehension about the cost of meeting proposed EPC standards.

While 63% welcome improvements in energy ratings, 25% want financial support or tax breaks for the upgrades.

Similarly, 62% support the Renters’ Rights Bill move to create a dispute ombudsman, but 25% call for a fairer approach between tenant and landlord rights before the legislation is finalised.

Despite these challenges, the PRS is showing resilience as Together reports a 16% uptick in its lending, reaching £2.2 billion by the end of 2024.

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