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Paragon Bank comments on the implications of changes to Stamp Duty for buy-to-let and the wider Private Rented Sector

Paragon Bank Managing Director of Mortgages Richard Rowntree comments on the implications for the buy-to-let market and wider Private Rented Sector (PRS) of changes to Stamp Duty Land Tax announced today.

Richard Rowntree said: “We welcome today’s announcement by the Chancellor. Whilst we would have liked to have seen the 3% surcharge for buy-to-let properties and second homes also removed for transactions below £500,000, we recognise the Stamp Duty holiday will lower landlords’ overall purchase costs, reducing the amount of Stamp Duty they pay from 5% to 3%. This could lead to an increase in supply of private rented property in regions that most need it.

“Our analysis shows that the Stamp Duty surcharge for buy-to-let introduced in 2016 disproportionately impacted new house purchase in areas with above average property prices, predominantly in southern regions.

“These are also the areas with the widest average earnings to house price ratios, meaning more people rely on rented property. We have started to see rent price inflation creep up in these regions as the undersupply of new rental homes bites. With the availability of higher loan-to-value mortgage deals reducing for first time buyers - making it harder to buy a home - we expect increased demand for rented property.

“Constraining private rented supply at a time when it is more difficult for people to get on the housing ladder risks certain groups being priced out of both home ownership and rented property. Longer term, we call on the Government to consider alternatives to the 3% surcharge, which has clearly had a detrimental impact on the flow of new stock into the PRS across those regions where property prices are higher.”