7th
Mar 2025
In just five weeks, a looming tax increase could spell the end for the buy-to-let market.
Recent analysis reveals that from April onward, 83% of all housing transactions will be subjected to stamp duty, a significant rise from the current 49% of transactions.
The report indicates that first-time buyers will experience less of an impact, with only 40% of their transactions becoming taxable, compared to the present 20%.
For landlords, the looming increase in the stamp duty surcharge from 3% to 5% on second homes and buy-to-let properties from April will intensify the financial strain on an already burdened market.
The study, conducted by an investment service using data from the government, Zoopla, and Rightmove, highlights how this new tax addition compounds the existing costs that landlords face due to recent regulatory changes.
Among the challenges landlords face are rising mortgage rates, escalating insurance premiums, and stricter Energy Performance Certificate (EPC) regulations. The study notes that the phased removal of mortgage interest tax relief has significantly impacted landlord profitability, adding to the financial burden.
While there are indications that demand might be stabilizing, the firm predicts that UK rents will still rise by an average of 17.6% over the next five years, largely due to landlords leaving the market.
Rightmove says the average newly advertised rent outside of London stands at £1,341 per month whilst in the capital, tenants still face an average rent of £2,695 pcm.
Despite potential stabilisation in demand by 2025, the financial service believes that the rental market may still face challenges as more landlords are selling their properties— an increase of 37% year over year in December—leading to a further reduction in rental stock.
A spokesperson for the firm says: “The proposed stamp duty increase, combined with mounting regulations and rising costs, are pushing many landlords to the brink.
“The UK rental market is already under severe pressure, and the last thing tenants need is more landlords being forced to sell. This will not only drive-up rental prices but also create instability, leaving tenants facing the stress and disruption of having to move.”
Instead of dissuading investment, and in an effort to potentially halt this trend, he contends that policymakers should prioritise support for landlords, which would help to preserve a fair and sustainable rental market for everyone.
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