THE construction industry is set to benefit from a budget boost designed to expand the nation’s rental housing market, a leading North-East property lawyer has predicted.
Chancellor George Osborne’s tax cuts on bulk purchases of residential properties are designed to encourage a return to the buy-to-let market by investors.
Chris Ross, a solicitor in the conveyancing team at regional legal firm BHP Law, says the opportunities could prompt a major expansion of the housing market and, in turn, provide fresh impetus for the construction industry.
“The coalition government has identified buy-to-let as a way of solving Britain’s housing shortage and wants to attract investment into residential property by major institutions, such as pension funds, as well as landlords,” explained Chris.
“The move, which is expected this summer, is anticipated to have a significant knock-on effect on the housing market.
“It will encourage large-scale investors to purchase large numbers of unsold properties for private rent as a solid form of income at the same time as providing much needed, high-quality rental property and boosting homebuilding.
“This, in turn, should help the construction industry. It should make it more attractive for investors to buy up unsold housing stock, enabling builders to release much-needed capital to begin new projects or pay off debt,” he added.
Buy-to-let has a controversial reputation after investors piled into the market before 2007, borrowing cheaply and seeking to take advantage of rising house prices only to come undone dramatically when values began to fall.
The tax cuts relate to stamp duty, which has been blamed for impeding investment as it pushed up the cost of buying or building large portfolios.
The Chancellor proposed that stamp duty on the purchase of more than one property be calculated on the average value of the properties, not the bulk value.
Chris explained: “This means that if an investor buys 100 properties worth an average of £200,000 they will pay stamp duty at one per cent, equal to £200,000, rather than at five per cent, equal to £1m.”
The British Property Federation, which has campaigned for tax changes on bulk housing purchases, said the budget: “went further than even the most optimistic within the industry could have predicted.”
Property agent CBRE has forecast that the move could unlock £7.5bn of investment.
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here