The stamp duty holiday failed to spark a surge in landlords bidding for more buy-to-let (BTL) properties, according to Hamptons.
During the 15-month tax break, investors purchased 12% of all homes sold in the UK, says the estate agent’s September Monthly Lettings Index.
But this is only marginally up from an average of 11% during the year before the relief was in introduced last July.
This is far from the 17% posted in the final quarter of 2015 – the run-up to the introduction of the 3% stamp duty surcharge on 1 April 2016, the last major change to the tax.
This year, at its peak, investors purchased 14% of all homes sold across Great Britain in February during relief from the levy.
Landlords bought 215,000 homes between last July and September of this year. This figure is up from 164,300 properties bought during the equivalent period in 2018 and 2019, although more transactions were carried out by other types of buyers.
But both these totals are below the 242,400 house sales by investors made during the 15-month run-up to the introduction of the 3% stamp duty surcharge on 1 April 2016, says the report.
The stamp duty holiday meant home buyers didn’t have to pay stamp duty on the first £500,000 of purchase, falling to the first £250,000 from 1 July.
However, the nil-payment threshold returned to the pre-pandemic level of £125,000 from 1 October.
The relief was introduced by Chancellor Rishi Sunak last summer to ignite the housing market, which had stalled following the first of a series of three national lockdowns brought in last March.
Over the course of the holiday, the average BTL investor’s tax bill fell by 35% to £5,500, which equates to almost three months’ rent, says the Hamptons survey.
However, average bills for landlords are set to return to around £8,400 from 1 October, just below what they were paying on the eve of relief from the tax.
The index says, the holiday meant that the average investor paid less in stamp duty than at any time since April 2016, when the 3% stamp duty surcharge was introduced.
Despite this, the average bill during the holiday remained twice the level it was before the surcharge was introduced.
The survey says: “This is partly why there hasn’t been as much of an increase in investor purchases this time around.”
It adds: “There is little indication that investors used their savings from the holiday to buy bigger properties in more expensive areas.
“Instead, 83% of investor purchases were under £250,000, meaning their savings from the holiday were significantly smaller than those enjoyed by home movers. It also means that investors have been less sensitive to the change in the nil-rate stamp duty threshold since they tend to buy cheaper properties.
“During the holiday the average price paid by a landlord rose by just 1% to £181,000, despite house price growth of 10% over the same period. This suggests landlords were happy to pocket the tax saving rather than use it to buy a property which would generate more rent.”
Average rental growth across the UK hit 8% in September, the third-fastest annual rate of growth recorded this year, says the report.
Nationally, regions in the South of England have continued to drive rental growth.
The average rent on a new home rose 14.8% in the South West, 14.7% in the South East and 10.8% in the East of England. September marked the sixth consecutive month where annual rental growth hit double figures in the South West.
Rents in the capital also continued to recover.
Although Inner London rents fell for the twentieth consecutive month, the 4.4% annual fall was the smallest decline this year, and smaller than the 22.1% decrease recorded in April when the market bottomed out.
In Outer London, rents grew 3.2% annually in September, rising for the thirteenth consecutive month. This kept Greater London rents overall in positive territory, up 1.8% year-on-year.
Hamptons head of research Aneisha Beveridge says: “The overall impact of the stamp duty holiday on investor activity has been relatively muted. The holiday resulted in a small uplift in the number of new BTL investors, but despite their reduced bills, they were not outbidding owner-occupiers on any significant scale.
“But by the same token, their numbers haven’t tailed off since the stamp duty holiday ended either, with rising yields softening the return to more normal tax bills.
“Stamp duty holidays have traditionally been an expensive giveaway for the Chancellor. They have often been deployed to jump-start the toughest markets in the months and years following big economic downturns.
“However, despite fewer people paying stamp duty than ever before, this holiday will go down as one of the cheapest giveaways for the treasury in history as buyers paying the 3% surcharge have kept revenues up above 2019 times.
“It is likely, that over the course of the stamp duty holiday, those paying the 3% surcharge will have contributed close to half of all residential stamp duty receipts.
“But our calculations show that only around half of people paying the 3% surcharge are BTL investors, with the other half made up of second home purchasers or those buying a primary residence without selling their old one.
“While rental growth rates typically peak over the summer months, this year they have continued to rise into the autumn. This means average monthly rents have passed £1,100 for the first time nationally, led by big increases on larger homes.
“The average four-bed home now costs 120% more than a one-bed, up from 95% pre-pandemic.
“While we are expecting this growth to moderate in the final few months of the year, it is likely 2021 will mark some of the fastest rates of rental growth in a generation.”
