Double Setback for the UK Housing Market: Tax Increases Take a Toll

The British real estate market faces a dual challenge. The decision by the British government to increase the stamp duty on second homes and buy-to-let properties from 3% to 5% is causing significant concern. Experts warn that this measure could considerably dampen the interest of property investors. At the same time, the tax relief for first-time buyers, which was temporarily applicable for property purchases up to £425,000, is being discontinued. As of March 31 of the following year, the tax-free threshold will be reduced back to £125,000, which, according to experts, means that 20% more first-time buyers will have to pay additional stamp duty. Ben Thompson, Deputy CEO of the Mortgage Advice Bureau, expresses concern that the failure to maintain previous tax incentives could nullify the progress made over the past year. Many people might refrain from moving and continue to remain in uncertain rental situations. The rising property prices contribute to more buyers facing additional stamp duty burdens. The Treasury defends the changes with the prospect of providing first-time buyers and individuals acquiring a new primary residence with a competitive advantage. They claim that over 130,000 additional transactions could result from this in the next five years. Furthermore, more than £1.2 billion in additional revenue is expected to be generated by 2029-30. However, critics from the real estate industry fear that the market could suffer, leading to the cancellation of numerous purchase transactions. Peter Stimson of MPowered Mortgages compares the tax increase to a "hammer blow" to an industry already weakened by past tax hikes and interest rate increases. The new regulations take effect immediately, which could endanger numerous ongoing purchase transactions.