Figures from Hamptons Letting suggest that, had the rental market continued to grow at the same rate as it did before 2016 when the surcharge was introduced, there would be an estimated 2.2 million more privately rented households than there are today.
Fewer first-time buyers now compete with a landlord when buying, with Aneisha Beveridge, Hamptons’ head of research, saying the policy had “broadly delivered what the government of the day set out to achieve”.
Side effects for renters
Although only 19% of first-time buyers now compete with a landlord when purchasing a home, down from 26% when the surcharge was introduced, this has made it harder for those who are still renting, Beveridge noted.
Hamptons estimates that rents are one percentage point higher than they would have been had the surcharge not been introduced, with Beveridge describing this as a “side effect” exacerbated by a tightening of the wider tax and regulatory environment for landlords.
“Tenants who can’t afford to buy, or don’t want to, have seen rents rise faster than inflation, while those on the margins of the market have found it increasingly difficult to find somewhere to rent in the first place,” she added.
A tenfold cost for landlords
The surcharge leaves some landlords paying 10 times as much stamp duty as first-time buyers. Today, a £350,000 buy-to-let (BTL) home in England attracts a £25,000 stamp duty bill for an investor, compared with £7,500 for a mover and £2,500 for a first-time buyer.
Those who pay the surcharge now account for almost half – 48% – of all residential stamp duty revenue, Hamptons said.
A changing rental landscape
The study shows that the number of rented houses has now effectively plateaued, rather than growing at the same rate as it was before 2016.
Only around 5.2 million households rent privately today, compared with the 7.4 million that might have been expected had pre-surcharge trends continued.
Some 18% of households now rent, where the population growth figures might have expected it to be 25.6%.
For renters, though, the cost of living has risen at the same time. Rents across Great Britain have risen 44.1% over the last decade, outpacing Consumer Prices Index (CPI) inflation, which rose at 39.9% over the same period.
A win for first-time buyers
The report suggested that first-time buyers are the main beneficiaries of the policy, as they are far more likely not to be competing with a landlord when they buy their first home.
There’s a regional split to this, though, with those in cheaper areas such as the North West now facing more competition, with 26% competing with a landlord – up from 23% 10 years ago. Meanwhile, London’s first-time buyers – who were competing with a landlord for their home in 28% of cases a decade ago – face the same situation in just 21% of cases of a 17-percentage-point fall.
