The stamp duty tax break has persuaded many investors to expand their portfolio.
Landlords are capitalising on the rising demand for British holidays and the stamp duty holiday by investing in properties targeted at domestic tourists. New research shows that the number of investors seeking to purchase holiday let properties has spiked in recent weeks, as families swap foreign holidays for staycations.
Analysis by Knowledge Bank, a mortgage searching firm, found that there was a sharp rise in inquiries for holiday let mortgages during July.
The coronavirus pandemic has caused many holidaymakers to shun foreign trips in favour of breaks in Britain. Travel restrictions have been imposed on many countries, most notably Spain, and have caused demand and prices for British holidays to rise sharply.
The report said that many landlords were also looking to expand their portfolios to take advantage of the stamp tax duty break.
Holiday lets differ from ordinary buy-to-let mortgages, as the loans only allow properties to be let out to tourists on a short-term basis. While interest rates are typically higher, landlords with holiday lets can claim a wide range of tax reliefs. This is in stark contrast to ordinary buy-to-let properties, which have been hit with an increasingly tough tax regime in recent years.
Matthew Corker, of Knowledge Bank, said he expected interest in holiday lets would continue to grow as more countries were hit with travel restrictions. “More people are looking into holiday lets as the desire to travel abroad is falling among British citizens while Covid-19 continues to impact the sector” he said. “I expect this to become a trend in the coming months as [country] bans are enforced and air travel remains limited.”
The most popular search among buy-to-let landlords was for loans to limited companies, suggesting that many owners are taking advantage of the stamp duty break to transfer their properties into a company structure. Other popular searches included first-time landlord mortgages, interest-only buy-to-let deals and loans for single applicants.
Mr Corker said “Transferring to a limited company means landlords, especially higher-rate taxpayers, will benefit from favourable tax treatment of their rental income.”
A separate report published by Knight Frank, the estate agent, found that the number of offers accepted on British properties was 146% above the five-year average.
The research, which looked at properties valued at £1.5m, said the stamp duty holiday had caused activity to increase significantly between 8 July and 3 August. Above that purchase price, activity has increased by 71%.
[Source: telegraph.co.uk/property, 10 August 2020]
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