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May 10, 2010
Plans For Stamp Duty Cut Aim To Boost Returns For Private Rented Sector
According to the Property Industry Alliance a potential cut of the stamp duty land tax could increase returns from residential funds by as much as 150 basis points over the next three years. Moreover, the PIA, which also includes organizations such as the RICS and the British Property Federation, believes that currently, the SDLT rules present a significant barrier to investment in the private rented sector.
Further to its response to a Treasury consultation on the PRS, the alliance claims that by reducing SDLT from 4% to 1% on bulk purchases would increase the return on a £50m portfolio by 120 basis points over three years and by 70 basis points over five years.
Stamp Duty cuts would also reduce costs on leveraged investments significantly. For example, the reduced cost to a £50m fund could be equivalent to 15 extra properties and increase the leveraged total return to 150bp over three years, and 100bp over five years.
The consultation response also recommends for VAT to be cut to 5% for renovation and repairs, and for refunds on the VAT liabilities for managing a residential portfolio.
It said that though this would cost the exchequer as much as £508m a year, it would generate £1.4bn pa of economic activity.