New Welsh Land Transaction Tax puts 429 Swansea Properties at Risk of Not Selling

New Welsh Land Transaction Tax puts 429 Swansea Properties at Risk of Not Selling

Hannah McCartan
2nd November 2017

From 1st April 2018, the new Welsh Land Transaction Tax (LLT) will replace Stamp Duty (SDLT). This is the first Welsh-only tax in over 800 years.

On 12 September, the Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Bill was introduced to the National Assembly for Wales. According to the Welsh Government, the change means that 9 out of 10 buyers will pay the same or a lesser amount of tax.

The new rates will see stamp duty exemption extended from properties worth £125,000 to properties worth £150,000 and above. The 3 % surcharge on second homes will still apply, but from the new banding.

Concerns for the Welsh Housing Market

Until 1st April next year, Stamp Duty will still apply and at the current rates, meaning that, conversely, 9 out of 10 buyers could end up paying more in tax now than they would if they waited 6 months for the new tax to come in.

This is where my concerns start for the Welsh housing market for the next 6 months.

At a time of the year when it is historically more difficult to sell a home, a contraction in motivated buyers could result in a glut of available property.  This could bring house prices down, or leave sellers frustrated and unable to move, thus stagnating the Welsh Housing Market.

This could have a catastrophic impact on the house-moving chain.

If you are thinking of buying a property, you can check out this Stamp Duty calculator to see if you are affected: Stamp Duty Calculator

The Current STLT Band vs New LLT

The current rates:

  • Up to £125,000, no tax
  • Between £125k and £250k, 2% tax
  • Between £250k and £925k, 5% tax
  • Between £925k to £1.5m, 10% tax
  • Above £1.5m, 12% tax

The new rates in Wales:

  • Up to £150,000, no tax
  • Between £150k and £250k, 2.5% tax
  • Between £250k and £400k, 5% tax
  • Between £400k and £750k, 7.5% tax
  • Between £750k to £1.5m, 10% tax
  • Above £1.5m, 12% tax

The new rates for 2nd properties in Wales

  • Between £40,000 and £150,000, 3% tax
  • Between £150k and £250k, 5.5% tax
  • Between £250k and £400k, 8% tax
  • Between £400k and £750k, 10.5% tax
  • Between £750k to £1.5m, 13% tax
  • Above £1.5m, 15% tax

What This Means

The tipping point is properties on the market for £135,000 and above. Currently, the Stamp Duty due on a property of this price would be £200. After 1st April 2018, the tax due will be £0.

Go up to £150,000 and the saving becomes £500, which would be incentive enough for most people to wait until after 1st April to buy their next home.

It is only for properties priced £200,000 and over that the tax difference starts to minimise again. According to Zoopla, that would put 429 properties in Swansea at direct risk of not selling before April, or their sellers being forced to lower the asking prices to attract a buyer*.

This would also mean, going up the house-moving chain, sellers who are relying on these 429 properties to be their purchasers are also caught up in the mix and unable to move.

Property Investment in Wales

Savvy property investors in Wales will be looking at the cost difference, too. Even though the 3% surcharge will still apply, they will still benefit from waiting until 1st April to purchase.

Recent changes to Stamp Duty for second home owners have already sent shockwaves through the property market.

Online property portal giant Rightmove regularly reported on the stampede of investors buying property prior to the 3% surcharge in April 2016. The effect of this is only now being felt as a saturated rental market cools rental asking prices across the UK.

Counter to the general UK trend, asking rents in Swansea have been rising, but if fewer new rental properties are coming onto the market here whilst demand continues to increase, those rising rents will be compounded. This is only good news for landlords as long as it doesn’t price tenants out of the market entirely.

Investment Opportunities

It’s possible that this will mean some opportunity for investors to purchase property in Swansea. Many unsuspecting sellers are going to be caught up in this, and may decide to get ahead of a potential stagnation by reducing asking prices now. Looking at properties that have already been on the market a while in these price categories could be a starting point.

Keep an eye out!

If you are thinking of buying a property in Swansea to let and would like the benefit of a free 30 minute consultation on where the best places to buy are, give us a call on 01792 430100, or drop us an email.

Sources: Property Industry Eye / Zoopla

*Zoopla: search – Swansea +5miles £140,000 – £200,000 as of 26/10/17

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