The recent Budget announcement by Chancellor Rachel Reeves has prompted concerns about the financial impact on landlords, especially regarding the steep increase in Stamp Duty. As of April next year, Stamp Duty for second-home purchases, often buy-to-let properties, will rise from 3% to 5%, effectively doubling the Stamp Duty costs for an average landlord to around £11,000 per purchase. This significant increase is projected to generate over £1 billion in tax revenue for the government across five years.

Projected Decline in New Landlords

This rise in costs is expected to deter new entrants to the rental market. Analysts anticipate that the number of new landlords could drop by up to 25% over the next five years. The decline is part of a trend where successive tax and regulatory changes have placed additional financial pressure on property investors, making the rental market less attractive. For example, many landlords are also grappling with increased mortgage rates, while the recent Budget has intensified these challenges by further raising entry costs for new investments.

Potential Implications for Tenants

A reduced number of new landlords could exacerbate the already limited supply of rental properties, pushing rents even higher. This shortage could particularly affect areas with high tenant demand, where competition for rentals is already intense. With fewer properties entering the market, tenants may face more difficulty finding affordable rental options.

Longer-Term Market Effects

The government’s increased reliance on Stamp Duty from the buy-to-let sector may continue to shift the dynamics of the private rented sector (PRS). While the Treasury stands to benefit from increased revenue, some industry leaders worry this approach could ultimately reduce the overall stability of the housing market by limiting housing options for renters.