Government moots change to stamp duty

The government is to consider whether or not to change the regulations around stamp duty for bulk purchases of flats in a bid to encourage the creation of a professional private rented sector.

The move is one of a number of possibilities raised by a Treasury consultation, published yesterday, on how to change regulation to encourage the construction of new homes for private rent.

Institutional investors have argued for a number of years that regulations around stamp duty discourage their involvement in the sector, by charging stamp duty on the total value of a bulk purchase, rather than individually on the value of each flat. This means that an investor buying a large number of flats worth £150,000 would pay stamp duty at the full 4% rate, rather than the 1% rate normally attributed to homes at that price.

Alan Collett, consultant for Allsop and chair of the British Property Federation's residential committee, welcomed the news. He said: “It is illogical that large investors pay more for the same transactions as individual investors. This is a disincentive as it reduces the total return to investors and restricts the amount of new money going into housing.”

In addition the consultation raises the possibility of using Real Estate Investment Trusts to act as a vehicle for the investing in rented housing. The changes would be designed to enable institutions to raise finance to fund the construction of new homes specifically for rent.

Andrew Cunningham, chief executive of listed residential property owner Grainger plc, said the consultation maybe too late to influence policy before the general election. He said: “It is welcome to have the government look into stamp duty and UK REIT changes that may increase investment in the sector - changes we've been calling for, for some time. We can only hope that this gesture will survive after the election and the next government will take action quickly.”