In the first month after Labour’s hike of the buy to let stamp duty surcharge, there appears to have been only minimal impact on the market.

That’s the view of Hamptons, which says the sales agreed in November suggest the surcharge hike from 3% to 5% had limited impact on landlord behaviour.  Some 10.7% of sales agreed across Britain in November went to a landlord, above the 2024 average to date of 10.2%.

While landlord purchases remain well below the 2015 peak of 15.7%, the figure remains broadly in line with more recent years when buy-to-let purchases have become rarer.  Landlords accounted for 10.8% of buyers in 2019 and 10.9% in 2020, both of which were years when movers made up a much larger share of the market.

Hamptons’ analysis shows that most investors who agreed deals in advance of higher stamp duty rates being announced in the Budget have remained committed to their purchase.  

Twenty-eight percent of sales agreed by investors in the three months running up to the stamp duty surcharge increase were either renegotiated or remarketed, around half the level recorded during the aftermath of the 2022 mini-budget when mortgage rates rose quickly.

The increase in stamp duty rates means that on a typical £300,000 purchase an investor pays £17,500 (5.8%), a mover £2,500 (0.8%), and a first-time buyer nothing.  These figures will rise by an extra £2,500 in April 2025 for investors and movers. 

The introduction of the 3% SDLT surcharge has increasingly pushed investors towards the North of England where stamp duty bills tend to be lower because of lower property prices.  Increasing the surcharge from 3% to 5% is likely to exacerbate this.

Since the introduction of the surcharge, the largest falls in investor purchases have been in the South of England (particularly outside London) where high stamp duty bills can make buy-to-let unviable.  On a £500,000 purchase, the stamp duty bill for an investor now stands at £37,500 (7.5%), rising to £40,000 (8.0%) from 1 April 2025.

In contrast, landlord purchases have held up more strongly in Northern England, with investors in the North East purchasing a larger proportion of homes than before the introduction of the surcharge in 2016.  

Last month, 18.4% of homes sold in the North East were bought by a landlord, 0.2% above November 2015 levels before the stamp duty surcharge was introduced.  Here, the average investor paid £115,000 for their buy-to-let, meaning their stamp duty bill would have risen from £3,450 to £5,750.

A growing share of buy-to-let purchases in the North of England are by investors who live in the South of England and have been attracted by lower stamp duty bills alongside higher yields and faster house price growth over the last few years.  The average gross yield achieved on a buy-to-let purchase in the North East this year was 9.7%, significantly higher than the average 5.7% yield achieved in London.

When the 3% SDLT surcharge was introduced in 2016, the government estimated it would raise between £700m and £900m per year.  In reality, it raised between two and three times this amount.  

The government estimates that increasing the surcharge from 3% to 5% will raise a further £400m per year, reflecting only a modest decline in investor purchases.  The relative strength of buy-to-let purchases in November supports these figures.

In Scotland, where the stamp duty surcharge rose from 6% to 8% on 5 December 2024, revenue from investors and second home buyers accounted for an overage of 31% of total stamp duty revenue during 2024 (January-October 2024).  This suggests a limited number of landlord purchases.  

Hamptons’ figures show that investors purchased 5.8% of homes in Scotland so far this year, down from 10.3% when the initial stamp duty surcharge was introduced.  Meanwhile, in England, the share of revenue from investors and second home buyers stands at 47% (January-September 2024).