25 February 2016, Potential investors in buy-to-let properties should not let the 3% Stamp Duty levy that comes into effect on buy-to-let and second home purchases from April 1 be the deciding factor in making a purchase.

Investments should be based on much stronger grounds than whether or not the deadline can be out-run, said Lisa Simon, head of residential lettings at Carter Jonas.

The national property consultancy has developed an online calculator to show potential purchasers how the Stamp Duty rise could affect them.

“The Stamp Duty change only takes investors roughly back to where they were before Chancellor George Osborne altered the way the tax was levied at a stroke during his 2014 Autumn Statement,” added Ms Simon. “It’s better to take a long-term view and survey how the property market has performed where you want to buy. There are other things to consider, too, such as affordability and the way write-down will affect offsetting some charges for things like furnishings.

“In London, two properties in Fulham, both in the same apartment block, illustrate buy-to-let should still be worthwhile.

“The sale of one flat has just completed for £855,000 - it sold for £550,000 in November 2010, illustrating compound annual growth of 9.3%. At the same growth rate it would be worth £1.33m in another five years and even at a modest forecast of 3% compound it would achieve £991,000 over the same period.

“As well as healthy capital growth, it would let for £550-£600 per week, a valuable additional return of 3.34%. With current uncertainty in equities, residential property makes a better home for savings. Ignoring the income, the capital growth projection at 3% equals more than five times the extra Stamp Duty, which may well be offset against future capital gains.

“A second flat, on the market now at £750,000, lets for £465pw and would have been worth circa £500,000-£525,000 five years ago. With compound 5% growth it would be worth £957,000 in five years (£869,000 at 3% compound). Again the sums more than add up.”

Those who believe the London market distorts the view, or who live elsewhere, will find more local examples that illustrate the point.

For example the old Terrys chocolate factory in York is being converted into apartments with the developers ensuring there will always be a good mix of owner occupiers and tenants.

Prices range from £180,000 to £1 million so the smaller-priced opportunities open big doors for investors.

From a buy-to-let perspective, the smaller apartments represent a very good investment – a purchase price of £180,000 will return a monthly rental of around £750 and a yield of 5% but added to that the capital growth is likely to be 3-5% per year until the development is completed. At that point, there is often a sudden jump in values as the supply of properties dries up and the site finally looks its best. In previous cases this jump has been anywhere from 5-10% as the site comes to look its best and all facilities are installed.

It’s clear that a 3% one-off panic by some investors is masking a much larger percentage opportunity. But buy-to-let is a long term investment, so the effects of an eventual Base Rate rise must be included when calculating affordability. It is a business decision, even though it may be your pension driving your thoughts, and should be approached with definite appreciation of profit and loss possibilities.

Try our stamp duty calculator.