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Sipp shock will slow BTL

The Chancellor’s shock decision to kill off residential property investments in Sipps will dampen the buy-to-let market for the next three years, warns the Royal Institution of Chartered Surveyors.

RICS was expecting 160,000 Sipp-related property pur- chases in the three years from April 2006 while the Council of Mortgage Lenders had predicted that one in three buy- to-let transactions from April onward would be for inclusion in Sipps.

Purely Mortgages chief executive Mark Chilton says as the expected rush next spring will no longer happen, property companies, which were gearing their strategies next year on Sipp prospects will have to revise their plans.

Several business relationships had been formed between Sipp providers and lenders to take advantage of tax incentives and the marketing expenditure behind these deals has now been wasted.

Alliance & Leicester head of mortgage intermediaries Mehrdad Yousefi believes that first-time buyers and investors interested in Reits will be the main winners. He describes the Sipp announcement as posi- tive for commercial mortgage brokers but admits that many industry relationships will now come undone.

BTL specialist Paragon Mortgages created a relationship with Sipp administrator James Hay in anticipation of the property Sipp move next year. Chief executive John Heron does not believe that the BTL sector will suffer irreparably and adds that most projected figures for property Sipps were based on conjecture.

He says: “The industry will inevitably feel negative towards how the Government operates. We would rather be rid of home information packs than Sipps.”

Chilton says: “I believe that the impact will have more of a bearing on London brokers who are heavily weighted towards buy to let.”

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