Foreign buyers avoid tax with buy-to-let loophole: Overseas investors will still be able to take advantage of property boom...and there are still plenty of bargains before surge in stamp duty 

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A loophole in George Osborne's crackdown on buy-to-let landlords will allow wealthy overseas investors to continue to profit from the UK property boom, it emerged last night.

Just hours after the Chancellor announced his £4billion tax raid on second homes and buy-to-lets, property firms were already devising strategies to get round the hike in stamp duty.

By contrast, savers who hoped to squirrel away retirement nest eggs into a buy-to-let property will bear the full brunt of the bill.

Under plans unveiled by Mr Osborne in Wednesday's Spending Review and Autumn Statement, landlords and second-home owners will pay three percentage points extra on each stamp duty band.

A loophole in George Osborne's crackdown on buy-to-let landlords will allow wealthy overseas investors to continue to profit from the UK property boom, it has emerged

The hike will pile £7,500 on to the price of a £250,000 property.

The shake-up is designed to bring down house prices for first-time buyers who have found themselves priced out by a boom in buy-to-let lending.

But experts warned the tax raid would do nothing to deter wealthy foreign investors – and could even kick-start a new house price bubble due to the 'rush' to beat the April 1 starting date for new rates.

Mortgage brokers warned that landlords keen to buy before the deadline will push up prices and freeze out first-time buyers competing for the same properties.

Brian Murphy, of the Mortgage Advice Bureau, said the 'unexpected' announcement meant 'landlords are more likely to put in offers above the asking price to get through more quickly'.

He added: 'There is a shortage of property on the market – supply is not going to increase but demand is going to increase.

'First-time buyers have less margin to up their offers, so in a very competitive market it is quite possible landlords are going to have the edge.'

Just hours after the Chancellor announced his £4billion tax raid on second homes and buy-to-lets, property firms were already devising strategies to get round the hike in stamp duty

Last night the Institute for Fiscal Studies criticised the 'ill designed' tax hike.

Gemma Tetlow, an IFS analyst, said: 'There will be a rush to buy second homes and buy-to-let properties between now and April. And it may raise rents if it feeds through to rents of the people in buy-to-let properties.'

Alan Ward, of The Residential Landlords Association, said: 'This stamp duty hike is not going to do anything to solve the problems facing the housing market. Instead, these changes are going to hit small, independent landlords who have tried to be self-reliant and to do their best for their future.'

Foreign buyers – many of whom are from China and Russia – have piled cash into British bricks and mortar and been blamed for pushing prices out of the reach of ordinary workers.

In some parts of London, up to a third of homes were sold to foreigners last year.

Experts warned that wealthy investors would be able to take advantage of loopholes in the smallprint of the shake-up that would allow them to avoid paying a penny of the extra charges by buying property through an investment fund or corporation.

The crucial smallprint in the Autumn Statement says the Government is consulting on whether to allow investors to avoid the hike in stamp duty if they snap up more than 15 properties through a company or fund. Yesterday British firms were already thinking up strategies to make it easy for wealthy investors both based abroad and in the UK to avoid the new rates.

One method involves setting up a company on behalf of investors, which then snaps up dozens of homes.

Because a company has bought the properties, those who have pushed cash into the fund are not liable for the increased stamp duty, but the returns are shared out between them.

In many cases these buyers will have not even seen the homes they are investing in.

Cheshire-based property company Assetz Capital is setting up a property investment fund, which chief executive Stuart Law said would target buyers both in the UK and abroad.

He believes wealthy foreign buyers will start snapping up homes in areas where prices are lower – which could push up prices in the North.

He said: 'You might find that these buyers decide not to spend £10million on a Mayfair townhouse. They might instead use that cash to purchase a block of flats up North and avoid the stamp duty rise.'

There was also uncertainty yesterday for thousands of small would-be landlords who have signed up to buy off-plan homes from developers – which are still in the process of being built.

Many will have put down hefty deposits and signed contracts which tie them into buying properties that will be completed after the stamp duty changes come into force.

But many now face a shock stamp duty bill – in some cases tens of thousands of pounds more than they expected to pay.

The Treasury said it was consulting under which system they will pay stamp duty.

Amy Eren, a professional landlord, said that the stamp duty change would penalise individuals while benefiting major corporations.

She said: 'You will get overseas cash buyers who buy property and leave it empty – it is just a deposit account for their money. [Mr Osborne] should be taxing people like that, not people who generate income and pay tax on that income.

'Landlords are being vilified as an easy target.

'We are moving towards a society where people will feel ashamed of saying they own a second home.'

Mr Osborne said in his Autumn Statement speech on Wednesday that some of the money raised from the extra stamp duty would be reinvested in areas where locals were priced out of home ownership.

So where is best to snap up a bargain before the surge in stamp duty? 

NORTH-WEST LONDON 

Two-bedroom flat located next to leafy park land in Park Royal, north-west London.

It has a south facing balcony, en-suite bathroom and there is parking available.

The nearest tube is a 15 minute walk and within 30 minutes of the nearest mainline station.

Price: £490,000 Current stamp duty: £14,500 Future stamp duty: £29,200

Difference: £14,700

SOUTH-WEST LONDON

A two-bedroom ground floor Victorian maisonette in Tooting, south-west London.

Original features are still in place throughout the property, which is just yards to the nearest tube station.

Price: £590,000 Current stamp duty: £19,500 Future stamp duty: £37,200

Difference: £17,700

SOUTH LONDON

A three-bedroom flat with its own private entrance and garden in Battersea, south London, with good train and bus links to the City.

Price: £600,000 Current stamp duty: £20,000 Future stamp duty: £38,000

Difference: £18,000

CENTRAL LEEDS

Two-bedroom semi-detached home with a garage, off-street parking and garden.

Just a few miles from Leeds city centre and within walking distance of local primary and secondary schools.

Price: £185,000 Current stamp duty: £1,200 Future stamp duty: £6,750

Difference: £5,550

YORKSHIRE 

A four-bedroom three-storey townhouse with a driveway and integral garage.

Located in the popular market town of Morley, just a few miles from Leeds.

Price: £239,995 Current stamp duty: £2,299.90 Future stamp duty: £9,499.75

Difference: £7,199.85