Stamp Duty Proposals For Foreign Investors: Will It Affect UK Demand?

Proposals to increase stamp duty for overseas purchasers of property will have an impact on the UK property market.  Benoit Properties set out the impact that they expect to see on foreign property investors.

Taken from an article by Benoit Properties

 

Speaking at the Conservative Party Conference, Theresa May announced plans for overseas purchasers of UK property who do not pay tax in Britain to be subject to a new stamp duty surcharge of up to 3%. To be levied on both individuals and companies, it’s proposed that the proceeds of the taxes would be towards a scheme for tackling rough sleeping on the streets of Britain.

While the immediate aftermath saw UK housebuilders among the top fallers on the FTSE100 on the following Monday, it seems that the concerns about the impact these proposals will have on foreign investment focus mainly in the South, and London in particular.

Mrs May noted that there was evidence that foreign buyers who do not pay UK taxes have helped to push up prices and reduce the rate of home ownership in the UK.

In London, the average house price to income ratio stands at 13.2, and a recent study by UBS shows that the city is at risk of a housing bubble.

We explore what the outcomes may be, should the proposals go ahead.

 

More Investment in the North

While the details of the tax have not yet been thrashed out, it seems likely that an increase in liabilities for overseas investors will see them seek out properties which offer affordable entry rates, or fall below any threshold which is proposed.

Areas such as Manchester, Liverpool and Leeds are already seeing booming levels of investment from overseas purchasers thanks to the excellent returns offered.

Tom Zajac of Benoit Properties notes “Since increased rates of stamp duty were levied on UK buyers, cities in the North have seen a real surge of interest from UK landlords looking to take advantage of the competitive prices. Investment from buyers globally is already strong in these areas, and an increase on tax liabilities would likely see this demand increase”

 

Emerging Markets

While the UK is an established market for investors across the globe, we expect a growing trend for investors to look to diversify their portfolios by seeking out deals in emerging markets.

Tom says “We are seeing increasing interest from investors from regions such as Asia, South Africa and Europe in more emerging markets such as Bangkok and Turkey. Low entry rates, affordable tax liabilities and of course decreased ongoing management and service charge costs make these areas incredibly attractive to purchasers across the world”.

It’s extremely unlikely that investment in UK property from foreign buyers would dry up completely, after all the UK is a considered safe haven for property investment across the world, thanks to the stability of the UK housing market in comparison with other locations.

However, should the proposals go ahead, we are likely to see some shifts in property trends across the UK and indeed beyond.