Overseas Investors to Conclude Real Estate Deals Before Stamp Duty Change

Overseas investors to conclude real estate deals before stamp duty change

08 Nov 2018

Overseas Investors

The UK autumn budget 2018 announced a proposal to increase the surcharge on the property – that will be further be revised in January. Some foreign investors are finalizing deals before implementing new regulations and tax hikes on a property in England and Northern Ireland. 

Earlier, it was assumed the duties will increase by 3 per cent, but the proposed rate is lower as compared to previous expectations. Further, this has been taken as a controversial decision at the time when the market is already facing a number of issues.   

This year most buying was need-based, and the highest number of transactions took place in small and midsized homes that included a number of first-time buyers. The reason for the increase in the sale of small homes is that there exists a severe shortage of large-sized affordable homes in the country.

Stamp Duty Implications

The stamp duty is given on the total value of the home on the completion of a transaction. It was introduced on 1st April 2016 and appeared as a barrier to the buyers, especially those who already own one. 

Approximately 3 per cent of the tax applies, in case of first time ownership, even in conditions of inheritance, or having an interest in a trust that owns it. It even applies to property bought outside the country.  

In 2017, first-time buyers were relieved from the duties for transactions below £500,000, but if the buyer already owns property or inherits one, he is liable to pay.

Foreign Investors Buying Before Tax Policy Changes

The rise in tax will increase overseas buyers’ operation costs in the region, and this can be negative for the realty sector, the political and economic situation. It is also worried that it will reduce the inflow of overseas students into the country. 

However, a number of Asia based investors bought or are concluding transactions before the new taxes are approved. In the last few weeks, some of the wealthy buyers spent approximately £400 million in central London; notwithstanding, there is an indication of a slowdown in the market.

The overseas transactions included the £105 million penthouse apartment and flat, which were historically US embassy and Canadian High Commission, and were bought by Chinese buyers.   A similar property was sold for £50 million - the penthouse overlooking the Queen’s Buckingham Palace to Chinese buyers.

Scope For Properties to Grow In 2019

The average house price growth in the UK may have reached the lowest since May 2013, but the outlook is still highly positive. The Nationwide figures find the year-on-year growth was 1.6 per cent, where there exists a high scope for price gain and activities to pick up in 2019 post Brexit. Such indications are supported by the Savills forecast that predicts the price will increase by 14.8 per cent in the next five years and UK property.

Modest growth is expected in the South East and East of England in the range of 2 per cent in London, whereas North West and East Midland prices are expected to grow at an annual rate of 3 per cent and West Midland, Scotland and Yorkshire rate is expected to be in the range of 2.5 per cent.  

To know more about UK properties, click Hamilton International Estates. 

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