The UK autumn budget 2018 announced a proposal to increase the property's surcharge(which will further be revised in January). However, some foreign investors are concluding deals before the new regulations, and tax hikes affect the sale of property in England and Northern Ireland.
It was assumed the duties would increase by 3 per cent, but the proposed rate is lower than previous expectations. Further, this has been taken as a controversial decision as the market is already facing several issues.
This year, most buying was need-based, and the highest number of transactions took place in small and midsized homes, including several first-time buyers. The reason for the increase in the sale of small homes is the severe shortage of large-sized affordable homes in the country.
Stamp Duty Implications
The stamp duty is given on the home's total value on the completion of a transaction. It was introduced on 1st April 2016 and appeared as a barrier to 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, which can hit the realty sector. However, several Asia-based investors bought or are concluding transactions before the new taxes are approved. In the last few weeks, some wealthy buyers spent approximately £400 million in central London, indicating 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, the penthouse overlooking the Queen's Buckingham Palace, was sold for £50 million 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, with a high scope for price gain and activities are expected 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 in the UK property sector.
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. West Midland, Scotland and Yorkshire's rate is expected to gain by 2.5 per cent.
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