The U.K. government sees a surge in overseas buyers rushing to snap up homes in Britain before a new sales tax kicks in next year.
The two per cent tax on non-resident home buyers that comes into effect in April 2021 was included in the budget presented by Chancellor of the Exchequer Rishi Sunak on Wednesday.
The Treasury forecasts a 250 million-pound ($322 million) revenue boost from the so-called stamp duty on property purchases during the 12 months before the new surcharge kicks in, followed by a 355 million-pound drop in the year after its introduction.
This dynamic has rocked the London housing market over the past five years, especially for top-end properties. The three per cent surcharge on landlords and second-home owners introduced in April 2016, for example, was preceded by a flurry of deals that dropped off dramatically after the higher tax rate came into force.
Shares in the U.K.’s biggest home builders declined during Sunak’s budget speech in Parliament on Wednesday.
Still, Sunak softened the blow for overseas buyers compared with the three per cent hike proposed in the ruling Conservative Party’s last election manifesto. And the new surcharge will only be levied on home purchases in England and Northern Ireland. Revenue raised will be put toward reducing homelessness.
International buyers accounted for 26 per cent of home purchases in greater London in the second half of last year, according to broker Hamptons International. In the choicest districts of central London they made up 55 per cent of deals, the broker’s data show.
The policy is likely to deter overseas investors from buying London apartments to rent out as it will affect returns, Hamptons head of research Aneisha Beveridge said by telephone. Yet the discount overseas purchasers can reap thanks to the weak pound will likely mean the overall impact of the surcharge is subdued, she said. - Bloomberg