A rush in overseas buyers is expected ahead of the stamp duty surcharge enforcement in April 2021.
The UK government has announced an additional 2% surcharge on all non-resident buyers of property in England and Northern Ireland, prompting a potential scramble from foreign investors before its enforcement on 1 April 2021.
Chancellor Rishi Sunak announced the new tax yesterday at the UK Budget 2020 announcement.
In 2016, there was a scramble from overseas buyers when the government imposed a surcharge on second properties. Experts are now bracing for a rush from foreign investors looking to take advantage of savings before the new foreigner surcharge kicks in.
Currently, foreign investors pay the same stamp duty rates as UK buyers, ranging from 0% for properties below the £125,000 price tag, to 12% for properties valued at more than £1.5 mil.
The new 2% stamp duty surcharge will be on top of the existing 3% surcharge on purchases of second properties, bringing the highest rate for foreign buyers purchasing the most expensive homes to an eye-watering 17%!
While lower than the original 3% surcharge planned; in Malaysian currency (and many other currencies), this could still amount to a staggering price of hundreds of thousands of ringgit in total!
Example
|
PROPERTY PRICE |
£1,000,000 |
£500,000 |
£250,000 |
|
STAMP DUTY |
£73,750 |
£30,000 |
£10,000 |
|
TOTAL STAMP DUTY |
£93,750 |
£40,000 |
£15,000 |
Will the surcharge affect property price growth in the UK? Based on historical data, it’s quite unlikely. See chart below:
Is NOW the best time to invest in the UK? Absolutely. Now, more than ever, is the best time to invest in the UK. Here’s why:
-
Strengthening currency
The Pound is strengthening after taking a nosedive during the EU Referendum. With renewed clarity in terms of the UK’s future with the EU, the Pound will strengthen further. Take advantage of affordable exchange rates now.
-
Increased market confidence
The UK economy has remained stable through the past 3 years of uncertainty following the EU Referendum. However, the market and economy are showing a rebound, thanks to more political certainty after the General Election in Dec 2019 and a decision on Brexit, with the UK leaving the EU on 31 Jan 2020.
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Price growth of 14.8%
The UK property market is underpinned by strong demand and low supply. Not even Brexit could dampen the growth of house prices in the UK. With more certainty in the market and economy, house prices are predicted to grow 14.8% by 2024 (JLL).
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Global safe haven
The UK continues to remain a global safe haven for investment. It has been named the hottest investment destination in the world by Ernst & Young. If you missed out on savings from the stamp duty surcharge in 2016, you don’t want to miss another opportunity to save now.
Speak to us to find out more about investment opportunities in the UK, or if you want to be updated on our upcoming UK Property Masterclasses. Contact us for more information at info@csiprop.com, (+65) 3163 8343 (Singapore), 03-2162 2260 (Malaysia) or simply fill in the form below. Also, read up on the UK Property Outlook 2020 here.
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By VP
Sources:
https://www.homesandproperty.co.uk/property-news/budget-2020-stamp-duty-surcharge-london-property-a137291.html
https://www.mansionglobal.com/articles/tax-levy-for-foreign-buyers-announced-in-coronavirus-focused-u-k-budget-212899
https://www.expressandstar.com/news/uk-news/2020/03/11/housing-market-may-see-spike-in-overseas-buyers-ahead-of-stamp-duty-surcharge/
https://www.financialreporter.co.uk/finance-news/budget-2020-govt-launches-2-stamp-duty-surcharge-for-non-uk-residents.html
I do not get why they have put this tax on foreigners who own a property here. This would really scare potential foreign investors who were looking to buy property here.