Rishi Sunak is preparing to unveil plans in his first Budget as chancellor next week for a new surcharge of up to 3 per cent on overseas buyers of UK property, a move likely to cause alarm across the real estate sector.
At present non-resident homebuyers pay the same rates of stamp duty land tax as those living in the UK — rising from 0 per cent on property purchases of less than £125,000 up to 12 per cent for values over £1.5m. There is already a further 3 per cent charge for people buying a second home.
In the Conservative party’s election manifesto last year, Boris Johnson promised to impose an extra 3 per cent surcharge on foreign buyers, raising an additional £120m a year that would be invested in schemes to tackle homelessness.
Although a final decision on the level of the surcharge has not been made ahead of Mr Sunak’s Budget on March 11, senior Tory figures have confirmed to the Financial Times that the additional stamp duty levy will be introduced.
The figures said the final rate could end up lower than 3 per cent — reflecting concerns from the property industry over the potential impact of the levy. “There are still moving parts,” said one Conservative insider.
Charlie Wells, managing director of buying agency Prime Purchase, said there was “no logic” to the surcharge.
“If this government thinks that penalising the people at the top, particularly foreigners, will revitalise the economy and get things going, then it is very wrong,” he said. “It is hard enough trying to sell a property in this market.”
The government has used stamp duty on residential properties as a handy revenue raiser in recent years — netting £9.3bn in 2017-18 against £3bn in 2008-09 — but ministers are cautious of setting the rate so high that it has a chilling effect on the market.
The idea of the new surcharge was first raised two years ago, with the government repeatedly tweaking the level of the proposed duty before it was left on the drawing board following Theresa May’s resignation as prime minister last year.
Since taking over from Mrs May, Mr Johnson has pushed to revive the surcharge, opting for the more ambitious 3 per cent figure.
The Tories believe that such a move would affect up to 70,000 transactions a year and raise £120m in revenue, which could be channelled towards helping the homeless, the Conservative party said.
Mr Sunak, who was chief secretary to the Treasury at the time, argued the move would give UK residents “a good bite at the apple” at a time when there had been “excessive foreign ownership” of UK real estate.
But if set at 3 per cent, the new charge would leave some foreign buyers at the top end of the UK property market paying as much as 18 per cent in stamp duty.
The top rate is 12 per cent, charged on the portion of the price above £1.5m. But where buyers (including British expatriates resident abroad) already own a property elsewhere, they could now face two further levies: both the existing 3 per cent surcharge on second homes and the new surcharge on foreign buyers.
Neal Hudson, director at housing market research firm Residential Analysts, said that if the government introduced a slightly lower charge it would reflect the need to strike the right balance between the priorities of home ownership and housing supply.
High-density city centre housing developments are often reliant on overseas sales to get going, since developers have to sell a certain proportion of properties before their backers release funds to begin building.
“Unless you’re changing the way the market is financed then overseas buyers are going to be an important part of that,” said Mr Hudson.
Source :- https://www.ft.com/content/6fa6fe7a-5d45-11ea-8033-fa40a0d65a98