Following the outcome of a huge majority Conservative win in December’s election, the uncertainty of Brexit and the future of the British economy is subsiding and optimism for the year ahead is fuelling a rush of overseas buyers keen to snap up on London property before the proposed 3% surcharge on stamp duty and probable strengthening of the pound.
The government has set the 11th of March as the date for the budget when Chancellor of the exchequer, Sajid Javid, will announce the changes in stamp duty. At the end of last year, Boris Johnson proposed an additional 3% for foreign buyers of UK property, so now may be the window for overseas investors to grab their properties ahead of the change to avoid this surcharge. The 3% increase is estimated to affect up to 70,000 transactions a year and raise £120m in revenues that could help address the problem of homelessness in the UK.
The massive win for the Conservatives in December with their pro-Brexit leader has caused a surge in optimism in the property world. Simon Lyons from property development group Enstar Capital says: “We now have stability and that counts a lot with foreign investors as they know they are not in for any surprises over the next decade.”
The London property market remains a reliable and relatively stable option with regard to capital appreciation over the long-term, and the subsidence of political uncertainty is expected to boost the market and work as a catalyst for Central London house prices over the next five to ten years. This, in addition to a currently favourable exchange rate, is urging foreign buyers to make their move in the limited time window before prices rise and the pound increases again now the uncertainty has passed.
Lucian Cook, director at Savills Residential Research, predicts a major influx of foreign investors looking to purchase property before the budget’s changes, believing that the value of the pound is an added incentive.
The pound’s volatility has been directly linked with Brexit negotiations, with the immediate aftermath of the referendum seeing the pound decline sharply and the Conservative win in December 2019 caused a surge. The expectation, therefore, is that the pound will fully recover as we reach milestones in the Brexit process. With new control in Parliament and the potential for a 3% increase in stamp duty by April, buyers are abandoning the wait-and-see approach necessary during Brexit uncertainty and making a rush for London stock in this window of opportunity.
That all being said, London’s 3% stamp duty surcharge is still more accessible for foreign investors than a vast number of other cities in the world, including Hong Kong with its hefty 30% total tax for foreign buyers, and Ontario with a 15% ‘non-resident speculation tax’. And with a surge in foreign investment, London property prices will continue a steady, reliable growth, providing buyers with a worthwhile and secure investment for the long-term, particularly with other future plans like Crossrail set to open in 2021.