The Spring Budget 2020 was announced yesterday, with the following changes made affecting property investors in the UK:
A Stamp Duty surcharge has been confirmed for overseas buyers
Milton Rodosthenous, Build to Rent expert and director of online auction service LetsBid Property, comments: “The stamp duty surcharge for non-UK tax residents represents positive news for domestic property buyers and landlords. Competition from overseas buyers – which has been rife in recent years, particularly in the UK’s largest cities – is likely to reduce significantly.
However, the additional tax could pose problems for the Prime Central London market, in which there is currently a huge amount of overseas investment. The market has been struggling for several years since George Osborne’s stamp duty reforms in 2014 and this latest move could see a further reduction in prices and activity.
Actively discouraging overseas investment with a 2% surcharge could be troublesome. Perhaps a 1% surcharge on overseas buyers – as originally mooted by politicians – would be fairer and more effective in creating a level playing field for all property purchasers?”
Mary-Anne Bowring, group managing director at residential property consultancy Ringley, says: “The falling pound has made housing more affordable to overseas buyers, while domestic buyers have had to contend with stagnant wage growth and ultra-low interest rates pushing up prices and eating away at their ability to save.
“An increased Stamp Duty for overseas buyers will simply put things back to where they were before the Brexit vote and level the playing field for domestic buyers.”
Neil Cobbold, Chief Sales Officer at PayProp, comments: “An additional 2% Stamp Duty surcharge for overseas investors will certainly have an impact on the demand for properties in England’s major cities. We will have to wait and see whether disincentivising overseas buyers causes a shortage of rental homes in the long-term.
“However, additional revenue from this surcharge could pave the way for a reduction or overhaul of the current 3% levy on second homes and buy-to-let properties.
“Changes of this type – and reduced competition from overseas – would encourage more domestic landlords to invest in further properties and provide more homes for the growing tenant population.”
Mark Hayward, Chief Executive of NAEA Propertymark comments: “If introduced, this policy allows those in the UK to have a better chance at purchasing a home. However, overseas buyers tend to purchase properties in prime central London which are completely unaffordable to most homebuyers anyway. Therefore, this move will not help those that need it most.
“Ultimately, by energising surcharges, it is likely that purchasers will factor this additional cost into any offers they make on a property so prices may be pushed down in areas where overseas buyers are purchasing.”
Stamp Duty changes within the UK
Milton Rodosthenous, Build to Rent expert and director of online auction service LetsBid Property, comments: “Many consumers and indeed property professionals would like to have seen changes to stamp duty rates in today’s Budget. This would have given the market a further boost following the increased activity we have seen in the first few months of the year post-election and post-Brexit.
“Those keen for stamp duty reform will now have to wait, but it could only be a matter of time as it’s clear from his previous comments that Boris Johnson has designs on overhauling the current stamp duty system.
“Meanwhile, it was surprising not to see stamp duty relief for first-time buyers confirmed as a permanent policy. This initiative has been highly successful and contributed towards many younger people no longer feeling that homeownership is out of reach.”
“Moreover, reviewing council tax levels would have been a significant and lengthy project to complete, but it has been much needed for a while as average property prices have spiralled since the existing levels were set.
Additional revenue from new council tax rates could have been used to pave the way for a stamp duty shakeup, which could save money for movers and encourage more transactions at the mid to higher end of the market.
Asaf Navot, CEO of London prop-tech lettings company, Home Made stated: “Despite the government’s claim of its commitment to fixing the UK’s housing crisis, this budget offered little to no immediate relief from taxation for landlords.
“The 1% drop in the stamp duty surcharge for investment properties does reduce some of the taxation landlords face. However, without harder-hitting measures on stamp duty, and the reintroduction of buy-to-let mortgage interest relief, it does little to increase the rental supply or benefits to landlords.
“With more people renting, and for longer, bold solutions are required to fix the housing crisis. In the next budget, the government must focus on reducing taxation further to encourage more landlords into the market and incentivise developers to build more homes to meet rising demand. Additionally, it is imperative that we reduce the transition of long-term rentals to short-term lets to avoid impacting the rental market further.
“While it is politically logical to pursue government-led initiatives to boost levels of homeownership, more needs to be done to ensure we are encouraging development of quality housing, supporting good landlords, and enforcing compliance, to provide properties that suit the variety of ways people choose to live in the 21st century.”