House price growth is at its lowest rate in five years, according to the latest ONS statistics. While Brexit is clearly a contributing factor, stamp duty is the main culprit in the London market. It is therefore highly alarming that the government has decided to press ahead with divvying out yet another stamp duty burden. The idea that the proceeds will help tackle homelessness is honourable, but we should look at less damaging solutions before taking radical steps like this.
While the domestic market is taking a wait-and-see approach, overseas buyers are looking at Brexit as an opportunity, especially in prime central London where currency fluctuations are securing discounts of up to 25 per cent for dollar buyers.
These buyers are crucial to the buoyancy of the market and will continue to be when the market hits hard times, but government is determined to introduce further punitive costs, with the consultation on the proposed one per cent additional levy on overseas buyers launching last month. Post-Brexit Britain should be open to the world and a foreign buyer tax sends exactly the opposite message.
With Google and Apple set to host over 9,000 employees between them at their new London headquarters, these punitive costs could deter further investment. After Brexit there will be a greater demand for skilled workers; we should be looking to entice the best talent not repel it.
Furthermore, overseas students are worth nearly £26bn to the UK economy and a substantial amount of our new homes sales to foreign buyers are driven by the UK’s world-renowned education system. These off-plan sales to the international investor community are the lifeblood of the UK’s new development cycle; there is a lack of understanding from government of the vital role this plays in the delivery of new homes. By securing offers on units ‘off plan’, meaning a couple of years in advance of completion dates, UK developers are able to secure sales at a time where there is less interest from domestic buyers.
This is crucial to bringing new homes to the market as it enables a constant flow of income into these projects at a very early stage, allowing them to ‘financially complete’ sooner and therefore move on to developing their next venture swiftly. While we as a business are still opposed to the notion, we are pleased to see the government climb down from their original 3 per cent stamp duty levy on international buyers to 1 per cent.
However, it is now crucial that an extensive and collaborative consultation takes place and government listens. Yes, 1 per cent is better than a 3 per cent as an additional cost, but the government seems to have forgotten that these foreign buyers are already paying a 3 per cent surcharge on many of these purchases as a second residence. I
t’s absurd that overseas buyers, who have kept the London market afloat throughout 2018 and helped encourage more development across the capital, will have to cover a nine per cent stamp duty surcharge before they even think about buying here.