Prime Minister Theresa May has been backed into a corner by her party over Brexit. At this years party conference, it would seem that she needed a rallying cry that showed her credentials as someone who protects the interests of the UK and her citizens, whilst demonstrating that Britain has a better future with her as Prime Minister. Because of this, she needed a policy idea that would be both popular with all parts of her party and one that resonates with the British public – the right to own your own home. To this end, she decided to put forward the idea that her government will introduce an extra stamp duty levy on foreign investors, either 1% or 3%, a figure that is yet to be decided.
According to May, evidence shows that non-resident buyers push up house prices and lower home ownership in the UK, although she did not claim there was a link between foreign buyers and homelessness. Research cited by the party suggests that 13% of new London homes were bought by non-UK residents between 2014 and 2016, and that an increase of 1% in the volume of homes being sold to overseas companies put up house prices by 2.1%. However, the English property market has softened considerably since then, particularly in London. Our view is that this may not be that straightforward to get through, as there may be certain legal challenges to begin with. There is currently a legal requirement not to distinguish between EU Nationals, so this new law will infringe on this. In addition, there will be push back from large house builders in the UK’s major cities as they to a large part attract a big foreign investor base, and no doubt those companies and associated business in the house building sector will have something to say.
If this does get through, what impact do we feel it will have? Generally the market in the UK is already quite punitive from a tax perspective, with inheritance tax and death duty already levied on foreign investors. This means that there is a relatively high bar for people from outside the UK to get over. This extra levy will of course add to this and will no doubt have an immediate impact, but will have less of an impact over the longer-term. This country is unique when it comes to property, and the fact that the Prime Minister is following a course where it is the ultimate goal of virtually every UK citizen to own their own home, the demand for property in this country will continue outstripping supply, therefore keeping a healthy demand for many more homes to be built. For us post-Brexit, the expectation is that the market will make a dramatic move higher, as the overreaction to our present situation unwinds and investors flock back to the UK. At Flambard Williams, we believe that the worse case scenario of a ‘No Deal’ Brexit is priced in, and it is our view that the reaction post March 2019 will be a positive one. So to act now is sensible, both in terms or price, but also in terms of beating any extra tax that the government may raise.
For more information about our views on Brexit, and how this may impact you as an investor, please get in touch today. Our property specialists will be more than happy to talk you through the stages and possible outcomes, or provide an action plan to make Brexit work to your advantage.