UK tax on for­eign buy­ers to hit Lon­don lux­ury home val­ues

Irish Independent - Business Week - - COMMERCIAL PROPERTY - Nishant Ku­mar

Bri­tain’s high-end and lux­ury home­builders face a squeeze as prime min­is­ter Theresa May pre­pares to im­pose higher taxes on for­eign­ers look­ing to buy prop­er­ties in the UK.

Overseas buy­ers ac­count for roughly half of all res­i­den­tial trans­ac­tions in cen­tral Lon­don, ac­cord­ing to Faisal Dur­rani, head of re­search at prop­erty con­sul­tants Clut­tons LLP. Berke­ley Group Hold­ings Plc, the home­builder with the most ex­po­sure to the UK cap­i­tal, fell the most among its peers in Lon­don trad­ing last Mon­day. UK de­vel­op­ers are al­ready grap­pling with slug­gish de­mand amid the na­tion’s messy di­vorce from Europe, a cool­ing prop­erty mar­ket and prospects of higher in­ter­est rates.

The cap­i­tal’s stock of un­sold homes un­der con­struc­tion is at a record, and shares of home­builders such as Crest Ni­chol­son Hold­ings Plc and Berke­ley have slumped this year.

“Fur­ther taxes on in­ter­na­tional buy­ers sends out a con­flict­ing mes­sage about post-Brexit Bri­tain be­ing ‘open’ to the world,” Dur­rani said.

“We will have to re­visit our res­i­den­tial fore­casts with a view to mak­ing fur­ther down­ward re­vi­sions, should the in­ter­na­tional res­i­den­tial sur­charge be con­firmed.”

Un­veil­ing its pol­icy plans as the Con­ser­va­tive Party con­fer­ence be­gan last Sun­day, May’s govern­ment said it will be­gin con­sul­ta­tions to in­crease the stamp duty on in­di­vid­u­als and com­pa­nies not pay­ing tax in the UK. Min­is­ters are con­sid­er­ing a rate rang­ing from 1pc to 3pc, ac­cord­ing to the Sun­day Tele­graph.

“We are go­ing to con­sult on the fig­ure but around 1pc, we are go­ing to con­sult to see if that’s the right fig­ure,” Bran­don Lewis, Con­ser­va­tive Party chair­man, said last Sun­day on Sky News.

The UK’s im­mi­nent de­par­ture from the world’s big­gest trad­ing bloc is al­ready weigh­ing on prop­erty val­ues in Lon­don, where house prices posted their big­gest de­cline in al­most a decade last

July. The av­er­age res­i­den­tial prop­erty in the cap­i­tal cost Stg£485,000 ($632,004), ac­cord­ing to the Of­fice for Na­tional Statis­tics. Na­tion­ally, growth slowed to the weak­est pace since Au­gust 2013.

In a sign that Lon­don would likely bear the brunt of the tax, Bri­tish home­builders fo­cused out­side the cap­i­tal had de­clines that were much smaller than Berke­ley’s 3.3pc fall. The Bloomberg UK Home­Builder

In­dex has dropped 15pc this year.

“We are very con­cerned about the im­pact that for­eign buy­ers have on the hous­ing mar­ket and the im­pact they have on peo­ple who are liv­ing here and try­ing to get into the hous­ing mar­ket,” May said on the BBC’s The An­drew

Marr Show last Sun­day.

“The ev­i­dence is that for­eign buy­ers com­ing in pushes house prices up and low­ers home own­er­ship here.”

Squeeze: The stock of un­sold homes un­der con­struc­tion in Lon­don now stands at a record level as de­vel­op­ers strug­gle with slug­gish de­mand

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