Hongkongers heading to UK under BN(O) visa scheme undeterred by end of stamp duty holiday, surging home prices

London has reimposed at least a 5 per cent tax on property purchases in England and Northern Ireland, officially winding up a stamp duty holiday that began a year ago
As homebuyers rushed to beat the July 1 deadline, the UK’s average home price shot up 10 per cent year on year in May to £254,624

British National (Overseas) passport

Cheryl Arcibal

Published: 8:30am, 21 Jul 2021

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The end of a stamp duty holiday and surging home prices are unlikely to deter Hongkongers from continuing to buy properties in the UK as they move there under the British National (Overseas) scheme, according to analysts.

Since the beginning of this month, London has imposed a minimum 5 per cent tax on property purchases worth at least £250,000 (US$342,705) in England and Northern Ireland, officially winding up a stamp duty holiday that began a year ago. The end of the tax break means that the maximum tax saving has now fallen to £2,500 from £15,000.

As homebuyers rushed to beat the July 1 deadline, the UK’s average home price shot up 10 per cent in May to £254,624 from a year ago, almost back at the peak of £255,913 in March, according to government data.

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Hongkongers, however, are likely to grit their teeth, pay the tax and shell out more money for a UK home.

“The choice to relocate to the other side of the world isn’t going to be made or broken on a saving of a few thousand pounds and we’ve seen a consistent stream of interest to continue to come from Hong Kong, despite the expiry of the initial stamp duty holiday,” said Marc von Grundherr, director at Benham and Reeves.

After the UK announced the BN(O) visa scheme in July last year, some 2,203 homes in London worth £1.1 billion had been snapped up by Hongkongers as of April, according to the London-based property agency.

“We have sold over £90 million worth of real estate in London this year,” said Mark Elliott, head of international residential at the property consultancy Savills based in Hong Kong. “In July, we have sold £7 million [worth of properties] month-to-date.”

Foreign homebuyers in the UK have also been paying a 2 per cent surcharge on property purchases in England and Northern Ireland since April 1.

“We are confident demand will continue,” Elliott said. “This is due to a plethora of reasons including the historical connection between Hong Kong and the UK as a country and as a market to invest in, and this is the main reason [these taxes] won’t curtail demand.

“Property in the UK will remain the top choice for Hongkongers, with education, a historically-sustainable market in times of potential inflation and demand for people looking to emigrate [as the top reasons].”

The UK government made it easier for 3 million Hongkongers who qualify for a BN(O) passport and their dependents to relocate to Britain and stay and work for extendable periods of 12 months, creating a path to citizenship. The move came immediately after China officially imposed a sweeping national security law on Hong Kong on June 30 last year.

An estimated 123,000 to 153,700 BN(O) passport holders in Hong Kong and their dependents are likely to move to the UK in the first year of the scheme, and between 258,000 and 322,400 are likely to purchase a home there in the next five years, according to estimates by the British government.

So far, more than 34,000 have applied for the right to stay long-term in Britain under the programme, with 7,200 already approved in May, government data shows.

Meanwhile, data from the Universities and Colleges Admissions Service in the UK showed that applications received from Hong Kong students were up 9 per cent to about 6,400 in January.

“Hongkongers have not been dissuaded by the end of the [stamp duty holiday], our clients are looking at the long-term benefits of investing in the UK,” said Andrew Weir, chief executive at property agency London Central Portfolio (LCP). “They were not initially attracted to the UK just because of a short-term tax break.”

LCP’s sales of prime London homes to Hong Kong buyers rose by half in the last year compared to the previous 12 months. The company saw a 29 per cent increase in website traffic from Hong Kong in the same period, Weir said.

The return of stamp duty is likely to dent overall demand for UK homes, according to Knight Frank.

“The property market will naturally pause for breath following the June deadline and as supply increases, we expect double-digit price increases to become single-digit rises by the end of the year,” said Tom Bill, head of UK residential research at the property consultancy.