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Britain

Britain’s PM Theresa May wants to hit foreign homebuyers with a higher tax

‘We are very concerned about the impact that foreign buyers have on the housing market’

PUBLISHED : Monday, 01 October, 2018, 10:40am
UPDATED : Monday, 01 October, 2018, 8:50pm

Britain’s high-end and luxury home builders 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.

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 home builders such as Crest Nicholson Holdings Plc and Berkeley Group Holdings Plc 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 on Sunday, the government said it would begin consultations to increase the stamp duty on individuals and companies not paying tax in the UK.

Ministers were considering a rate ranging from 1 per cent to 3 per cent, according to The Sunday Telegraph newspaper.

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

The move is likely to add to pressure on the country’s property market.

Bank of England Governor Mark Carney told senior government ministers earlier this month that a no-deal Brexit could see house prices plummet by more than 35 per cent, according to people with knowledge of the matter.

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 in July.

The average residential property in the capital cost £485,000 (US$632,004), the Office for National Statistics said last week.

Nationally, growth slowed to the weakest pace since August 2013.

“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 Andrew Marr Show on Sunday.

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

May is facing pressure over her leadership, and the Tory conference comes a week after the opposition Labour Party announced a series of policies to try to rejuvenate struggling parts of the country, including a house-building programme.

The government said the stamp duty increase would make homes more affordable for British residents and that money raised would be used to help the homeless.

“This policy, with its uncomfortable echoes of blaming foreigners for every ill, may make good headlines, but it sends an uncomfortable message to the rest of the world and will do nothing to create more homes for those unable to buy or to rent today,” said Henry Pryor, a UK-based luxury real estate broker.