Looking to invest in London property? Wait for stamp duty to be cut next spring, says fund manager

Property investors eyeing London might be better off waiting for the British government to reduce the stamp duty on the capital’s houses, rather than buying now to take advantage of the weak pound.

The government is likely to retract the property curb of high stamp duty on buying luxury homes next spring, and while the pound may have by then recovered some of its lost value, the savings from paying the lower tax will be bigger, according to Evans Randall, a London-based private funds manager.

“The [removal] of the higher stamp duty is going to move the market … I wouldn’t buy now, I’d wait for that,” said John Slade, executive chairman at Evans Randall.

“But if you play that game, you have to time it very carefully. You’ve got to catch it while the currency is low.”

Before Boris Johnson succeeded Theresa May as the UK’s Prime Minister in late July, he was reported to have been considering a cut in stamp duty, a step that is widely expected to provide a boost for the London market in terms of volume of sales and also pricing.

Since the stamp duty was first raised in 2014, many parts of central London have seen a decline in prices of 20 per cent, having reached a peak the same year.

On the other hand, since the British public voted to leave the European Union in June 2016, the pound has weakened by about 9 per cent against the US dollar.

Prime London home rents slipped by 1.3 per cent between July last year and June this year, but the latest evidence from the market suggests a return to rental growth in the second quarter of the year, according to consultancy Savills.

Slade, who has 30 years of experience investing Asian money in London, reckons it will be a few months before London begins to reduce stamp duty, given that the government is struggling to get an acceptable Brexit deal past the EU, and will also be busy sorting out its budget programmes.

With or without a deal, Slade said he believes the British currency will recover quickly once it becomes clear what a post-Brexit UK will look like.

Are tiny homes at sky-high costs Hong Kong’s price for low taxes?

Other analysts believe investors have an advantage buying property now rather than waiting for Brexit uncertainty to be resolved.

“Unless it is going to be a no-deal Brexit, which will see a short-term fall [of the pound], we expect the currency to stage a rebound,” said Mandy Wong, head of international residential at JLL in Hong Kong.

Hongkongers have other reasons to snap up property in London right now. The political crisis in the city and the volatility of stock markets make investment in overseas property attractive, and London remains “one of the top considerations”.

Property consultancy Knight Frank points to healthy occupancy in London offices as a vote of confidence in the city’s long-term prospects. The vacancy rate is currently just 5.6 per cent.

Investment in London’s office property hit £6.89 billion (US$8.83 billion) in the first half of the year.

“Look at the London commercial occupier market – entirely contrary to the mood of political risk in the UK – financial and tech employers have made a clear vote of confidence with near-record rates of office take-up,” said Liam Bailey, partner and global head of research at Knight Frank.

The healthy demand for London office space is supporting the city’s residential segment as workers need a place to live.