Brexit concerns: confidence of foreign buyers in London’s property market on the wane following referendum
Home seekers looking to invest overseas have become wary of spending their cash on properties in the British capital, and are instead favouring cities such as New York
A new report from Cushman & Wakefield suggests that London might already be losing favour with overseas property buyers. With investment volumes in the British capital falling from US$39 billion to US$25 billion over the year to June, New York has stolen the crown as the most desirable investment location, according to the firm’s analysis.
Noting that the research monitors all sectors of the market, not just residential, David Hutchings, Cushman & Wakefield’s partner and head of EMEA (Europe, the Middle East and Africa) Investment Strategy, EMEA Capital Markets, says that London lost out this year due to Brexit concerns and high pricing.
In terms of the residential sector, Hutchings believes that the cost increases creeping up over recent years had already been impacting foreign buyer activity, and were partly the reason for a slowdown in the higher-end residential sector.
These costs include stamp duty changes not specific to foreign buyers “but nonetheless significant”, with a tiered tax rate for residential property based on lot size with the highest value tranche, above £1.5 million (HK$14.4 million), now taxed at 12 per cent and an additional 3 per cent added for second homes. In addition, capital gains tax on the increase in value of a residential property when sold has been extended to foreign buyers.
“These changes have certainly impacted and if taxes were raised higher, the impact would increase,” Hutchings says. “However there are some suggestions that at least in part these measures may be unwound to help promote inward investment and new development. Obviously the Mayor’s review may impact any such thinking but ... there are no firm plans on the table to increase costs further.”