Stamp Duty Holiday Creates a Surge From Overseas Investors

The Stamp Duty Holiday has created a mortgage surge from overseas investors, seeking to save thousands of pounds from this tax break. The mortgage holiday is in effect a tax break raising the amount at which tax is charged from £125,000 to £500,000. Mortgage searches by advisers for non-UK residents have seen a significant rise according to Legal & General Mortgage Club. Data from the SmartrCriteria tool, which helps advisers to determine whether a particular lender would consider a mortgage application from their client, shows that criteria searches related to ‘visas’ were ranked as the most searched term at the end of July.

Expat Mortgage Enquiries Surge

Throughout July, mortgage searches by advisers for ‘ex-pats not in the UK’ also featured in the top 10 search terms, whilst a search combination of ‘expat not in the UK’ and ‘foreign income’ has remained in the top five searches by advisers. According to the data, one in every 22 residential searches is for a query relating to an applicant currently on a visa or an ex-pat not based in the UK.

The data also suggests that a growing number of overseas buyers are also reacting to recent changes to stamp duty, which include a 2% surcharge for non-UK buyers beginning in April 2021. SmartrCriteria searches related to applicants on a visa showed a 146% for buy-to-let searches, as well as 97% for residential criteria enquiries since May 2020. Of the residential visa searches made in July by advisers, 88% of applicants have a Tier 2 or other working visa and the majority (71%) have been in the UK for two years or more.

The rise in non-resident enquiries coincides with increased interest from overseas buyers as they turn their attention to the UK housing market. Recent industry data has shown a surge in demand from Hong Kong-based buyers.

UK Property Market ‘Bucking The Trend’

Kevin Roberts, director at Legal & General Mortgage Club, said: “Britain’s housing market is bucking the trend and has faced unprecedented levels of demand since reopening in May, and new figures show that a growing number of overseas buyers are also taking interest in UK property. Our SmartrCriteria tool is tracking some of the key industry trends in the mortgage market’s new normal and shows recent announcements from the Government have clearly gained the attention of non-UK based buyers. Many are now looking to take advantage of the stamp duty holiday while also investing in the market before the 2% surcharge for overseas customers takes effect.

“Our latest figures also coincide with increased interest from Hong Kong buyers, who are now looking to the UK housing market as a ‘safe haven’ amidst political uncertainty in the territory.

“There is an opportunity for advisers to support many of these buyers, particularly if they have little to no credit history in the UK. Lending criteria is changing every day in the mortgage market at the moment, and advisers will be key in helping these borrowers and others to cut through the noise and find the best product for their particular circumstances.”

Read More: Stamp Duty Holiday

Read More: Is UK Property Still a Foundation for an Investment Portfolio?

What is Stamp Duty?

Stamp duty land tax is a tax charged on the transfer on the total price paid for land or property. It is levied on the majority of those who purchase a home in England and Northern Ireland. However, many commentators claim the market slow down is due to Stamp duty. This is because it prohibits many people from buying or moving due to the additional cash required. First-time buyers will now not pay a penny of Stamp duty on homes up to £500,000! This is widely anticipated to engage first tome buyers, and stimulate the market.

Who Will Benefit From the Stamp Duty Holiday?

The reason Stamp Duty Holiday has Created a Surge From Overseas Investors is that it will benefit all property buyers. Those purchasing more expensive homes will benefit from reduced costs. Mr Sunak said nine in 10 buyers would no longer pay any stamp duty.

Stamp Duty Holiday Timeline

The stamp duty holiday will start immediately and run until March 31 2021.  Based on the average property price of £248,000, this would save a typical buyer £2,460 in tax. Someone purchasing a £500,000 property should save £15,000.

What about Those paying the 3% Surcharge?

Unfortunately, for those buyers who have to pay the 3% stamp duty surcharge, it will still apply.  However, the initial band from 125,000 has now been moved to 500,000. Therefore there is still a saving; a buyer purchasing their second property at £300,000 will pay 3%, totalling £9,000. Whereas before the same purchase would cost £14,000 in Stamp duty, a saving of £5,000!

Who will benefit from the Stamp Duty Holiday?

In short, everyone! First time buyers, landlords looking to expand their portfolio, agents will benefit from increased demand.  A saving for property investors has been against the legislative current; Property tax changes, over recent years, have penalised landlords.

What effect will this have on the market?

The Stamp Duty holiday which is creating a surge from overseas investors, coincides with the plans to hike stamp duty by 2% for overseas buyers. Stamp duty for overseas buyers will include non-resident British nationals. It will come into force on the 1st of April 2021.

Therefore buyers overseas, buying a second property, will pay the 3% surcharge and the additional overseas 2% rate. This is on top of the normal bands.

As an example, an overseas buyer, buying their second property at £300,000 will cost

£9,000 On or before 31st March 2021

Or £20,000 on and after 1st of April 2021.

That represents a huge £11,000 saving.

We are expecting a wave of investor activity particularly from those in the Dubai and Middle East, and also Asia. British ex-pats will be looking to repatriate funds back home to beat the tax hikes.

If you want to discuss property investment options feel free to get in contact

Click Here to View Current Opportunities

Read More: UK Property Market Predictions 2020