The Prime Central London (PCL) residential property market can breathe a sigh of relief as the threatened imposition of an additional surcharge of Stamp Duty Land Tax (SDLT) on overseas buyers did not take effect from yesterday.
However this issue is not dead. Buried in the details of the budget was an announcement that the Government will publish a consultation in January 2019 on a SDLT surcharge of 1% on purchases of residential property by overseas buyers. This is probably something to watch out for in the 2019 budget. The likelihood of the additional surcharge and a conclusive Brexit deal should enable the market to stabilise, although at what level it is impossible to predict at this stage.
The market is still feeling bruised from increasingly punitive rises in SDLT over the past few years. According to research from Savills, prices in PCL have been falling since mid-2014 dropping by around 18% over the last four years. The momentum of price falls increased in 2016 due to the introduction of the 3% surcharge on the purchase of additional residential properties, and also following the Brexit vote.
The current political climate and the lack of an agreed Brexit deal provides continuing disruption and uncertainty resulting in overseas buyers being generally reluctant to invest in PCL despite a weak GBP. A perceived greater focus by the Treasury on wealth taxes still further detracts from London’s attractiveness to overseas buyers. The immediate imposition of an additional SDLT surcharge – which was rumoured to be as much as another 3% – would have been a big blow to an already struggling market.
But there are buyers ready to pounce on good value properties. Although that requires sellers willing to price their properties realistically – something that our estate agent contacts say is still rare. Investing in properties with the potential for added value such as flats with shorter leases will be attractive for more sophisticated buyers who are willing to be steered through the complex enfranchisement process.
The Chancellor has helped first time buyers by giving full relief from SDLT for first time buyers on purchases up to £300,000 with reduced SDLT liability between £300,000 and £500,000, and this has now been extended to shared ownership properties. This measure will be retrospective. Therefore any first time buyer who purchased within these limits since 22 November 2017 (being the date of the budget last year) can claim back the SDLT that they paid on their purchase. The procedure for reclaiming the SDLT paid will probably be the same as that for those reclaiming the 3% surcharge paid following the sale of their main residence within the three year time limit.
Whilst the cancellation will be of negligible effect in PCL (unless you were a first time buyer who purchased a short lease on a small flat), it will benefit first time buyers in the rest of the country providing a saving of £4,950 on a purchase of £299,000. Every little helps.
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