Thursday, March 22, 2012

UK stamp duty hike "will not deter foreign buyers�

Buyers of homes above £2 million (S$4.02 million) in the United Kingdom will have to pay a 7 percent Stamp Duty today, up from the previous figure of 5 percent, while those who buy properties through companies will have to pay an extra 15 percent.

The U.K’s Finance Minister George Osborne, in his Budget statement yesterday, acted to close a loophole where people were buying properties through offshore companies to avoid paying tax. The new rules have already come into force, and most agents contacted by PropertyGuru were supportive of the plans and are not expecting a substantial impact on levels of foreign buyers in London and elsewhere in the UK.

Donna Houguez, Market Analyst at Quick Move Now - the U.K's leading home buyer, said: “The announcement that stamp duty is to be raised to 15 percent for companies purchasing properties worth over £2 million is a good thing for both the home buyer and HMRC, the U.K.’s tax and revenue department. In some areas of London, 90 percent of buyers are cash buyers and over 50 percent are foreign investors. This has contributed to the maintenance of prices in a range unreachable for the average family in the south and we are delighted to see a small effort to address this.”

Ben Everest, Partner at West End specialist estate agency, LDG, said: "The fact that the new 7 percent stamp duty came into force immediately will have a dramatic effect on deals that are currently being negotiated - naturally, it will mean the property on the market in the region of £2 million - £2.5 million will be negotiated down. Thereafter, the next six months will be interesting - we think it will affect transaction levels, particularly in the region of £2 million - £2.75 million, with less property being purchased. However, in the long-term, it won't affect real property values; agents value the property, not the tax bracket.”
He added: "We're pleased to see the Government clamping down on the stamp duty mitigation with an increase to 15 percent stamp duty on buying through companies. However, in the immediate term, this may well mean that deals will fall through.  The only real losers here might be the developers who have speculated on selling expensive luxury flats at high prices to foreign investors."

Jamie Lester, Head of Haus Properties, said: "I am very surprised that the 7 percent top band of stamp duty on homes priced over £2m was introduced from midnight yesterday This is a harsh tax due to the jump from last year's 5 percent threshold on property above £1 million. This may well create a void in the market and push prices up - many buyers and sellers will hover over the threshold meaning transactions will either fall below the £2 million threshold, or dramatically increase which will impact the property valuation process. An increase in stamp duty for properties worth over £2m is a much cheaper method of the government collecting tax versus the previously suggested mansion tax which would have been very onerous to put in place.

Jo Eccles, Director of London property search company, Sourcing Property, said: "However, the 7 percent stamp duty increase will penalise those living in the South East and London. In London, house prices are so high that a £2 million home no longer represents 'the super-rich'. It is therefore going to hit a lot of buyers, particularly in the £2 million - £4 million price bracket, who are going to struggle to swallow the extra £40,000 stamp duty bill. If they are higher rate tax payers, they will have had to earn almost £80,000 pre-tax to pay for this increase.”

She added: "I suspect buyers will choose to postpone mid-term family house purchases in the £2 million -£3 million price range, opting to save up to buy a longer term purchase. As a result, this will reduce the volume and turnover of properties coming onto the market in this price bracket. It may also push those who would be buying in London further out, where they can buy a family house below the £2 million threshold. At the higher end of the market in the £5 million plus range I don't expect it to have a significant impact or be enough to put off buyers.  None of our clients have bought through mitigation schemes such as offshore companies in the six years that we have been operating, so the 15 percent stamp duty is unlikely to affect our clients."

James Wyatt, partner at luxury agents Barton Wyatt, said: "Chancellor George Osborne might have kept his promise of coming "down like a tonne of bricks" on those who have avoided paying stamp duty by closing the tax loophole in today's Budget but this won't deter foreign nationals from buying property in U.K. The U.K. is an extremely attractive place to buy property given the Pound's weakness in recent years. In fact the U.K. is an all-round favourite choice due to our dominant financial centre, superb sporting and cultural activities, some of the world's best restaurants and top drawer educational choices.”

Trevor Abrahmsohn, Managing Director of London prime and super-prime property consultants Glentree International said: “The rise of stamp duty from 5 percent to 7 percent will create a momentary hiatus but since the higher end of the residential markets, particularly in London, is so robust it will be absorbed into the system and taken for granted.  I can see there is going to be an unseemly squabble when sellers want to put their properties on the market at just over £2 million.  In all probability you will find more properties around £1.9 million being sold with more and more money put into “goods and chattels” which bypasses the stamp duty trigger.”

Martin Bikhit, Managing Director of London estate agency Kay & Co, said: “Not only will the 7 percent stamp duty have a major effect on people purchasing property over £2 million in the longer term - but the fact that this was implemented from midnight yesterday is an extremely unfair and reckless move by the government that will cause turmoil within the property market, and the lives of those buying and selling in it now. Whole chains will be disrupted, people who have carefully planned their budgets and financing will not have the time to rethink their prospects. Unlike past announcements of this type, people have not been given sufficient warning to prepare and get all their ducks in a row. People buying in specific school catchment areas will suddenly find they can no longer afford to buy there. It will cause untold disruption to people’s lives.”

Camilla Dell, Managing Partner at leading independent London buying consultancy Black Brick Property Solutions, said: “Obviously this is a massive increase from where we were before. It’s a real hit on wealthy buyers buying properties mainly in the Southeast of the U.K. I would say that this new increase will undoubtedly make some investors think twice before buying. The 15 percent rate for companies in particular is a real hit at international buyers,  however some international buyers may now choose to purchase in their own individual names, in which case I don’t think the new 7 percent rate will stop them buying. But there is still a real tax advantage for international buyers buying in company names who save on inheritance tax (unless that is also going to change), so they may decide that paying a one of 15 percent tax is worth it in order to save on future inheritance tax. In addition, for international buyers who are not resident in the U.K., when they come to sell on their properties, they don’t pay any capital gains tax. So although these new stamp duty hikes are significant, there are still huge tax advantages for wealthy international buyers buying in companies.

Tom Hudson, Partner at country buying consultancy, Middleton Advisors, said: “The majority of our clients have been aware for some time that they may well be liable to some form of addition tax, with regard to owning country houses.  This increased rate for properties worth over £2 million will be seem by the majority of purchasers as a better option than to pay some form of annual tax.  For those who currently own houses this is a good result.”

View the original article here

Source From Property Guru

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