LONDON INVESTOR INTELLIGENCE
UK’ s Stamp Duty
Surcharge
More Consequential than Brexit
BY JAMES GLEW
Homes close to stations on London’ s new Crossrail route have done very well, with average values up 22 % over the past two years, according to a study from Lloyds Bank. This increase is substantially higher than the 14 % increase in surrounding areas over the same period. The study’ s findings support the investment insights I provided in the February edition of REI Magazine, where I made mention of the Crossrail effect and its positive spin off for residential properties located close to the stations along the new line. It also confirms my conviction that, as a buy-to-let investor in London, areas of infrastructure and urban development, with good rail links to the capital, may offer opportunities for quicker capital growth.
More on UK’ s stamp duty surcharge Any slowdown in the UK buy-to-let market in 2016 is largely the result of the introduction of a stamp duty surcharge on buy-to-let and second homes, rather than the Brexit vote. Since April 2016, anyone buying a UK home that is not their main residence has had to pay a 3 % stamp duty surcharge – which has effectively increased their acquisition costs. In real terms, this means that, on the purchase of a second home or buyto-let property costing, say, £ 330 000, the stamp duty that the buyer must pay on acquisition is £ 9 990 more than it was pre-April 2016.
A healthy price growth nevertheless maintained
Even with the introduction of the stamp duty surcharge, however, the annual price growth in London towards the end of 2016 stood at a healthy
8.1 %. Nine out of London’ s 33 boroughs recorded double digit growth, with Barking & Dagenham( 17 %) the strongest performer, followed by Newham( 16.3 %) and Bexley( 16.1 %). Annual price growth fell in only one borough: Hammersmith and Fulham(-2.3 %).
In some areas where price rises slowed, a positive spin off has been an increase in investment activity ‒ with buyers deciding to take advantage of the opportunity to commit to what they consider‘ acceptable’ prices in a market still short on supply. This is especially apparent in those locations where the shortage of available properties is pronounced.
Offshore investors can benefit from Brexit A positive spin off from Brexit for foreign buyers is that the devaluation of the Pound means that you can get more bang for your foreign buck than you would have before the Brexit vote. This is making UK property appear very attractive to opportunistic, overseas, buy-to-let buyers.
What does the future hold for London? With its rich history, strong fundamentals and progressive attitude, London will continue to be a leading global city. It is one of the largest buy-to-let markets in the world and so it makes sense for SA investors to look at it as a first rate, hard currency investment option.
RESOURCES
Smuts & Taylor Ltd
50 MARCH 2017 SA Real Estate Investor www. reimag. co. za