A stamp duty surcharge for non-UK residents is set to come into force next year – and could spark a scramble among overseas investors to buy properties before it kicks in.
From April 1 2021, the Government will introduce a 2% stamp duty surcharge for non-UK residents purchasing homes in England and Northern Ireland.
Budget documents said the move will help to control house price inflation and to support UK residents to get on to and move up the housing ladder.
The money raised from the surcharge will be used to help tackle rough sleeping.
But some experts suggested there could be some increased activity among non-UK residents looking to snap up homes before the new rules come into force.
London, in particular, tends to attract wealthy property investors from overseas.
Richard Donnell, director of research and insight at Zoopla, said: “The additional 2% stamp duty surcharge for non-UK resident buyers represents the latest in a long series of tax reforms, and may have a short-term impact on demand in higher-value markets once it is introduced.
“For those who are looking at a longer-term hold, the additional up-front purchase cost will diminish in significance over time.
“In the interim, however, there will likely be some increased activity among non-UK residents looking to purchase before the new rules come into force.”
Mr Donnell said dollar-denominated buyers may find that the additional stamp duty cost is partly offset by currency movements in any case, with an effective discount of more than 20% for those buying UK property now compared with the summer of 2014 purely due to movements in the pound.
Mark Hayward, chief executive, NAEA (National Association of Estate Agents) Propertymark, said the stamp duty surcharge would allow those in the UK to have a better chance at purchasing a home.
He continued: “However, overseas buyers tend to purchase properties in prime central London which are completely unaffordable to most home buyers anyway.
“Therefore, this move will not help those that need it most. Ultimately, by energising surcharges, it is likely that purchasers will factor this additional cost into any offers they make on a property so prices may be pushed down in areas where overseas buyers are purchasing.”
Rachael Griffin, a tax and financial planning expert at Quilter, said: “This represents a crowd-pleasing policy which will win over people worried that foreign house buyers are hoovering up UK property as an investment, only to leave it empty, which further exacerbates the housing crisis gripping the nation.
“While this surcharge introduction is welcomed, increasing the UK’s housing stock will have a more important impact for domestic buyers.”
But Tom Moran, a partner at law firm Charles Russell Speechlys, said: “This imposed tax burden pushes the UK out of kilter with other European countries and will adversely impact London as a leading international city.”
The Budget documents also said the Government will explore how to improve the guidance available for self-employed people applying for a mortgage.
The Government has committed to creating at least one million new homes in England by the end of this Parliament and an average of 300,000 homes a year by the mid-2020s.
It will also look at long-term reforms to the planning system.