Wed, 03/11/2020 – 15:49
Overseas buyers will pay an extra 2% stamp duty when buying property in the UK, the Chancellor Rishi Sunak announced in today’s Budget.
The surcharge on non-UK residents purchasing residential property in England and Northern Ireland will apply from 1 April 2021 and is to help first-time buyers and home movers who are resident in the UK to get on to or move up the property ladder.
The move was announced alongside a raft of housing infrastructure measures in the Budget.
The money raised from the surcharge will be used to help address rough sleeping. The Chancellor pledged £643million for accommodation and support services to help people off the streets and start rebuilding their lives. Money raised from the surcharge will help fund these policies.
However, the Budget did not go further to reconfigure stamp duty, which many commentators had been expecting as a move to get the sluggish housing market moving.
The stamp duty surcharge has been welcomed by property professionals, though one that probably will not deter foreign investors.
James Greenwood of Stacks Property Search says: “We’re very pleased he hasn’t messed around with stamp duty; what UK buyers and sellers need is certainty.
“The 2% on non-resident buyers is generally digestible; it’s likely to impact London but look at the land and property taxes that non-residents pay in other countries, and UK tax is relatively benign. We don’t believe it will have a detrimental effect on the market generally.”
The stamp duty announcement comes in the wake of the Bank of England interest rate cut from 0.75% to 0.25% earlier today, which will have a more immediate impact on mortgage borrowers on standard variable rates.
This will help ease the burden on homeowners affected by the coronavirus, together with measures some banks – RBS and Lloyds, for instance – are introducing to allow a ‘mortgage holiday’ whereby people affected by the coronavirus may be able to defer mortgage and loan repayments.
Tomer Aboody, director of property lender MT Finance, explains: “On the one hand, this surprise rate cut is a real positive for borrowers on variable-rate mortgages as it will ease any financial burden caused by the coronavirus. But on the other hand, it could be seen to delay the economic plan of the government going forward.
“For now, business will welcome this move and the decisive action which has been taken with regard to relaxing rules on the amount of capital banks have to hold against loans to UK borrowers. We are eager to see what other stimulus for the economy will be announced in the Budget later today.”
Rob Griffiths, director at the Mortgage Market Alliance, agrees: “The Bank clearly wants to stimulate the flow of lending out to consumers and businesses and for those seeking a new mortgage or looking to refinance, this is now an opportune time to do so.
“While many lenders’ cost of funds and pricing will not be directly linked to Bank Base Rate, this is still likely to filter through to mortgage rates at some level, which means what was an already highly competitive market has just got even more so.”