By Gavin Gibbon
UK Chancellor Rishi Sunak has added a two percent surcharge onto the tax from April 2021
Gulf investors could take advantage of the stamp duty stay of execution delivered by UK Chancellor Rishi Sunak in his maiden budget speech on Wednesday.
As expected, Sunak outlined plans to increase the stamp duty tax, although by two percent, as opposed to the predicted three percent surcharge on the purchase of homes by non-UK tax residents.
The additional levy will come into force in April 2021, although stamp duty will remain as it is for UK buyers.
Sean Randall, partner at leading tax and advisory firm, Blick Rothenberg, said: “Non-resident buyers will breathe a sigh of relief that the stamp duty surcharge will not be introduced this year and will be one percent lower than expected.
“However, it will be introduced and appears to be driven by political imperative rather than economic theory. For example, non-residents are a major market for off-plan sales which fund new schemes, such as Battersea Power Station in London, which include affordable housing.
“Hitting that market and making it less appealing to international investors could reduce supply, increase demand and drive-up house prices in some parts of the country – the very opposite of the intended effect.”
According to property advisor CBRE Middle East, investment into the UK from the Middle East in 2019 was down 60 percent on 2018, falling from £3.7bn to £1.5bn.
Randall feared the latest stamp duty move would further impact investor appetite.
“This will be seen by many as yet another grab on the prime central London property market and those affected will be entitled to ask themselves when it will end,” he said.
Following the general election in the UK in December and the subsequent clarity as a result of Britain finally leaving the European Union at the end of January, it was hoped that the country could claw back momentum from the long-running Brexit saga.
However, the onset of the global pandemic coronavirus, and the increase in stamp duty tax has, for overseas investors at least, furthered levels of volatility in the market, according to Ryan Tholet, head of Investec Private Bank.
He said: “Nothing is a given with the UK economy at the moment, but we expect to see foreign buyers moving forward with property purchases before the additional 2 percent stamp duty comes into effect in April 2021.
“This is likely to cause significant shifts in the property market as decisions have a domino effect on other buyers, sellers and brokers, both foreign and UK-based. The decision to leave stamp duty as it is for UK buyers, alongside other news events, means the market is less predictable than ever.”