Foreign buyers bulk buying London properties to boost stamp duty savings

Saleha Riaz
·3 min read
The government will introduce a 2% stamp duty surcharge for non-UK buyers from April 2021. Photo: Getty Images
The government will introduce a 2% stamp duty surcharge for non-UK buyers from April 2021. Photo: Getty Images

A growing trend of bulk buying has been noted among foreign property buyers across the UK, so that they can boost their stamp duty savings, real estate adviser Astons revealed.

Currently, foreign buyers benefit from the same stamp duty holiday reductions as domestic UK homebuyers. However, with a 2% stamp duty surcharge for foreigners due to be implemented in April 2021, those making purchases now are “essentially securing a double stamp duty saving,” the report said.

By purchasing six or more residential units in one transaction, these buyers are able to secure non-residential stamp duty rates starting at just 2% from £1500,001 to £250,000 and 5% above the £250,000 threshold.

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“By ‘bulk buying’ in the residential market, they are able to secure a far lower rate of stamp duty and with the weaker pound, investing now is making very good business sense. While the residential rush from foreign buyers will no doubt dissipate come April, we expect this higher level of investment will continue as many lay future foundations in anticipation for life after COVID-19,” managing director of Astons, Arthur Sarkisian, said.

Astons recently oversaw a six-unit purchase in London from a Hong Kong-based buyer for roughly £7m ($9.3m). The purchase of six residential properties was an investment and to act as accommodation for staff.

If the buyer had opted for the traditional residential path to purchase, they would have paid £946,991 in stamp duty at present, a considerable saving of £338,914 compared with purchasing post-April 2021 with the additional 2% surcharge.

However, purchasing the units as a non-residential investment resulted in a stamp duty tax bill of just £338,914. This was £608,077 less than the current residential rate and £762,842 lower than the residential rate with the incoming additional 2%.

“Due to regional instabilities and the ability to apply for British citizenship from January, the buyer opted to invest in the London market due to the liquidity and growth the capital presents,” Astons explained.

An earlier report by Aston showed that people in Hong Kong bought £305.6m worth of London homes in the first nine months of 2020. A large reason for this is that from 31 January 2021, those in Hong Kong who have a ‘British national (overseas)’ passport and their immediate family members can apply for a special class of visa that puts them on the path to citizenship.

Meanwhile, a report from September showed that seven in 10 Brits think the UK government should extend the stamp duty holiday, as they may only have until the end of the month to find a property if they want to complete their purchase in time.

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