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International investors clambering for UK property amidst global uncertainty

COVID-19 cases might be steadily decreasing, though this does not mean we have overcome all of the fundamental challenges posed by this global pandemic. Market uncertainty has made it difficult for investors to plan for the future. While it looks as though we are on the path to recovery, there is nothing to suggest a second spike in infections is completely off the table.

What’s more, we are only beginning to realise the economic ramifications of the coronavirus.

It seems as though the majority of the world’s major economies will stay in a recession for at least the rest of 2020. GDP levels in advanced economies are expected to remain around 3-4% lower than their pre-pandemic projections until at least 2025, according to a Fitch Ratings report.

As such, investors are seeking ways to hedge against this forecast by gravitating towards assets which have historically been able to deliver stable returns and quick recoveries from sudden downturns. In the UK, this has translated into an incredible spike in overseas demand for UK property.

Overseas interest in UK property

While housing in the UK has long-attracted international demand, previously it had mainly been concentrated in the capital; specifically, Prime Central London (PCL) property. However, recently, estate agencies are reporting a surge in interest from Hong Kong buyers in buy-to-let properties in the North of England.

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This is not to say that COVID-19 has damped international demand for London property. To the contrary, Beauchamp Estates recently reported that they had assisted with $374 million worth of investment into PCL housing from Chinese and Hong Kong residents between December 2019 and June 2020; representing 20% of all property transactions worth above £10 million in the capital.

Additionally, estate agent Dexters revealed that PCL sales for properties worth over £2 million between mid-June and mid-August were 85% higher than during the same period a year prior. This incredible uptick in demand demonstrates how UK property is seen as a safe and secure asset in times of uncertainty across the globe. Dexters also reported that the majority of these transactions were by cash buyers in Hong Kong, Singapore, the UAE, the US, Italy and India.

Why are overseas investors clambering for UK property?

As well as UK property’s historical positive performance, there are three additional benefits for international investors at present.

Firstly, the Stamp Duty Land Tax (SDLT) holiday on the first £500,000 on all property sales across England and Northern Ireland provides substantial discounts compared to previous years. Non-UK-resident buyers can now save as much as £15,000 in SDLT through this tax holiday.

Already, the tax break is having a noticeable impact on the housing market. The first national House Price Index to be released after the introduction of the SDLT holiday revealed an annual price growth of 1.5%.

Secondly, the SDLT overseas-buyer 2% surcharge is due to be implemented from April 2021. Acting now, before the above holiday ends and this additional added cost is introduced, allows for substantial SDLT savings.

Finally, the economic and financial stability of the UK provides many an escape from market volatility they may be experiencing in their own jurisdiction. London in particular is recognised as a global financial capital and bustling cosmopolitan centre, allowing buyers easy access to both further investment opportunities and the luxury lifestyle benefits the capital city can provide.

Property in a time of uncertainty

As 2020 continues and the COVID-19 pandemic plays out, it’s likely that the level of foreign buyer interest in UK property will continue to steadily increase. Overseas investors are becoming more aware of the prime property investment opportunities across the UK.

From a recovery standpoint, this influx of foreign capital is helping to reignite the property market, encouraging buyers and sellers who initially retreated following the introduction of lockdown measures to make a steady return. Supported by the SDLT holiday, this will be vital in supporting the UK’s post-pandemic economic recovery.

BY RYAN BEMBRIDGE

Source: Property Wire

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Benham and Reeves: Foreign buyers should invest in UK property now

With the temporary changes to the stamp duty threshold in place until March 2021, and a 2% surcharge for foreign buyers set to come in from April, now is the time for overseas buyers to invest in UK property, according to Benham and Reeves.

The current stamp duty holiday means that foreign buyers are able to save £14,573 on the average London property purchase.

The April 2021 surcharge will take the average the cost of stamp duty up to £38,579.

For foreign buyers making their move now, this means an additional £24,006 saved in addition to the sum already wiped off by the stamp duty holiday.

Kensington and Chelsea offers the most significant additional saving for foreign buyers transacting at the moment; the cost of stamp duty on a current purchase has reduced from £125,243 to £110,243, a saving of £15,000.

Come April next year, this stamp duty requirement will climb to £153,165 with the additional foreign buyer surcharge, so international buyers transacting before this are saving a further £42,922.

Similarly, foreign buyers looking to buy in Westminster can save £36,699 by transacting now, while Camden (£32,621), Hammersmith and Fulham (£29,943) and Hackney (£27,773) were also found to offer some of the best savings.

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In the last year, house prices in the City of London have fallen by £60,868 on average; combined with the £30,851 stamp duty saving made by buying now, foreign buyers would be £91,720 better off on average at present.

In Brent, a £28,463 reduction in property prices coupled with a £21,287 stamp duty saving means that foreign buyers would be £49,750 better off buying now.

Richmond has also seen property prices decline by £12,875 in the last year; with the addition of a stamp duty saving of £27,670 ahead of April’s surcharge, foreign buyers would be £40,545 better off on average as a result of buying now.

Marc von Grundherr, director of Benham and Reeves, said: “The recently implemented stamp duty holiday has not only rejuvenated domestic buyer demand, but we’re also seeing foreign buyers starting to return to the capital in their numbers. In fact, the vast majority of our buyer interest coming from Asia has only been concerned with homes falling under the £500,000 threshold.

“This has been intensified due to the sour taste of a two per cent stamp duty surcharge on the horizon as the government continues to dampen what is a vital sector of the London property market.

“In any case, the stamp duty savings currently on offer have been heavily bolstered by the additional saving made in comparison to buying from April next year and this has caused an immediate uplift in buyer demand from foreign shores.

“Great news for developers who with stock currently, or due to hit the market in the coming months.

“What’s more, some boroughs have seen property prices reduce over the last year and so foreign buyers are not only able to save considerably where stamp duty is concerned, but they’re securing even better value in terms of the price of the property itself.

“London remains the pinnacle of homeownership for many foreign buyers, and while a ramped-up level of stamp duty will be hard to swallow, it certainly won’t deter buyers in London’s high-end market.

“However, with many rushing to make the most of the savings currently on offer, any negative price trends that have plagued the capital in the last 12 months are sure to be short-lived as demand starts to outweigh supply.”

By Jessica Bird

Source: Mortgage Introducer