Real Estate Investor Magazine South Africa February/March 2019 | Page 51
OFFSHORE
What would UK stamp duty changes
mean for overseas investors
BY JOANNA DAVIS
T
owards the end of 2018, there were concerns that the
government would announce a 3% stamp duty levy on
UK property purchases for overseas buyers. When the
Autumn budget arrived, Phillip Hammond instead announced
that the UK Government would be holding a consultation in
January 2019 on a Stamp Duty Land Tax (SDLT) surcharge
of just 1% for non-residents buying residential property in En-
gland and Northern Ireland.
In the event that this would be enforced, it could mean a
step-change in where global investors look to make their next
investment. For serial investors, portfolio growers and overseas
investors with long-term UK interests, watching the market
will be vital.
What would the UK SDLT changes mean for
overseas investors?
All investors know that markets rise and fall but time and
again, the property market has shown proven growth over
the long-term. The UK property market is no different and
while the 2009 crash saw prices drop, the average property has
increased in value to well above original figures in the years
since, with prices 67% higher than they were fifteen years ago.1
Short-term investors may have to accept a slightly lower
initial return from off-plan investments but still earn good
returns from a 20% capital growth, notwithstanding higher
yields from key locations.
Mid-term and long-term investors aiming for maximum
returns with capital growth and rental yields would be looking
to avoid any additional SDLT hikes in the upper end of markets
such as London. Lower entry points such as Birmingham, the
Commuter Belt and emerging markets like Oxfordshire would
offer better value in the long run, with lower property values
carrying less stamp duty but offering higher yields and the
opportunity for a more diverse, robust portfolio.
Investors around the world, regardless of strategy, could
also find themselves in an increasingly competitive market.
These more affordable destinations will inevitably experience
an increased demand for the highest quality developments,
demand that wouldn’t necessarily exist before any SDLT rise.
As these areas become more squeezed, it’ll be important
for investors to identify key infrastructure investments like
HS2, Crossrail and the Heathrow expansion as well as local
and regional strategies that signpost future tenant demand in
up-and-coming areas.
Assuming the January consultation does result in a SDLT
increase, the big winners will be those that retain a strategy
based around passive income. Whilst the additional initial
investment may be a consideration, the forecasted growth
of the UK property market will continue to be attractive for
investors. Areas such as Slough in the London Commuter
Belt are still forecasting 35% growth2 over the next two years
while regional cores such as Birmingham and Manchester are
maintaining excellent rental yields with highs of 10%.
SOURCE www.sevencapital.com
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SA Real Estate Investor Magazine FEBRUARY/MARCH 2019
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