Foreign buyers are bulk buying London real estate to boost stamp duty savings
International real estate experts on residency and citizenship through investment, Astons, has revealed the growing trend of bulk buying amongst foreign property buyers across the UK in order to secure an even bigger stamp duty saving than the one currently on offer via the stamp duty holiday.
Currently, foreign buyers benefit from the same stamp duty holiday reductions as domestic UK homebuyers which has helped bolster market activity from international shores. However, with a 2% surcharge for foreign buyers also due to be implemented in April of next year, foreign buyers transacting now are essentially securing a double stamp duty saving.
But with a weak pound and strong signs of returning market health, many foreign buyers are looking beyond their own personal property requirements and bulk buying UK real estate with an eye on the future.
By purchasing six or more residential units in one transaction, these buyers are able to secure non-residential stamp duty rates starting at just two per cent from £1500,001 to £250,000 and 5% above the £250,000 threshold.
One such example Astons recently oversaw was a six-unit purchase in London from a Hong Kong based buyer with a sold price of £6.988m. 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.
The purchase of six residential properties was an investment and to act as accommodation for his staff.
Had the buyer opted for the traditional residential path to purchase he would have paid £946,991 in stamp duty at present, a considerable saving of £338,914 compared to purchasing post-April 2021 with the additional 2% surcharge.
However, purchasing these six units as a non-residential investment resulted in a stamp duty tax bill of just £338,914, £608,077 less than the current residential rate and £762,842 lower than the residential rate with the incoming additional 2%.
Managing director of Astons, Arthur Sarkisian, commented: “A whole host of global influences are spurring foreign interest in the UK property market at present. While the residential stamp duty holiday has helped boost this interest, we’re now seeing many invest above and beyond a family home to lay far stronger foundations for their personal and professional future in the UK.
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.”
|Astons transaction example||Stamp Duty (£)|
|Purchase price for six units||£6,988,275|
|Residential Stamp Duty for Non-UK resident before April 2021 (With Stamp Duty Holiday)||£946,991|
|Residential Stamp Duty for Non-UK resident after April 2021||£1,101,756|
|SDLT commercial property||£338,914|