The gap between house buying taxes for investors in London and rival European cities will drastically widen owing to changes announced in the Budget, new research shows.
The government will introduce a 2% stamp duty surcharge on non-UK residents purchasing residential property in England and Northern Ireland from April 2021.
The stamp duty charge to buy a £1 million home in London currently stands at £43,750 for owner occupiers, while UK and overseas investors both currently pay £73,750, according to property agent JLL.
From next year overseas buyers will need to pay £93,750 for the same purchase, nearly double the amount of tax they would incur to buy a similar priced home in major rival EU cities.
The transaction taxes in Paris and Frankfurt for a £1 million property are £58,000 and £50,000 respectively.
JLL’s head of UK living research, Nick Whitten said: “Despite the Brexit promise of an open trading environment, the additional stamp duty charge for overseas buyers will put London at a disadvantage compared with other major cities in the EU.”
Figures from Deloitte show the total stamp duty tax paid by an international buyer on the average value of a London residential property, £483,922, would increase from £28,713 to £38,391 once the new surcharge comes in.
However, the shake-up was not as bad as the industry had feared, with the government originally planning a 3% hike. That prompted a number of buyers to rush to get deals over the line ahead of the Budget.
Agent Chestertons said it had a hurried sale on a £5.5 million Knightsbridge property take place at 10pm on the day before the Budget.
Luxury London housebuilder Amazon Property sold six flats at its development The Park Crescent, which overlooks Regent’s Park, between the general election and the Budget. During the same 12 weeks a year earlier three homes sold there.
Chris Lanitis, director at Amazon Property, said: “Between the December 2019 Election and the Budget a 12-week buying opportunity window opened up for purchasers and we had £42.2 million worth of apartment sales agreed before the anticipated stamp duty changes."
