Budget: Government confirms 1% stamp duty hike for overseas buyers

The move was first announced by Theresa May earlier this month and the stamp duty tax was expected to be between 1% and 3%.

Once the changes come into force, overseas buyers 1% extra on top of the existing stamp duty surcharge on second homes and buy-to-let purchases, with the government planning to spend the extra levy on tackling homelessness.

However the surcharge has faced criticism from some in the property industry.

Guy Bradshaw, director of Central London sales and lettings at UK Sotheby’s International Realty, commented: “Whilst we are still opposed to the notion, we are pleased to see the government climb down from their original 3% stamp duty levy on international buyers to 1%. We have a number of international clients who are anxiously waiting to hear more news on this tax, which we believe will do nothing to increase our attractiveness abroad or aid transactions locally.

“It is absolutely crucial that an extensive and collaborative consultation process takes place in January where we hope the government continues to listen to the genuinely detrimental impact this could have on an already fragile London market. Yes, 1% is better than a 3% additional cost, but the Chancellor seems to have forgotten that these foreign buyers are already paying a 3% surcharge as many of these purchases will be a second residence. The top end of the market is already paying a chunky 15% on stamp duty, the balance here is too delicate to add any more burdens to buyers, even if this is just 1%.

“Post-Brexit Britain should be open to the world and a foreign buyer tax sends exactly the opposite message. Penalising foreign investment in the UK at a time where we should be looking to strengthen our relationships outside of the EU is risky, to say the least. With Google and Apple set to host over 9,000 employees between them at their new London headquarters, these punitive costs could deter further investment. After Brexit there will be a greater demand for skilled workers and we should be looking to entice the best talent not repel it!

“Overseas students are worth nearly £26bn to the UK economy and this additional tax may have a negative impact on new applications. A substantial amount of our new homes sales to foreign buyers are driven by the UK’s world renowned education system. These off plan sales to the international investor community are the lifeblood of the UK’s new development cycle, there is a lack of understanding from the Government of the vital role this plays in the delivery of new homes.

“We expect a flurry of foreign investment ahead of the January consultation as international buyers will obviously try to agree deals ahead of a given deadline.”

Charlie Wells, managing director of buying agency Prime Purchase, added: "Before the Budget, we all feared the government would have yet another go at 'top end' of the property market’, which it perceives to be dominated by foreign buyers. The 3% additional surcharge on foreign buyers which had been mooted by Theresa May was a pure headline grabber, and has now been reduced to a proposed 1% with a consultation being published in January.

"On the one hand, the government claims to champion social mobility and diversity but on the other, it is saying that if you are foreign you are not welcome. There is no logic to it. If this government thinks that penalising the people at the top, particularly foreigners, will revitalise the economy and get things going, then it is very wrong.

"It is hard enough trying to sell a property in this market and any community which has had the fortunate experience of a foreign or UK-based buyer purchasing a large house in their area will have benefited from the spin-off prosperity this brings countless people. Whether it be tradesmen at all levels, tech providers, gardeners, or plenty of other professionals who all earn wages, salaries and fees from said buyers - it helps create activity in other areas of the market. It truly is a top-down fuelling of the property market at a whole.

"It’s time to stop trying to tinker with the property market. The government should put its arm around the industry and realise it’s one of the cornerstones that makes the UK a place where many people want to live, wherever they originally come from."