The budget has been announced and in amongst all the spending and tax cuts, there was a significant sentence that directly affects property investment, that there would be an additional surcharge added to overseas investments in property, whether residents or otherwise.
The initial impact of a 2% surcharge
There’s already a 3% stamp duty tax on all properties valued over £125,000 for all investors. We predicted that this threshold would be raised to £500,000, but this wasn’t the case. This will only come into effect in April 2021 though, but it does suggest that overseas investors will be paying 5% stamp duty surcharge (3% standard + 2% newly introduced) so this does make investments after April 2021 slightly more expensive
Increased demand for investment opportunities
We anticipate that this will facilitate a massive surge in demand in property investment for the next 12 months before the surcharge is brought into effect. While Coronavirus has delayed some investment decisions, this is perhaps no longer a motivating factor behind delay as the longer investors wait, the closer we get to the April 2021 date and with off-plan investments starting now or having begun in the last few months then getting involved as early as possible means you beat the increase.
Property value matters more
This will harm the London property market as typically they’re higher value properties, so an increase of even 2% sees a much more significant financial outlay for stamp duty after April 2021. Therefore it will make more financial sense for property investors to look for property that will be the smallest initial outlay as to keep stamp duty tax down as much as possible while anticipating high growth areas so that their investment yields the best return in the long run.
Interest Rates reduced to 0.25%
It’s good news right now for people looking to lend from banks, with the interest rate declining so that there’s a boost to the economy. This means those looking to borrow or to get mortgages can take advantage of more favourable rates from the Bank of England. The government are looking to encourage spending and lending in the wake of Coronavirus but also to ensure that the sustainability of the economy is paramount. There was the inclination that we may see a slight dip in economic performance as a result of the outbreak, however.
In other budget information, there were positives throughout the UK where funding was promised for infrastructure, major UK cities to get more funding through development of transport links and less opportunity being held in and around London. The roads and rail will all look to receive substantial funding over the next few years, suggesting that critical areas in the North West will continue to grow and prosper.
To beat the 2% surcharge coming into effect, we advise getting in touch with us as soon as possible to make your property investment. To speak to us, call on 01942 251945 or email us at email@example.com.