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Foreign buyers are bulk buying London real estate to boost savings

28th November 2020 | by The Luxury Report Editor

A growing trend amongst foreign investors has led to bulk buying of property across the UK in a bid to take advantage of large savings on stamp duty.

Earlier this year, in wake of the Covid 19 pandemic Chancellor of the Exchequer, Rishi Sunak announced that Stamp Duty Land Tax (SDLT) will be cut to zero per cent for all properties £500,000 and under, until 31 March 2021.

Property website Rightmove has recorded a strong increase in demand and asking prices, in the months following the announcement. The measure is estimated to bring an average £4,500 in SDLT savings however, international real estate experts, Astons has found that some overseas buyers are saving over £300,000 by bulk buying property.

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.

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 two per cent 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 five per cent 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 over £945,000 in stamp duty at present, a considerable saving of just under £339,000 compared to purchasing post-April 2021 with the additional two per cent surcharge.

However, purchasing these six units as a non-residential investment resulted in a SDLT bill of just £338,914. This figure is £608,000 less than the current residential rate and £762,000 lower than the residential rate with the incoming additional two per cent.

“By ‘bulk buying’ in the residential market, foreign investors are able to secure a far lower rate of stamp duty and with the weaker pound, investing now is making very good business sense.” explained Managing Director, Arthur Sarkisian.

“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.”

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