When the government announced a consultation on a Stamp Duty Land Tax (SDLT) surcharge for non-resident buyers in early 2019, the market began to identify what this could mean for overseas investors.
In the event that the surcharge does go forward, global investors looking to the UK for their next investment opportunity will need to watch the market closely, ensuring they get the best value for their money. More than likely, where people invest will change, moving away from the traditional high-end London market to more affordable regions with lower entry points and higher yields.
Birmingham, the Commuter Belt and emerging markets such as Oxfordshire will offer better value in the long run, with lower property values carrying less stamp duty but offering higher yields and the opportunity to create a much more diverse portfolio.
For mid to long-term investors who have a clear goal of capital growth and rental yields, the 1% surcharge could increase the initial investment but not have a huge effect over the long-term. Property suits the long game and ensuring a steady stream of rental income would mitigate the initial increased cost, delivering higher yields as time goes on.
The surcharge could also play a part in creating a more competitive market. As these more affordable locations become popular, demand for quality developments in these destinations may rise, meaning overseas investors would need to become more shrewd in identifying up-and-coming areas. Infrastructure projects like HS2 and Crossrail, as well as local and regional strategies, would indicate tenant demand and act as key signposts for overseas investors on where ideal investment opportunities will be.
All investors know that markets rise and fall, yet property remains one of the least volatile investments. While prices may drop, the UK market has shown remarkable resilience. Since the 2009 crash, UK property prices have recovered to the point where the average purchase price is now higher than it was pre-2009, growing an impressive 4.5% in the last 12 months alone.
Assuming the January consultation does result in a SDLT increase, the big wins for investors will still be in long-term strategies based on passive income. Although the initial investment is inevitably a consideration, the continued growth of the UK property market will ensure it’s an attractive prospect for investors.
For UK hotspot hunters, property in areas around the Commuter Belt, such as Slough, is still forecasting growth of 35%and regional cores continue to impress. Birmingham and Manchester are using the momentum of incredible inward investment to attract top tenants and top businesses. Birmingham remains a top location for year-on-year growth, increasing property prices by 6.3% on average in the last year.
For overseas investors, this means now could be the ideal time to take advantage of any potential investment opportunities, before the potential increase in 2019. For those waiting to see the outcome of the consultation, maintaining a long-term strategy will help mitigate any potential increases in future.
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