Research undertaken by market intelligence from Global Mortgages indicates that purchasers into London’s prime market accounted for 12% of the Stamp Duty Land Tax (SDLT) receipts throughout England in 2020. According to this source, approximately £2.9 billion was paid in stamp duty across England, of which £368.6 million from purchases above £3 million in London.
It seems that the Treasury’s attempt to generate movement in the property market by temporarily suspending the SDLT fees is one of the many contributing factors to the flourishing property market surrounding London real estate. Another of which is also the increase in foreign direct investment in property development both for residential and commercial sites. The strengthening of political ties between Britain and historically overseas territory, particularly Hong Kong with the government’s announcement of a new visa application, continues to generate property transactions from these prospective overseas nationals. In a similar notion as the pre-independence visa in 1997, the government’s creation of a new route for BNO residents and their dependents to attain citizenship through financial accreditation or property investment is also indicative that transactions on this basis will arise, and will continue to do so into 2022.
The implementation of a 2% surcharge on SDLT from foreign investment in the Spring has caused some speculation as to whether this has encouraged a faster pace of transaction from overseas buyers. Although, as many property investors and purchasers are aware, the SDLT is only one piece in the assortment of taxes and conveyancing procedures that are necessary for achieving freehold status. Furthermore, for those seeking to invest in the country’s wealthiest region, motivation for doing so, likely, extends far beyond the possibility of a comparably small tax-saving and is rather a reflection of other more enticing qualities; some of which may include the bestowal of elite status, the historical prestige and the prospect of belonging to one of the most globally renowned, exclusive, and wealthy communities. A representative from Enness Global Mortgages commented that “…a prime London home remains one of the must-haves on any notable international property portfolio and so this increase will be viewed as a small price to pay for the serious investor.”
Perhaps, if viewed in this respect, the momentum surrounding the activity for such a high percentage of SDLT receipts in England last year is due to ongoing confidence in London real estate. As the economic centre of the country and a focal point of British history, the uplift in market activity this past year could possibly mark this area as amongst the most secure for investment in unprecedented times. The rationale for this would be that in spite of fluctuations in the market, the hierarchy of property worth means that London will always maintain a value above that of the national average. Following the economic uncertainty of the past year, we have seen an evident increase in activity within this prime market as investors adopt a quality over quantity approach to extending their investment portfolios.