PROPTECH-X ‘Proptech & Property News’: Stamp duty for overseas buyers | 62% of landlords saw increased demand in last 12-months

Andrew Stanton’s daily proptech & property news in association with Estate Agent Networking

NAPB: Increasing stamp duty for overseas buyers could “level the playing field”

PRESS RELEASE: The surcharge for stamp duty land tax (SDLT) which non UK residents must pay to buy a home in England and Ireland should be doubled, according to a leading property association. 

Under current rules, foreign buyers must pay a 2% surcharge and up to an additional 5% if the property isn’t going to their main home.

But the National  Association of Property Buyers believe Ministers should hike the surcharge to 4% to help “level up” the market. 

Their suggestion comes as latest figures show almost 250,000 homes in the UK are now owned by overseas nationals. 

NAPB spokesman Jonathan Rolande said: “Right now it is not a level playing field – foreign buyers must pay a 2% surcharge of Stamp Duty and up to an additional 5% if the property is not to be a main home. 

“However, to many wealthy foreign buyers based in high income and low tax locations, this does not, in reality, appear to serve as much of a disincentive.

“In fact, the brief but significant collapse in sterling after the mini-Budget was a huge discount for foreign buyers. 

“If buying at £500,000 in January ’22 versus January ’23, a US, Hong Kong or Saudi based buyer would have saved £50,000 making the minor decreases in UK property prices irrelevant.

“With the UK property supply crisis really acute this makes the matter of coming up with ways of helping UK citizens all the more urgent.”

Explaining the reasoning behind the SDLT rise, Mr Rolande continued: “My feeling is that there is scope to increase the SDLT from 2% to say 4% – this would potentially discourage buyers and level the playing field further. Even if it did not do that it would bring in additional funds for the Treasury which, either way, is not a bad thing. It could impact prices at the very top end of the market too in London especially and many would see that as a price worth paying.”

Underlining the need to strike a balanced approach he added: “We obviously need to handle this matter carefully. Preventing foreign purchasers, or even forcing them to sell property already owned would send a shockwave through the economy and severely damage the UK market. It should also be considered whether that would be fair as 400,000 UK citizens own property abroad.

“But foreign ownership is reducing available stock in the sales and rental sector and pushing up prices. And, if other inequalities in housing are not addressed, this will continue to be a pressing issue for many. Right now we need to think bigger in terms of our ideas around housing and how to generate supply for those who still want to enter the market.”

According to the latest available data overseas nationals own almost 250,000 homes across England and Wales. In the current market, that is £90.7bn worth of property, suggesting that the UK remains a safe haven for foreign homeowners.

On a regional basis, London is home to the highest value of foreign owned homes, with the 85,451 properties belonging to overseas homeowners equating to a total value of £45.3bn.

Westminster ranks top, with foreign owned homes commanding a current market value of £11.8bn, while in Kensington and Chelsea this total sits at £10.7bn.

Tower Hamlets ranks third, although some way off the top two, with overseas homeowners sitting on £3.7bn worth of property, followed by Wandsworth (£3.3bn) and Camden (£3.2bn).

Outside of the capital, Buckinghamshire is home to the highest value of foreign owned homes at £31.1bn, while Tandridge (£1.6bn), Liverpool (£1.4bn), Salford (£1.1bn) and Manchester (£1.1bn) also make the top 20 list.

FINBRI: 62% of Landlords Saw Increased Demand in the Last 12 Months

PRESS RELEASE: With many first-time buyers delaying their entry into the property market until market stability returns, demand for rental properties has soared throughout the mortgage and affordability crisis.

Following a chaotic end to the year for the UK property market, 75.92% of renters don’t think they’ll be able to own a property in 2023. Demand continues to outpace supply by a wide margin, with 62.24% of landlords experiencing increased demand for their rental properties in the last 12 months, says a new 2023 landlord report

As Stephen Clark, from Finbri, a specialist property finance broker, says, “Due to the continued instability of the mortgage market and the UK economy, rental property demand is rising. Due to prolonged uncertainty, first-time buyers are postponing entry into the market.” 

The rental market is also experiencing a tumultuous time. Following a survey of over 1,000 UK renters, it was discovered that when securing a rental property, 48.45% had experienced increased rental prices, high deposits, and a lack of rental properties available in their desired location. The situation is expected to become more precarious for renters as demand increases, so too is the UK base rate, and it’s expected to reach a high of 4.5% in 2023. To cover the additional expenses, 52.75% of landlords stated they intend to raise rents.

How is the lack of rental stock affecting renters? 

The UK is experiencing a shortage of rental stock, with landlords unable to meet the increased demand, leaving renters struggling to find a suitable property. 

After surveying over 1,000 UK renters, it was discovered that renters have experienced the following:

  • 48.45% experienced increased rental prices
  • 37.06% high deposits
  • 35.86% experienced a lack of properties available in the desired location
  • 18.08% experienced competition over the asking price
  • 11.49% were unable to secure a viewing

The situation is particularly dire in London and other cities, where rents have risen significantly due to high levels of competition for rental properties. Finbri’s survey found that of those who lived in London, 54.7% experienced increased rental prices when sourcing a rental property. Additionally, 73.48% of renters in London are Concerned (30.39%) or Extremely concerned (43.09%) about rent increases.

Are rental prices expected to increase in 2023? 

As a result of increasing demand with a lack of available rental stock, the average rent increase over the past 12 months in 2022 was 12.1% and typically accounts for 35% of a renter’s income, according to Zoopla

With the UK base rate expected to increase further and reach a high of 4.5% in mid-2023, and as a result the likelihood of increased mortgage payments, 52.75% of landlords will raise rents to cover additional expenses.

Are investors looking to capitalise on increased rental demand?

What factors must investors take into account if they want to profit from the rising demand for rental properties?

  • Capital appreciation: With the expectation that property values will fall by at least 5% in 2023 and the rising number of foreclosures and complex mortgage applications for many homeowners, an increase in the number of properties on the market will offer excellent opportunities for investors to diversify their property holdings.
  • Affordability crisis: As household budgets become more constrained and costs for food, fuel, and housing rise, fewer individuals can afford to buy homes. The state of the UK economy is making it challenging to save money and adding to the pressure on household budgets. Despite 83.82% of renters wanting to own property, 75.92% don’t think they’ll own in 2023, with 53.82% stating they are unable to save enough for a deposit – most likely due to the increased costs.

Despite the number of opportunities presented to investors, they may find it challenging to obtain traditional financing due to tighter lending criteria, forcing them instead to seek alternative finance solutions such as bridging or development finance. 

  • Base rate: In December, the Bank of England announced a 0.5% increase in its base rate, from 3% to 3.5%. With the base rate expected to increase to 4.5% in 2023, 44.66% of landlords expect to sell investment property/properties, and 45.35% to consider alternative investments. 
  • Potential recession: A potential recession could cause a significant reduction in the number of people investing in property, both as a source of income and as an investment. This could lead to reduced demand for rental properties, placing pressure on landlords’ cash flows and reducing the long-term value of their investments.
  • Shortage of investment properties: Despite growing opportunities to invest in rental property, 53.85% of investors stated they had trouble sourcing investment properties.

Final thoughts

Despite the number of challenges faced by investors, 45% are still looking to invest in 2023 according to Finbri’s survey, rental prices are expected to continue rising, with an increase of 4.2% in the private rental market, and investors need to consider the long-term implications of their investments by factoring in potential changes in the UK economy, tighter lending criteria and a shortage of available investment properties. 

Proptech and Property News in association with Estate Agent Networking.

Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.

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