Wealthy property investors to pay more as UK raises stamp duty
Prospective Nigeria property buyers, especially the wealthy seeking to acquire new homes in the United Kingdom will have to pay more as the authorities have concluded an increase of two per cent stamp duty surcharge on new acquisitions from next year.
The tax hike for overseas buyers, which industry experts have described as a ‘bloody nose’ for the property market, was generally seen as a disincentive to investment in that country which is only emerging from years of stagnating prices and low activity.
UK is one of the world-leading epicentres that offers real estate investment opportunities to foreigners especially Nigerians, Chinese and Russians.
The two per cent stamp duty surcharge for non-resident homebuyers was announced by Chancellor Rishi Sunak in his Budget and was trailed in the Conservative party manifesto, which had promised to impose a three per cent surcharge on overseas buyers.
Essentially, non-resident buyers have so far been subject to the same stamp duty rules as buyers living in the UK, ranging from zero per cent for properties costing less than £125,000 up to 12 per cent for homes over £1.5 million. Also first-time buyers pay no stamp duty on a home costing £300,000 or less. If they spend £300,000 to £500,000, they pay no duty on the first £300,000 and five per cent on the rest. In the case of first homes costing more than this, usual rules apply.
However, The Guardian learnt that from April 1 next year all non-UK residents buying residential property in England and Northern Ireland will have to pay a two per cent surcharge on stamp duty already chargeable on their purchase, yet buyers who become UK residents after their purchase may become eligible for a refund of the surcharge.
The Guardian gathered that treasury forecasts predict a surge in buyers ahead of the April 2021 deadline with stamp duty receipts expected to increase by £250 million in the coming tax year before dropping by £355 million from 2021 to 2022. They are then expected to pick up again in 2022-23, before holding at £105 million per year.
The Chancellor had said that the money raised from this tax would be used to fund 6,000 new homes for the homeless people. The measure is aimed at controlling house price inflation and supporting UK residents to get on the housing ladder by deterring non-UK residents from buying up UK housing stock as an investment. Revenue raised from the surcharge is to be applied to fund policies to help reduce rough sleeping.”
In fact, the new surcharge for overseas buyers is expected to affect about 70,000 of the UK’s total 1.2 million annual property transactions, with most of the impact likely to be in London, the UK’s most international market.
President, Nigeria’s Chapter of the International Real Estate Federation, (FIABCI), Adeniji Adele told The Guardian that stamp duty has been a significant revenue raiser whether high or low. He said it’s the multiplier effect that would bring back better return into that economy. Adele said the targeted non-residents buyers who would now think twice before buying property in that country would mostly feel the impacts of the policy.
He said: “Presently in UK and other parts of the world there is what capital gain tax which whenever you buy properties, there is an element of tax to be paid either from the point of the seller or the buyer. When you also doing the documentations of the papers, there is another fee to be paid but those fees were regulated in UK unlike that of Nigeria”
A fellow of the Nigerian Institute of Estate Surveyors and Valuers (NIESV), Chief Kola Akomolede stressed that it’s a way of increasing burden on whoever is buying property and an increase in price.
Akomolede said when such policy is implemented, the demand for UK property by non-residents buyers might slow down initially obeying the law of demand and supply.
He also stressed that it will discourage those who would want to buy for investment who will now compare investing in UK with some other countries in order to maximize cost.
“For example if you are buying a house that worth about £500,000 pounds and an addition of two percent on it, that is a lot of money and that may discourage some people from buying. For those who must buy, they will need more money, delay property purchase until they get additional money being required.
The immediate past chairman, NIESV, Lagos Branch, Olurogba Orimalade said if there is anything learnt with the coronavirus, it’s the fact that the world is a global village adding that everywhere is connected.
He said, “As some nations are putting taxes to certain assets being sold, others like United Arab Emirate are opening their doors to property buyers from all other the world to come and stay as well as buy properties. Foreign buyers were restricted before.
“UK is almost our second home and most Nigerians have real estate properties there and lots of Nigerians try to spend their vacations in the UK and send their children to school there. If we have statistics, it will show that Nigeria has the largest number of its people schooling there”.
“A lot of people own property in the UK not just for people to know that they have property there, but for investing purposes to get good rent. Some of them also own properties there because of future plans. So it will definitely pose a bit of extra strains”.
“Nigerian property market can’t be taking out for isolation from the economic reality in the country. We are at a stage now where the naira might be devalued and with the price of crude oil crashing, and in view of that the foreign currencies against the naira will keep appreciating and that indirectly will make a lot of the assets in Nigeria cheaper”.
He noted that such policy might not however encourage domestic property buying but poses a good opportunity for speculators that have foreign exchange to be able to get into the Nigerian property market.
No comments yet