Foreign Buy-To-Let Investor Market Shrinking
At the start of October, Theresa May used the Conservative Party Conference to announce plans to increase the Stamp Duty Land Tax on foreign buyers.
The policy aims to increase the current additional tax from 1% to 3%. During the unveiling of the new tax, the Prime Minister claimed that 13% of London based homes were bought by foreign buyers; a percentage that is taking much needed housing stock from current residents.
In addition, the claim has been made that foreign buyers, looking to speculate on the UK housing market, significantly raise housing prices by over 2%; this in turn prevents UK residents from being able to afford a property.
New research, using property from Countrywide affiliated businesses, has found that Brexit concerns and an increasing hostile attitude from the Government is deterring foreign buyers from purchasing property in the UK.
Foreign landlords have decreased in the buy-to-let market from 14.4% in 2010 to 5.8% in the first 11 months of 2018.
London still has the healthiest amount of overseas based landlords with 10.5% in 2018. However, this statistic has shrunk by 15% from 2010 and 5% since 2016; highlighting that stricter rules could be dissuading foreign buyers from investing in the capital.
6.1% of South East landlords are currently overseas investors; a 10% reduction from 2010 and 3% decrease from 2016.
This trend continues throughout every region of the UK when comparing 2010 figures. The only region to have the same amount of foreign landlords as the figures from 2016 is Yorkshire and the Humber.
Aneisha Beveridge, head of research at Countrywide brand Hamptons International, said: “The proportion of homes let by an overseas based landlord has more than halved since 2010.
“Sterling’s depreciation since 2016 undoubtedly makes it cheaper for international buyers to purchase property in Great Britain.
“However, the conversion of pounds back into local currency means additional costs which cut into an overseas landlords’ monthly income. This combined with a harsher tax regime for overseas investors is dissuading some international investors from entering the rental market.
“Throughout this year rental growth has been sluggish, averaging 1.5% and only passing 2% on two occasions.
“Affordability is not just an issue for those looking to buy a home, but impacts tenants paying rent too. These affordability barriers will continue to keep a cap on rental growth in the future.”
With Brexit uncertainty overwhelming the property market at the moment and tighter tax restrictions on foreign investors, it is likely that this sector of the buy-to-let market will shrink further in the future.
What impact will this have on the conveyancing sector?