Brexit Sparks Overseas Spending Spree in London Property
The fall of the pound since the Brexit vote in June has created a prime opportunity for foreign investors in London’s property market.
Half of the properties in central London are already owned by foreigners, but these overseas buyers are no longer only targeting the prime central locations, as changes in stamp duty mean that they are now interested in cheaper properties.
There is now higher stamp duty on second homes, but by buying cheaper flats, this can be avoided. If an investor buys, for example, a single small flat in Mayfair for £1.5m, they have a tax bill of £138,000. However, six flats at £250,000 each, somewhere cheaper in London, would cost them the same, but with a tax bill of just £60,000.
The mayor of London has spoken out against these foreign investors buying up the affordable homes that British first-time buyers so badly need, but developers warn that they are keeping the market afloat amid Brexit uncertainty.
Unfortunately, one of the great hopes of Brexit has backfired – people hoped that it could make houses more affordable, and it has – for foreigners.
For Honk Kongers, Brexit jitters means that the dollar against the pound buys them 15% more here than a year ago, making developments like Colindale, which are supposed to be affordable first homes, is now more profitable than Kensington.
“There are pockets of London that are still heavily undersold, and there’s still value to be had.” said Neil Jensen, of Fraser and Co, Asia.
Another estate agent has reported a 1000% post-Brexit surge in foreign buyers. Ada Yau is a Chinese investor. “Brexit is not the end of the world. This country has a stable and secure property system, and it attracts a default investor to come here, like me.”