Flurries of activity as UK buyers try to avoid possible tax implications of forthcoming Budget

Owners of prime property in central London are bringing properties to the market now before policies are introduced to reduce the UK government’s deficit, according to leading buying agents Prime Purchase.
 
In expectation of the effects of 50% tax rates, a bonus levy and a continuing threat to the status of non-doms, property owners who can move are taking the opportunity to explore the market. At the same time owners of properties over £1 million that will be affected by a new 5% stamp duty tax are now bringing properties to the market, say Prime Purchase.
 
Investment buyers, particularly from South East Asia and Hong Kong and those who are seeing stronger rental growth with yields predicted to continue rising by the end of the year and who sense that exchange rates between the dollar and sterling will remain low are all active, the company says.
 
‘Buyers from South East Asia have, in the past, been reluctant to instruct buying agents and have instead used their own agency contacts and networks. However, there is a now a tangible sea change,’ said Guy Meacock of Prime Purchase in London.
 
‘As with Russians, who until the last few years did not appreciate the benefit of paying someone upfront to find them a property, Chinese buyers are now starting to see the value that a buying agent can add in terms of providing market insight and intelligence,’ he added.
 
According to Jo Eccles, director of independent London property search company, Sourcing Property, the government’s proposal to increase CGT from the current flat rate of 18% to 40 or 50% is likely to encourage more supply of property in the short term, especially in the mainstream market.
 
‘We’ve recently seen a gradual increase in the supply of new property coming onto the market. There are approximately one million buy to let properties in the UK and approximately 250,000 families who own second homes, so an increase in CGT is likely to have a widespread effect,’ she explained.
 
‘We may see a period of panic selling over the next few weeks as people seek to quickly dispose of second homes and investment property before the Budget is announced,’ she added.
 
Any increase in supply is a welcome change for buyers who have been facing high competition, a climate of sealed bids and demanding vendors, according to Eccles, and it is likely to suppress price growth over the short term as it has largely been fuelled over the past 12 months by a lack of supply, holding prices firm at near peak values.
 
‘Over the long term, it remains to be seen whether the proposed change in CGT, assuming it is introduced, will have a wider impact on the UK property market as a whole. There are concerns that it may reduce the appeal of buying UK property for investment purposes and we may see would be buyers turning to alternative assets instead. Taxation is especially crucial in the prime London market as purchases at this level are typically funded by cash, rather than borrowing,’ she said.
 
‘On a positive note for overseas buyers, sterling remains low which will continue to make UK property look cheaper to such buyers, who have played an active role in the London property market. This has been evident in our own client mix over the past 12 months, with a large proportion of the clients we’ve represented having been overseas buyers based in Australia, Dubai and across Europe,’ she added.