London Luxury Homes Face New Hit as U.K. Plans Foreign Buyer Tax

By Nishant Kumar / Bloomberg | October 2, 2018 2:30 PM SGT
Photographer: Chris J. Ratcliffe/Bloomberg
Britain’s high-end and luxury homebuilders face a squeeze as Prime Minister Theresa May prepares to impose higher taxes on foreigners looking to buy properties in the U.K.
Overseas buyers account for roughly half of all residential transactions in central London, according to Faisal Durrani, head of research at property consultants Cluttons LLP. Berkeley Group Holdings Plc, the homebuilder with the most exposure to the U.K. capital, fell the most among its peers in London trading on Monday.
U.K. developers are already grappling with sluggish demand amid the nation’s messy divorce from Europe, a cooling property market and prospects of higher interest rates. The capital’s stock of unsold homes under construction is at a record, and shares of homebuilders such as Crest Nicholson Holdings Plc and Berkeley have slumped this year.
“Further taxes on international buyers sends out a conflicting message about post-Brexit Britain being ‘open’ to the world,” Durrani said. “We will have to revisit our residential forecasts with a view to making further downward revisions, should the international residential surcharge be confirmed."Unveiling its policy plans as the Conservative Party conference began on Sunday, the government said it will begin consultations to increase the stamp duty on individuals and companies not paying tax in the U.K. Ministers are considering a rate ranging from 1 percent to 3 percent, according to the Sunday Telegraph newspaper.
“We are going to consult on the figure but around 1 percent, we are going to consult to see if that’s the right figure,” Brandon Lewis, Conservative Party chairman, said Sunday on Sky News.
The move is likely to add to pressure on the country’s property market. Bank of England Governor Mark Carney told senior government ministers last month that a no-deal Brexit could see house prices plummet by more than 35 percent, according to people...