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Foreign investors bulk-buying UK properties to capitalise on stamp duty savings

Research by Astons – a leading international real estate expert on residency and citizenship through investment, offering bespoke residence and citizenship solutions in the UK, EU and Caribbean through property investment – has found evidence of a growing trend amongst foreign investors bulk-buying properties across the UK in order to capitalise on the current stamp duty holiday before foreign surcharges are introduced in April next year.

At the moment, foreign buyers benefit from the same stamp duty holiday reductions as domestic UK buyers, which has seen a surge in activity across the housing market in recent months. However, with the 2% surcharge for foreign buyers sitting ominously on the horizon in the spring, those that complete their transactions now can essentially escape the additional charge.

And, with a weak pound and strong signs of an imminent market recovery, many foreign buyers are looking to bulk-buy UK real estate while profit potential is at its highest. By purchasing six or more residential units in one transaction, foreign buyers are able to secure non-residential stamp duty rates starting at just 2% between £150,001 and £250,000, and 5% above the £250,000 threshold.

One such transaction which Astons recently oversaw was a six-unit purchase in London acting as staff accommodation from a Hong Kong-based buyer which sold for £6.988m. Due to “regional instabilities” and the option to apply for British citizenship from January, the buyer opted to invest in the London market “due to the liquidity and growth the capital presents”.

With the traditional residential path to purchase, the buyer would have paid £946,991 in stamp duty according to current regulations, making a considerable saving of £338,914 compared to purchasing post-April 2021 when the foreign buyer surcharge is due to be implemented.

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However, as the buyer purchased these same six units as a non-residential investment, the stamp duty tax bill actually totalled at just £338,914 – a whopping £608,077 less than the current residential rate, and £762,842 lower than the residential rate with the incoming additional 2%.

Managing Director at Astons, Arthur Sarkisian, commented on the emerging trend:

“A whole host of global influences are spurring foreign interest in the UK property market at present. While the residential stamp duty holiday has helped boost this interest, we’re now seeing many invest above and beyond a family home to lay far stronger foundations for their personal and professional future in the UK. 

“By ‘bulk buying’ in the residential market, they are able to secure a far lower rate of stamp duty and with the weaker pound, investing now is making very good business sense. While the residential rush from foreign buyers will no doubt dissipate come April, we expect this higher level of investment will continue as many lay future foundations in anticipation for life after Covid”.