A 2% Stamp Duty surcharge will apply to non-residents buying dwellings in England and Northern Ireland from next April.
Its aim is to control house price inflation by reducing the number of purchases made by non-residents. But it may well cause inflation in the long-term after the impact of COVID-19 falls away.
This is for two reasons. First, many UK housebuilders rely on off-plan sales to fund new developments. Overseas buyers are a major market for off-plan sales. If they are pushed away, new developments may fail to get off the ground.
Secondly, some of the largest developers in the ‘private-rented sector’ and affordable housing would be regarded as ‘non-resident’ under the proposed rules because the UK companies used to purchase sites are controlled by non-residents.
The incremental Stamp Duty cost will not only affect the viability of future schemes but will also impact on long-term schemes that have already been entered into based on what is now an incorrect forecast of the Stamp Duty cost.
The existence of a chronic housing shortage in the UK is indisputable. Overseas developers responsible for increasing the level of housing stock in these key sectors in England and Northern Ireland should be rewarded, not penalised. Our attempts to persuade the Government that an exception should apply to developers have been rejected. We are still hopeful that the Government might realise that the impact on overseas developers is not acceptable collateral damage.