Foreign HNW Homebuyers Facing Stamp Duty Hike

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Foreign HNW Homebuyers Facing Stamp Duty Hike
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Foreign HNW homebuyers facing stamp duty hike of £95k via surcharge as prime London market pays 12% of all stamp duty owed

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Research by Enness Global Mortgages, the mortgage broker of choice for global-high-net-worth individuals, has found that London’s high-end homebuyers paid 12% of the stamp duty owed across England in 2020, despite accounting for just 0.1% of market transactions.

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The National Prime Market

Enness analysed market sold price records for transactions at £3m and above to have completed in England during 2020.

The research shows that across the residential property market in England, a total of £2.9bn was paid in stamp duty in 2021 across 468,929 transactions, with a total of £1.2bn saved as a result of the stamp duty holiday implemented in July.

As much as £436.4m of this was paid on transactions with a sold price of £3m or above, meaning the prime market accounted for 15% of all stamp duty paid in England. This is despite this tax coming via just 846 property sales, accounting for 0.2% of the entire market.

Despite this notable sum, prime homebuyers across England still saved £6.1m in stamp duty as a result of the current reprieve. However, in contrast to the wider market, this does account for just 0.5% of the total stamp duty saved.

The London Prime Market

The large majority of these sales were for high-end homes within the capital, with London seeing 675 properties sell for £3m and above - accounting for 80% of all prime transactions but just 0.1% of all homes sold across England.

Even with the capital’s top-tier market accounting for a minute proportion of transactions, London’s high-end homebuyers paid out a total of £368.6m in stamp duty in 2020 alone, accounting for 12% of all stamp duty paid across the country.

Again, as with the rest of the market, the current stamp duty holiday did provide some relief with homebuyers in London’s top tier saving £4.5m in stamp duty since the holiday. Although this equates to just 0.4% of the total saving made.

Foreign Buyers

The current stamp duty holiday has also benefited foreign buyers. Based on the average sold price for a prime property of £4m in 2020, non-UK residents saved £15,000 in stamp duty.

The stamp duty owed on an initial purchase reduced from an average of £393,750 prior to the holiday to £378,750 from 8th July onwards, with the tax owed on a secondary purchase reducing from £513,750 to £498,750.

Unfortunately, unlike the rest of the domestic market there is no stamp duty holiday extension for foreign buyers at the end of this month and to rub salt in the wound, there is also an additional two per cent being added for non-domestic buyers.

As a result, foreign buyers will now see the stamp duty owed increase by £95,000 as of April 1st, increasing from £378,750 to £473,750 on an initial purchase and £498,750 to £593,750 on a secondary property.

Stamp Duty: Just One Piece Of The Puzzle

CEO of Enness Global Mortgages, Islay Robinson, commented:

“While stamp duty is often considered a financial barrier to buying for the average homeowner, the sums paid via the prime market are far more substantial.

However, stamp duty is just one piece of the puzzle when buying a property in the UK. Any discount negotiated, the potential to add value, finance costs and currency considerations all need to be weighed up to determine the true value of a transaction. Looking at stamp duty in isolation won’t provide an accurate indicator of the additional costs incurred when buying.

Of course, those transacting at the very top-end are far better placed to stomach these costs and so a stamp duty saving hasn’t been a driving factor with regard to transacting, nor has it caused the mad panic to complete that we’ve seen across the regular market.

The prime market is arguably better off as a result and we’ve seen a quality over quantity approach continue to improve market health across the top price thresholds, as confidence returns following a year of pandemic uncertainty.

Of course, the introduction of a further two per cent stamp duty penalty for foreign buyers won’t do much to help this returning health, with high-end homebuyers from outside of the UK looking at an average cost of half a million pounds owed in stamp duty alone as of April.

That said, a prime London home remains one of the must-haves on any notable international property portfolio and so this increase will be viewed as a small price to pay for the serious investor.”

Data Description English Market (All Price Thresholds) English Prime Market (£3m+) % of Total Market London Prime Market (£3m+) % of Total Market
Total Transactions in 2020 468,929 846 0.2% 675 0.1%
Total Stamp Duty Paid £2,941,689,326 £436,363,575 15% £368,604,052 12%
Stamp Duty Saved £1,168,001,245 £6,165,000 0.5% £4,530,000 0.4%

Transactional data sourced from the Land Registry Price Paid records of all individual residential transactions in 2020.

Non-UK resident Prior to 8th Jul 2020 Jul 8th 2020 to 31st Mar 2021 Change (£) As of 1st April 2021 Change (£)
Home-mover £393,750 £378,750 -£15,000 £473,750 £95,000
Additional home £513,750 £498,750 -£15,000 £593,750 £95,000

The above stamp duty owed is based on the average sold price of £4m for prime properties sold across England in 2029 as per the Land Registry Price Paid Records.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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