A Lennox Investment Management partner has said that the stamp duty on homes bought with off-shore trusts has badly affected the market, does the duty stamp even make much difference to the economy?
In April 2016 a stamp duty has been applied towards the ‘super-rich’ meaning that if a property is paid for by off-shore funding, then there is a 15 percent tax is added to it, and an extra 3 percent if that home is a second home. Sounds like a potentially very profitable concept, which could only benefit the infrastructure of our capital and its surrounding areas. Instead, foreign billionaires that would have once spent obscene amounts purchasing a home (more often than not a second/fifty-second property) have now decided it’s a more financially sound idea just to rent. By doing this the tax is loopholed and avoided, and now we need to ask if it will do more harm than good by scaring the foreign rich from buying and investing in the UK economy.
It’s not that the foreign wealthy will choose not to live in the UK, or more particularly London, but now they just choose to rent colossal properties. RT UK has reported that rent in two properties, in Mayfair and Knightsbridge, is £40,000 a week! That is £2,080,000 a year. So for argument’s sake the value of this property is £2m flat (I know they’re both likely worth much more than that!), and that this would be the renter’s second home, then there is £360,000 lost in tax over the choice to rent in one of those properties. That equates to a year’s salary for thirteen graduates. Between the introduction of the duty stamp and the turn of the new year it raised £7.3 billion for the government, but based on the change of the market, I doubt that will be replicated this year.
Rupert Bradstock, a manager of London property investment fund Lennox Investment Management, has said that where they would once sell properties after a period of time, they now hold on and rent. Plus the tenants they offer their properties to are of accustomed to premium standards, meaning that for as long as these properties are held on to they become more exclusive and have will have continually increasing rents. While we already have a figurative class divide, do we want to enforce a physical wealth divide through the duty stamp? But was this the plan all along? It’s no surprise that there are Tory fantasies of London being a hub for the world’s wealthy, so maybe the tax is there to allow property investment firms to renovate luxury properties only to then sell these super homes to the elite further down the line!
If my airtight conspiracy isn’t going to come to fruition and the duty stamp is simply to try and tax the elite, then the only way to eradicate this loophole is for the government to introduce a corresponding rent tax on the rich, something simple like if a tenant’s monthly rent is higher than the value of an average property, then they are subject to a tax similar to that of the duty stamp. Problem solved and extra income for the country. Regardless, it’s safe to say that no matter what taxes are introduced my home in Chelsea is still a little out of reach!
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