At the beginning of the month Prime Minister Theresa May announced proposals to implement a new SDLT surcharge of 1 or 3% on foreign buyers of UK residential properties.
The announcement has met with significant criticism as industry experts fear that such a policy could lead to reduced development activity and the creation of less affordable housing. Shockingly, news of the announcement has apparently already wiped off £600m from the value of listed developers, including Berkeley Group, Barratt Developments and Taylor Wimpey.
The Conservative's argument is that foreign investment in the UK residential market has led to inflated house prices and reduced domestic home ownership, with the proposal set to "fix our broken housing market."
On the other hand, foreign investment is unquestionably a very important part of the UK housing market and with the decline in the value of the pound, it has become a very attractive investment for overseas buyers. Adding a further surcharge (on top of the recently imposed second homes surcharge) has the potential to deter foreign investors, thus lowering investment activity and resulting in less new homes being constructed. This could have a devastating effect on the already problematic housing shortage within the UK.
A consultation is anticipated although no date has been set yet. Further clarification is expected in the budget on 29 October so watch this space...