Overseas landlords retreat from UK property market

Lower price growth forecasts, higher taxes and weak pound weigh on sentiment

Overseas landlords are beating a retreat from Britain’s property market. Photograph: Dominic Lipinski/PA Wire

Overseas landlords are beating a retreat from Britain’s property market. Photograph: Dominic Lipinski/PA Wire

 

Overseas landlords are beating a retreat from Britain’s property market in the face of lower expectations of house price growth, a tougher tax regime and the impact of the Brexit-related fall in sterling on their rental returns. The share of new lettings accounted for by landlords based outside the UK has more than halved in eight years, falling from 14.4 per cent in 2010 to 5.8 per cent in the first 11 months of 2018 — the lowest proportion recorded by estate agent Hamptons International since it began gathering the data eight years ago.The decline was particularly pronounced in London, the country’s biggest housing rental market, where one in four homes — 26 per cent — were rented by an overseas landlord in 2010, but this has fallen to 10.5 per cent so far in 2018. Aneisha Beveridge, head of research at Hamptons International, said: “International investors are quite savvy about what’s going on in the UK housing market and their future expectations of price growth are weaker than they have been for some time. They just don’t think property prices will grow as much as they have in the past.”

The overseas share of the London rental market fell by 4.7 percentage points in the past two years alone, which Ms Beveridge partly ascribed to the effects of the Brexit referendum on the pound.

Changes in the tax regime have also counted against overseas landlords. From 2015, non-residents became subject to capital gains tax on the sale of residential property in the UK, removing a significant tax advantage. The move also covered the so-called “off-plan sales” popular among international investors in new developments such as London’s Nine Elms, where purchasers acquire the right to buy a home ahead of its completion.

Buyers of second homes in England and Northern Ireland have faced a three percentage point surcharge in stamp duty land tax since April 2016, raising the costs of purchase. For non-resident buyers, a separate 1 percentage point stamp duty surcharge now looms, after the Treasury announced in the Budget that a consultation on such a levy would be published in January. – Copyright The Financial Times Limited 2018.