November’s Autumn Budget, dubbed the ‘Housing Budget’, saw Chancellor Philip Hammond pledge to prioritise the necessary building of new homes and supporting infrastructure to meet the needs and demands of Britain’s growing population. But was the statement worthy of the title ‘Housing Budget’? Although ‘housing-centric’ to an extent—first time buyers and stamp duty stole the headlines—the high net worth (HNW) end of the property market were left somewhat underwhelmed, with only passing references to how the Budget would affect the HNW property landscape.
This was a budget for Britain’s youth; the Chancellor revealed the government would be abolishing stamp duty for first-time buyers on properties up to £300,000, helping to get more young people onto the property ladder. For those purchasing their first property in London or another larger city, stamp duty will be removed from the first £300,000 of a £500,000 home. Whilst this is a positive step within the capital, this only operates at the lower end of the London housing market where the average property price for a one bed is currently around £480,000. Those who are looking to buy in Prime Central London, where housing prices significantly surpass this, have been left high and dry by this Budget.
What does the Autumn Budget mean for high net worth individuals?
As first-time buyers and housebuilding pledges took centre stage, promises of consultations which will affect HNW individuals were well hidden in rhetoric. It will take a long time before any change will be seen. It could be that the Chancellor is keeping his cards close to his chest after learning from the criticism he received back in the Spring, with his reversal of the National Insurance Contribution policy. He has protected himself from Parliamentary backlash by filling this budget with hypotheses, as opposed to hard-line policy; dropping the stamp duty bombshell to satisfy the headlines, and magicking away any questions about real change to the upper end of the market.
The most impactful of these upcoming consultations to affect HNW individuals, which came as quite the surprise, will be the introduction of capital gains tax (CGT) for non-residents on commercial property and on ‘property rich companies’. CGT was slapped on residential property back in 2015, so applying it to commercial property too makes sense in theory. However, in a market that thrives on foreign investment into infrastructure and business, this doesn’t appear to make much sense in practice.
The proposal will have an impact on international HNW individuals and family offices who invest in commercial property, and who are currently in part motivated by the quite generous tax breaks when structured correctly. Despite this, foreign investment will forever be attracted to the London property market, as it is a global business centre in a favourable location offering a desirable lifestyle. Regardless of doubt cast by Brexit, as well as other political events, the market has proved its resilience and its capacity to continue delivering attractive returns for investors.
London property market remains desirable
We’ve seen this first hand at Enness. From our office in Mayfair, we’ve consistently secured UK and European mortgages for expats and foreign nationals based in the GCC throughout any geopolitical turbulence. We opened our Dubai office in the DIFC earlier this year as a direct response to the increased demand for large loans for property in the UK and Europe. It is crucial when navigating any change in the market, no matter how small or significant, to seek the advice of an expert broker to help you make the most of your investment.
Tax treatment depends on individual circumstances and may be subject to change in the future. Enness does not provide tax advice and this material has been prepared for informational purposes only. Enness can refer you to specialist property tax experts to ensure your investment runs smoothly.