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According to Simon Rubinshon, chief economist at RICS, the turmoil in mortgage markets in recent weeks has compounded the increasing level of economic uncertainty due to increased energy bills and the increasing cost of living, which has led to the increase in house prices in the UK. However, as the economy adjusts to high-interest rates and the labour market continues to improve, the pressure on the housing sector may be alleviated.
Stamp Duty Cuts
In an attempt to prop up the housing market, the UK government has cut stamp duty taxes bringing in the new system where the first £250,000 of a property’s value will be exempt from stamp duty. Buyers buying property valued at £250,001 will pay a stamp duty of 5% of the value of the home; if a property is valued between £925,001 and £1.5 million, the stamp duty tax will be 10% of the value of the property, and property worth more than that will be eligible for a stamp duty tax of 12% of the value of the property. By raising the threshold for property eligible for stamp duty taxes, first-time home buyers, including Hong Kong investors, have more reason to buy property in the UK.
According to Halifax, UK’s biggest mortgage lender, the increase in demand for properties in the UK since the beginning of 2022 has played a major role in the influx of house prices in major cities. House prices in major cities have gone up by 9.2%. Coupled with a demand for housing in urban centers, the UK property market in major cities is set to experience a significant shift due to the changes in preferences for homeowners who are returning to their offices post-pandemic.
Property price increase
Since January 2022, cities like Manchester have seen an increase in house prices by 11.5%, Birmingham by 9.4% since, London by 6.8%, and in September 2022, house prices in Reading were up by 9.9% compared to last year.
What does this mean for the Hong Kong investor?
Since Sunak stepped into office, some mortgage lenders have reduced their fixed rate by up to 0.5%. The average two-year fixed mortgage rate had risen by 6.46%. Regardless of these changes, investors cannot ignore that the Pound's value dipped to a record low, and the current economic status of the UK is at a prime for international property investors.
Currency play
The low value of the British Pound against the US dollar means that Hong Kong investors can get more value for their money. Forecasts show that property value will continue to rise, so investors must take advantage of the current market prices and buy property in the UK. As property supply falls and housing demand increases, investors can secure their financial future through UK property.
The new Crossrail with stations in prime locations like London, Manchester, Reading, and Birmingham, the thriving job market, the new taxes, prestigious schools, and the predicted improved political climate are all factors that favour Hong Kong, property investors.
