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When buying property in the UK, you are required to pay the Stamp Duty Land Tax. The Stamp Duty Land Tax applies to properties bought outright or with a mortgage, as well as residential and commercial properties. Before her resignation, Liz Truss and Kwasi Kwarteng announced a stamp duty cut as part of their mini-budget.
Prior to the stamp duty cut, the threshold of how much property has to cost before paying stamp duty was £125,000. The stamp duty cut has raised this threshold to £250,000. New measures have also been introduced. Investors buying UK property worth £425,000 for the first time will not be paying stamp duty. In addition, first-time buyers buying property up to £625,000 can claim stamp duty relief.
In the recent past, there has been economic and political turmoil that has led to a severe undersupply of housing, especially for UK residents. As a result, house prices have increased, and the number of UK residents who can comfortably afford mortgages continues to dwindle.
What does this mean for Hong Kong Investors?
Although Hong Kong is cutting stamp duty taxes, the stamp duty cut will most likely favour foreign investors in Hong Kong. Permanent residents in Hong Kong who are buying their first property as a primary residence are exempted from extra and higher taxes. However, they must pay the base stamp duty, which varies depending on the property's value. This means that permanent residents buying either their first or second property are eligible for a stamp duty tax ranging from HK$100 to 15% of the property value.
In comparison, Hong Kong investors buying property in the UK will pay an extra 2% surcharge, but with the current exchange rates, the discount outweighs the additional taxation. With adept implementation, the stamp duty cut in the UK will allow more people to move homes, and property investors will get a better chance to acquire property in the UK. In fact, if the cut remains permanent, more balanced conditions will return to the UK property market.
The UK government hopes to increase the ability of UK citizens to own property locally, but the measures applied and the current economic status in the UK and overseas are boosting foreign investment in the UK. Truss’ announcement also revealed plans for more space for properties to be built. As more property emerges in the UK property market, Hong Kong investors can take advantage of the new economic policies and the friendly exchange rates to be first in line for prime UK property.
The UK property market is ripe for Hong Kong investors. Forecasts predict that house prices will slowly increase, so it is best to buy UK property now.
