Foreign investors buying up flats in suburbs after stamp duty hike

Wealthy foreign property investors are turning their attention from central London to cheaper suburban locations to avoid paying heavy stamp duty bills, an investigation has found.

The trend, which follows a series of swingeing stamp duty hikes on expensive properties since 2012, means cash-rich investors are increasingly in competition with first-time buyers in new developments in outer London.

It has been accelerated by the slump in the value of the pound that followed the Brexit vote in June, which has made London property around 15 per cent cheaper in dollar terms compared with a year ago.

Chinese investor Ada Yau, who has been looking at flats in the north-west London suburb of Colindale in Zone 4, told BBC’s Inside Out London programme: “Brexit is not the end of the world.

“This country has a stable and secure political system. Yes it attracts foreign investors to come here — like me! Fifteen per cent off, it’s like a sale... I’m going to invest in buying flats and rent them out.”

The current system of stamp duty means a purchaser buying a £1.5 million apartment in Mayfair would have to pay more than £138,000, including a three per cent stamp duty surcharge on buy-to-let properties. However, by spreading the same investment on about six cheaper flats of £250,000 each, the bill is reduced to £60,000 — a saving of £78,000.

One first-time buyer, junior doctor Tania Rahman, told of her frustration that she now has to compete with foreign investors.

She said: “Brexit has just brought so much big hope for Brexiteers that property would become more affordable. Well it has for one group — foreigners.”

David Adams, managing director of Mayfair agents John Taylor Estate, said that British buyers were using post-referendum uncertainty as a reason not to take the plunge and were in danger of missing out. He said: “The London sale is on to foreigners. It’s not on to the English — they continue to sit on their hands and say, ‘David, it’s not a good time to trade.’”

He said that of the enquiry calls received by the agency in the month after the June 23 referendum, 80 per cent had foreign dialling codes for their point of contact.

Recent property surveys show prices in the most expensive central London boroughs such as Kensington and Chelsea are tumbling — in large part because of the huge stamp duty burden — while those in more affordable local authority areas on the fringes of the capital, such as Waltham Forest, continue to surge by up to 20 per cent a year.