Tax on overseas buyers sees pre-sales of London homes drop 33%

Demand for London homes under construction has slumped by 33% in the first quarter as a new tax on overseas buyers and high values damped demand.

Tax on overseas buyers sees pre-sales of London homes drop 33%

The number of homes sold prior to completion in the UK capital fell to 5,947 from a record high of 8,927 a year earlier, according to data compiled by Molior London that was seen by Bloomberg News.

Molior has declined to comment.

“Affordability is still a huge issue for domestic buyers,” said Faisal Durrani, head of research at broker Cluttons.

“New builds in the higher price echelons normally appeal to international investors, but lots of uncertainties in their own economies — such as currency issues and the drop in oil prices — have led to a slowdown in purchases from a year ago,” said Mr Durrani.

Demand has fallen for new homes in London following the British government’s decision to raise UK sales taxes, to introduce a capital gains levy for overseas buyers and said it plans to cut tax breaks for the wealthiest landlords.

Developers in central London are offering institutional investors discounts of as much as 20% on bulk purchases as the tax changes limit demand from private individuals.

“There have been very few higher-end expensive sold in the central areas this year,” said Matthew Jackson, an associate director at real estate broker Chestertons.

“Some of the volume has been taken up in the lower price ranges, where we have got investors who are looking well beyond the centre.”

About 6,379 new homes were started in London in the first three months of the year.

That is 39% less than a year earlier and the lowest number for seven quarters, the Molior data shows.

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