Tory party pledges 3% surcharge for overseas buyers of English homes

The Conservatives would force overseas homebuyers to pay extra stamp duty in an election pledge that effectively blames foreign purchasers for inflating property prices.

The party has unveiled plans for a 3% stamp duty surcharge for non-UK tax residents which would apply to companies as well as individuals – and also to expats wanting to move back home. It said as many as one in eight new London homes were bought by non-residents in 2014-16.

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The higher tax suggests that a wealthy foreign buyer of a £1.5m home in London would pay £183,750 in stamp duty compared with £93,750 for a Londoner buying the property for their own use.

The Conservatives said homes that were snapped up in the UK were “often bought by wealthy individuals or companies, and kept as investments or rented out at inflated prices”. It said a 2017 York University study showed that 13% of new London homes were bought by non-residents in 2014-16.

“This adds significant amounts of demand to limited supply, inflating house prices and making it harder for people in Britain looking to get a foot on the property ladder,” said the party.

The stamp duty move coincided with Labour’s manifesto pledge to build 150,000 council and social homes a year by the end of the parliament.

At the moment, those who are not tax resident in the UK are able to buy homes as easily as those who live there.

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The 3% rate – which would only apply to England – represents a hardening of an earlier proposal for a 1% surcharge, which the government consulted on this year. It would be charged on top of all other stamp duty already payable, including the 3% surcharge on second homes and buy-to-let properties that took effect in 2016.

A number of other countries and cities have introduced surcharges on foreigners buying homes – for example, the Canadian city of Vancouver brought in a 15% tax, which was later increased to 20%.

The measure is projected to raise up to £120m a year, and this money would be directed at programmes to help tackle rough sleeping, the party added. The Conservatives said the policy was “not about nationality but residency” and would affect about 70,000 purchases a year.

The chief secretary to the Treasury, Rishi Sunak, said: “Evidence shows that by adding significant amounts of demand to limited housing supply, purchases by non-residents inflate house prices.”

He added: “Britain will always be open to people coming to live, work, and build a life in this great country.”

The party quoted from a study by King’s College London which estimated that a one percentage point rise in the share of residential transactions registered to overseas companies led to an increase of about 2.1% in house prices, and lowered the overall homeownership rate.