A Labour government would increase the stamp duty paid by foreign buyers of UK property while also restricting the sale of new-build properties to overseas investors under plans being drawn up for the party’s general election manifesto.
Keir Starmer, Labour leader, wants to tackle Britain’s property affordability crisis, which has made it increasingly difficult for younger workers to buy their own homes.
Starmer’s policies are set to come under closer scrutiny ahead of a general election next year, with Labour far ahead in the polls and having made substantial gains in Friday’s local elections.
Labour would introduce new rules so that for a certain period — for example six months — only first-time buyers would be able to buy homes in a new development, Labour officials told the Financial Times.
Individual councils would negotiate with developers as to how long sales would be limited and whether that period would start with the first sales off-plan or after projects are built.
Overseas buyers would not be able to purchase more than 50 per cent of the properties in a new development.
A Starmer government would also increase the surcharge on stamp duty — currently at 2 per cent — which overseas buyers already have to pay compared to domestic property buyers.
The idea of hitting non-UK residents with higher taxes — either stamp duty or a “penal rate of council tax” — has been looked at by Rishi Sunak’s government, according to one Tory official. But the proposal was quashed by Jeremy Hunt, chancellor last year, amid fears that it would “freeze” the property market and raise little money. The Treasury remains opposed.
Labour’s new proposals are expected to get the go-ahead this summer when the party draws up its final manifesto policies ahead of a general election expected next year.
The number of homes in England and Wales owned by overseas buyers has already almost tripled in a decade as residents of Asia and various tax havens have flooded into the market — prompting concerns about pricing out locals.
A recent analysis by the Centre for Public Data, a non-profit organisation, suggested that the number of residential properties in England and Wales registered to individuals based overseas jumped from under 88,000 in 2010 to about 250,000 in 2021.
Starmer’s plan echoes other initiatives in the world, with Denmark, Canada and Malta among countries to have restricted sales of homes to overseas residents.
But Luke Mills, head of UK residential at real estate advisers CBRE, said the policies could slow the flow of new urban apartment buildings — where developers like to sell a proportion of units in advance before they start construction.
The so-called “off plan” sales market is dominated by overseas investors although they only account for over 50 per cent in a minority of projects.
“It’s well-intentioned to let first-time buyers buy first, but working across the board it is unrealistic,” Mills said.
Stewart Baseley, executive chair of the Homebuilders Federation, said: “While prioritising UK buyers is key, some large-scale developments require upfront funding that (overseas) investor buyers can provide.”
However, Baseley said the industry approved of Labour’s broader focus on “prioritising housing supply”, particularly by addressing constraints in the planning system.
Companies building homes in rural and suburban locations have welcomed the pledge by Lisa Nandy, the shadow levelling-up secretary, to reform the planning system to ensure more homes can be built — taking on so-called “nimbies” that block projects in their areas.
Labour has also promised to build more social and affordable homes although its Treasury team has not yet resolved the question of how much more subsidy to offer housing associations.
Starmer would also introduce a new “more comprehensive” and permanent mortgage insurance scheme to help first-time buyers.