Hong Kong-based investors are the largest foreign buyers of homes in the UK, but additional education fees, a new tax scheme and slowing growth in rental rates could conspire to turn people away from the country.
As of December 5, Hong Kong investors had registered 25,972 property titles in the UK, up 5.7 per cent from 2023, accounting for 13.7 per cent of all foreign homebuyers, according to data provided by London-based property agency Benham and Reeves.
In 2024, about 190,000 properties in England and Wales were owned by foreigners, up 2.6 per cent from a year earlier, the data showed.
Recent developments in the UK, however, stand to put a damper on demand.
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“The residential property market saw continued interest from Hong Kong buyers, especially in cities like London, and this demand was driven by several factors including investment diversification, political and economic stability as well as education,” said Amber Zhao, director and head of the China desk at London-based property agency Chestertons. “Looking ahead to 2025, the outlook for the UK residential property market is expected to be cautious.”
One reason for that is rental rates in the UK grew by 3.9 per cent in the 12 months to October, the slowest pace in three years, according to Zoopla, a property listing portal. It also said demand fell and supply increased in the market. The portal said demand for rented homes dropped 29 per cent for the same period as effects from the Covid-19 pandemic faded and migration related to work and education slowed.
On top of the rental rates, some tax-related changes in the UK are likely to make the market less appealing to Hongkongers, Zhao said.
Starting this year, fees for private schools, including boarding and vocational training institutions, will be subject to a value-added tax (VAT) of 20 per cent. And in April, new arrivals to the UK and people who have non-domicile status will lose certain perks in terms of exemptions and inheritance levies.
“The introduction of a VAT on private school fees and the revamp of the non-domiciled tax scheme are likely to affect Hong Kong buyers in the UK property market as these changes could increase the overall cost of living and investment,” Zhao said. “Those considering the UK primarily for educational opportunities or tax benefits might reassess their plans, which could lead to a shift in demand for luxury properties in the UK, especially in the cities with a high concentration of international buyers.”
Source: SCMP
