(April 7): A slew of tax changes is discouraging many foreigners from buying homes in the UK, particularly in the flashiest parts of London.

The share of overseas buyers registering with an estate agency in Britain fell to 1% between January and March, the lowest level since at least 2008, according to data from broker Hamptons.

In central London’s most affluent postcodes, the share of prospective buyers based abroad declined to 2.9% in the period, down from 4% in 2024 and a peak of 7.9% in 2009.

“It’s tax changes that have stemmed the flow of overseas house hunters,” said Aneisha Beveridge, head of research at Hamptons. “Stamp duty increases, particularly for those purchasing second homes, combined with Brexit and amendments to the tax treatment of non-doms, have added to costs and reduced the lure of property in the UK.”

The Labour government hiked stamp duty for second-home owners by two percentage points and announced plans to abolish the preferential tax status enjoyed by affluent foreigners living in Britain — or non-domiciled residents — during its first year in power. Those changes have damped demand from overseas buyers, many of whom are already under pressure from higher interest rates and geopolitical uncertainty.

The decline in demand has mainly been driven by fewer Europeans — particularly buyers based in France and Italy — relocating to Britain post-Brexit, Hamptons said. US buyers have increasingly replaced this group, with applicants from North America accounting for a record 16% of all foreigners looking to purchase a property in Britain in the first quarter, a figure that’s more than doubled since 2008.

Hamptons said that, taking stamp duty changes in recent years into account, the bill for an overseas citizen buying a second home for £1 million (US$1.3 million or RM5.76 million) in Britain is about £113,750 — an effective tax rate of more than 11%.

The share of international applicants seeking a second home in Britain decreased by over a third in the past five years to 19% in the first quarter of 2025.

Still, the amenities and culture that London offers, combined with the UK’s “robust” legal system, continue to attract overseas money to residential property, according to Hamptons. Foreign applicants are increasingly seeking a permanent home in Britain rather than an investment property, while some are choosing to rent to avoid those taxes, the broker said.

“The case for buying a home, particularly in prime central London, has become increasingly tenuous for some international buyers,” Hamptons’ Beveridge said. “For those immigrating for an undetermined period, the cost of buying property and the prospect of little or no capital growth, as seen over the last decade, have led many to opt for renting instead” in prime central London, she added.

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