Dubai: Don’t blame the relatively subdued overseas investor interest on UK real estate now to the Brexit vote alone. UK’s politicians have been saying and doing enough over the last year to give them second thoughts.

“The issues that are impacting on the market relate more to the changes in UK tax law, which have applied capital gains tax and higher levels of stamp duty to overseas purchases of UK property, particularly those enveloped in a corporate vehicle,” said Jon Neale, Head of Research — UK at JLL. “Additional levels of stamp duty for domestic investors, as well as the removal of some interest tax exemptions, are also important.”

But Neale doesn’t foresee any further changes to the existing stamp duty structure — based on the transacted property being in a particular pricing band.

“It seems unlikely that those buying in their own name will face further punitive taxation,” said Neale. “The high levels of tax already applied to those buying through enveloped companies is unlikely to be increased. But we may see further measures aimed at increasing transparency. There does need to be a balance with privacy however, and the push for more transparency may face barriers within tax havens themselves.

“The UK media has been exaggerating the extent to which overseas HNWIs (high net worth individuals) are buying property and leaving it empty in London. This is confined to a handful of homes; most investors are buying property to rent out.

“Indeed, without their investment many schemes would not go ahead, as development funding remains problematic. They are helping to provide rental homes for Londoners.

“The real reason London property is so unaffordable is the lack of supply, caused by a number of factors including constraints on land produced by the planning system. It is worth noting that there is less coverage, or disquiet, around overseas ownership of commercial property.”

Factbox: What changes to the stamp duty structure has brought on

* From April 2015, a capital-gains tax was levied on non-UK residents at the same rate as residents. “It is surprising that this change wasn’t brought in sooner as the UK was somewhat of an anomaly compared with other markets,” said Hamish Pound, Senior Investment Manager at IP Global.

* From December 2014, the method of calculating Stand Duty Land Tax (SDLT) changed to a progressive system, which meant that the rate only applies to the amount of the purchase price that falls within a particular band. At the end of last year, an additional 3 per cent surcharge was introduced on second properties exchanged after November 25, 2015 and completed after April 1, 2016. “Ultimately these measures are designed to cool investor demand and restrain excessive price growth resulting in a more stable property market, which, overall, is good for our medium to long-term investors,” said Pound.