So, what are the costs associated with buying a property in London? In today’s article, we’re going to be breaking down the costs associated with buying a property in London, and how to budget appropriately. Obviously, this can be super helpful for buyers, as you’ll know what you’ll actually need to budget for and what will come out of your pocket, alongside just the price of the property itself, depending on the price point you’re looking and searching for. For sellers, it’s actually great to help you also understand the cost associated for buyers to buy your property.
What to budget for when buying a London Property
Stamp Duty is the number one cost as the buyer you’re definitely going to have to consider and allocate for. For foreign buyers who might not be familiar with stamp duty, in essence, it’s a tax on the purchase price of a property. It’s currently in tiers, so you will need a stamp duty calculator, such as this one to help you know the price based on your property budget.
We’re currently in the middle of a stamp duty holiday where the buyers in London are saving £15,000 on their stamp duty bill, which has been one of the reasons property sales have boomed during the pandemic, which will last until 31st Of March 2021. I’ve got a great video that gives you all you need to know about stamp duty as well as another article on what the current stamp duty holiday means for you, so make sure to check those out for more in-depth information.
If we use this as an example a million-pound property purchase, and you’re an overseas buyer already owning another home, your stamp duty costs would normally be £73,750. However, during the stamp duty holiday, it’s been reduced to £58,750 – which is a considerable saving, so if you are looking to invest in property in London, right now is a great time, if your budget and needs suit it.
A note for Foreign Buyers – Please note that the government currently has plans to impose an additional 2% stamp duty cost for foreign buyers as of the first of April 2021, so if you’re looking to avoid that, you definitely want to try to get your deal done before that new surcharge kicks in.
In addition to stamp duty, you’ll need to budget for mortgage fees and charges, if you plan to use financing for your purchase. For budgeting purposes, we’ll assume you’re using a mortgage advisor, and we’ve budgeted up to £1,500 for their costs of arranging that deal. In addition, the bank may also charge a fee for arranging the valuation to verify value as part of their due diligence, which may cost up to £600.
In the UK, you have plenty of choices from a simple condition report or condition survey, they’ll be pretty basic and identify obvious defects, and can cost around £950. A Condition Report might be appropriate for newbuilds, which are typically covered by a builder’s warranty and shouldn’t have anything major to consider. But if it is an older property or if you’re planning to do works, you might want to consider a Builder’s Survey, which is a comprehensive in depth look and will advise on defects and repairs, this can cost around £1,500.
Finally, you want to budget for your conveyance cost, which is the cost associated with hiring the solicitor that will represent you. They will do searches on legal title and due diligence to make sure legal possession and boundary lines etc. are legitimate. For a London-based property and using a London solicitor we’ve budgeted on the safe side up to £2000 for this.
Total budget for purchasing a million pound London Property
So, all in on a million-pound budget, your additional costs will range from £75,000-£79,000. If you’re able to take advantage of the current stamp duty holiday, this will save you an additional £15,000 pounds. These budgeting costs should be carefully considered as a part of your purchasing budget, and can make your property search change within the budget you initially thought. Below you can see all of the costs associated with this property investment, for a clearer view of what to expect to pay regarding the purchase.
So, I hope this article has given me the key budget items you’ll need to consider when buying a property in London. And if you actually want to know what a million pound budget will get you in London, then make sure to check out my video here, which takes you around some fantastic options throughout the city.