Propertymark says confusion over new stamp duty rules has led to a surge in fall-throughs.
Since April 1 homes bought in England and Northern Ireland by non-UK residents have had an additional two per cent stamp duty surcharge on top of the rate that applies to purchases made by UK residents.
Overseas buyers are now being treated as non-UK residents if they were not present in the UK for at least 183 days during the 12-months before their purchase.
Propertymark says many foreign buyers will fall into this category due to travel bans and as such, are now subject to the additional two per cent stamp duty charge.
The association says that many agents, predominantly in London, have seen a dramatic drop in the number of overseas property buyers.
Liana Loporto-Browne, NAEA Propertymark president, says: “During the pandemic, naturally we have seen a standstill in the number of overseas buyers due to travel restrictions in order to adhere to safety guidance and limit the spread of Covid-19.
“Since travel restrictions have eased, numbers are still extremely low for those wishing to buy a property within London from overseas. Trends brought to light by NAEA Propertymark Regional Executives show that the increase in stamp duty for non-UK residents is already having a knock-on effect and buyers are pulling out of sales due to the additional fee.
“The continuous question of when travel restrictions will be gone for good and the uncertainty of how and when the world will ‘return to normality’ seems to hold a weight over those classed as ‘non-UK residents’ with the aspirations of purchasing a property.”
And Jonathan Hopper, NAEA Propertymark executive for buying agents is aware of chains falling through due to buyers and property professionals alike being unaware of the qualifying details of the additional charge.
He comments: “Some non-UK based buyers are committing to purchases unbeknown to them that more stamp duty charges may be coming their way. The property sector has a collective responsibility to help educate buyers on this issue so they can obtain independent tax advice. This assists all parties and reduces the risk of transactions collapsing due to lack of awareness of key information, which may impact some purchasing decisions.”
The government has stated that buyers may be able to claim a tax refund if - following a purchase - they are present in the UK for at least 183 days in the two-year period beginning a year before the purchase and ending a year after the purchase.