Government to tax foreign property investors from 2015

LONDON Thu Dec 5, 2013 12:48pm GMT

A residential street is seen in Notting Hill in central London October 8, 2013. REUTERS/Toby Melville

A residential street is seen in Notting Hill in central London October 8, 2013.

Credit: Reuters/Toby Melville

Related Topics

Quotes

   

LONDON (Reuters) - The government will impose capital gains tax on foreign investors selling homes that are not their primary residence from 2015, Chancellor George Osborne said on Thursday as the government moved to curb soaring house prices in London.

"It's not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence - while those who don't live here do not," Osborne said in a twice-yearly budget statement to parliament.

"That is unfair. From April 2015, we will introduce capital gains tax on future gains made by non-residents who sell residential property here in the UK."

Britons pay capital gains tax - typically at 28 percent - on any profit from selling property that is not considered their primary residence.

Property prices in London have jumped by about 10 percent in the last 12 months and increases in some parts of the capital have been greater, driven by demand from foreign investors hunting for a second home or wanting to tie their cash in the safe haven of London.

About 70 percent of newly built properties across central London are bought by foreign investors, according to Savills (SVS.L), while 30 percent of luxury London homes worth 1 million pounds or more were bought by non-UK residents in the year to June, consultancy Knight Frank said.

Developers that have benefitted or are looking to cash in on this trend include Berkeley (BKGH.L) and Barratt Developments (BDEV.L), who have built thousands of homes in London, as well as British Land (BLND.L) and Land Securities (LAND.L) that have recently entered the luxury housing market.

"This shows that the government is worried about a London housing bubble, and it is vital that the extra funds raised from overseas investors will be ploughed back into genuinely affordable housing for people on low incomes," said Paul Hackett, director of left-leaning think tank The Smith Institute.

Property industry players said the implementation of the tax sent the wrong signals to overseas investors, who they say have helped support the city's rental market. However, they said it would likely only have a marginal impact on demand and pricing as investors came to London for other reasons such as political stability.

"The introduction of this tax may provide the wrong signals to overseas investors, and be seen to discourage their investment into UK property," said CBRE's (CBG.N) head of residential research, Jennet Siebrits.

"However, while it might cause some disruption at the time of implementation, we do not believe this will have a substantial long-term detrimental effect on the wider residential market."

(Additional reporting by William Schomberg; Editing by Susan Fenton)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.