Capital Gains Tax

HK buyers face demands for UK capital gains tax

PUBLISHED : Wednesday, 28 June, 2006, 12:00am
UPDATED : Wednesday, 28 June, 2006, 12:00am

With many Britons squeezed out of the market, campaigners seek review of system that favours overseas investors

The British government ought to consider making Hong Kong investors pay capital gains tax, Britain's first-time buyers have demanded. Those Britons struggling to get their foot on to the property ladder have been angered by a wave of overseas investment that has helped to push up prices in some parts of the country, most notably London.

British residents must pay capital gains tax when they sell a property if they own more than one, but Hong Kong landlords are not required to do so.

'It is a cause for concern that overseas investors may be encouraged to speculate on UK residential property prices by favourable local taxation treatment,' said a spokesperson for the first-time buyers campaign group, PricedOut.

'We feel this type of activity can only exacerbate the problems for home buyers already struggling with record property prices. With so many people now struggling to buy or priced out of buying, to the extent that the government has had to set up subsidised schemes to help key public-sector workers, we really need to ask ourselves do we want to be a destination for property speculation.

'We are calling for the government to take a close look at this to see if the system is inadvertently working against the interests of UK home buyers.

'If so, we would ask them to exercise the same commonsense they displayed in reversing the decision to allow residential property into UK pensions (Self Invested Personal Pensions).'

Hong Kong investors have bought millions of pounds worth of flats and houses in Britain over the past decade and have recently embarked on another buying spree.

Estate agent King Sturge boasts of having sold GBP133 million ($1.88 billion) worth of new homes to Hong Kong investors last year. Colliers International reports a surge of investment by Hong Kong buyers since the start of this year.

The biggest inflows of overseas cash come from Russia, the United States, the Middle East and Britain's fellow European Union members.

While overseas investors are snapping up investment properties, second homes and places for their children to live while they study in Britain, the country's first-time buyers are becoming sidelined. According to the National Association of Estate Agents, first-time buyers account for only 13 per cent of purchasers.

Affordable homes built at London's Chelsea Bridge Wharf for public sector first-time buyers such as teachers and nurses have been sold to Hong Kong investors by the Threshold Group housing charity, much to the annoyance of London politicians.

Resentment against overseas investors is spreading.

London's Kensington and Chelsea borough council is analysing results of a survey that asks residents whether they want to be given preference over foreign buyers in that district's residential sales market. The results will be published later this year.

The survey follows a call made in November last year by a leading Conservative councillor that overseas buyers be barred from buying into new developments in the borough. Half of the borough's homebuyers are from overseas.