Britain's finance minister Alistair Darling appears to have done enough to stop an exodus of wealthy foreigners from the country. In his budget last month, the Chancellor of the Exchequer announced long-awaited plans to tax non-domicile foreign residents GBP30,000 (HK$462,613) a year on their overseas income. The flat-rate charge becomes payable from this month by non-domiciles who live in Britain for more than seven years.
Non-domicile status is a quirk of Britain's tax system that previously allowed wealthy foreign residents to avoid paying tax on overseas income not brought into the country.
Estate agents are sighing with relief that uncertainty about what Mr Darling might do is finally over and is less draconian than feared. Non-domiciles had threatened to leave Britain in droves if the government taxed them too harshly. Savills estate agency says half of Central London's homes valued at GBP1million or more are bought by overseas buyers, so their departure will devastate the top end of the housing market. Places featuring these beautiful homes include Cornwall Terrace, Bishops Avenue, St George Wharf and Holland Park.
The country's homes market is increasingly dependent on foreign money. Two-fifths of homes sold for GBP5million or more in the Home Counties during the booming sales market last summer went to overseas buyers, figures from Knight Frank estate agency show.
According to Savills, luxury London property prices were rising at an annual rate of 29 per cent by the middle of last year, a record level of increase, partly because of overseas investment. Following the Chancellor's announcement in October that non-domiciles would pay more tax, price rises slowed to 16 per cent by the end of last year, the agency's research reveals.
Now the Chancellor's plans have been clarified, London property professionals expect fewer jitters in housing markets favoured by wealthy non-domiciles, especially those in the desirable areas of Mayfair, Belgravia, Knightsbridge, Kensington and Chelsea.