Proposed capital gains tax on British property takes Hong Kong investors by surprise

Hong Kong investor Lai Wing-to, who has shifted his focus to Britain’s retail property market owing to successive cooling measures by the government in his hometown, is now facing a possible capital gains tax in Britain.

“I picked London among other overseas markets because there is no capital gains tax in the country. If they [impose one], I may consider other cities such as New York, where prices have bigger growth potential,” Lai said.

He is one among many Hong Kong investors who were surprised by media reports that the British government was looking to introduce a capital gains tax on the sale of second homes owned by overseas investors.

British Deputy Prime Minister Nick Clegg was quoted by Bloomberg as saying the government was reviewing the matter before finance minister George Osborne’s December 5 update on his economic plans, but no decision had been taken.

Clegg said demand from foreign buyers, especially from Asia and the euro zone, had raised concerns of a property bubble and worries that many Britons were being priced out of the market.

London’s house prices have jumped 37 per cent since mid-2005, compared with 8 per cent across the country as a whole, according to Savills.