Hong Kong investors face cloudy prospect in UK property sector

HKMA's participation in Mayfair project and talk of capital gains tax send mixed signals

PUBLISHED : Tuesday, 19 November, 2013, 1:07am
UPDATED : Tuesday, 19 November, 2013, 1:07am

Prospective Hong Kong investors in British properties received mixed news from the market recently.

On the one hand, the Hong Kong Monetary Authority unveiled its investment in a prime, mixed-used development in London, boosting the confidence of Hong Kong investors.

But on the other hand, the news came amid reports that the British government was looking to introduce a capital gains tax on the sale of second homes owned by overseas investors.

On November 7, the HKMA confirmed it had entered into a 50-50 joint venture with British-based Great Portland Estates to develop the Hanover Square Estate project in Mayfair, London.

The deal is believed to have encouraged more investors to explore opportunities in the rising London market.

However, recent media speculation in Britain that a capital gains tax might be levied on foreign buyers prompted concerns among investors. A decision on the tax is likely to be announced early next month.

Rightmove reported yesterday that asking prices in London were down 5 per cent this month from last month after jumping 10.2 per cent between September and October. According to property agent London Central Portfolio, quoting Land Registry data, prices in prime Central London rose 1.64 per cent quarter on quarter and 7.52 per cent year on year in the third quarter.

Analysts said imposing the tax would do less damage to foreign property owners and the British market than a tax on homes worth more than £2 million (HK$25 million) proposed by the Liberal Democrats.

Yolanda Barnes, a director of residential research at Savills, said foreigners who had lived in Britain for five years now faced buying, selling and occupation/ownership costs of 8.5 per cent of selling prices in London. Under the proposed regime, that will rise to just under 12 per cent, compared with 18.1 per cent in New York, 19.8 per cent in Singapore and 26.5 per cent in Hong Kong.

The number of sellers continues to decline in prime Central London, with deals falling to just 1,322 for the third quarter, London Central Portfolio said.

The agent suggested the Greater London Authority, the largest landowner in the city, increase land supply to allow construction of more affordable housing.

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