Homes in luxury London postcodes, including Belgravia, Knightsbridge and Chelsea, have far outperformed the rest of the UK market in terms of price rises over the last two or three years. Prices have risen by 9.4 per cent in the last 12 months alone, while average prices across the rest of the UK have risen only very modestly, if at all. Bricks and mortar in the centre of the UK capital is seen as a ‘safe haven’ investment option by international and domestic buyers, and this has helped push prices to new record highs. But the market for family homes and pied-a-terres in the most fashionable areas of London has been slightly overshadowed in recent months by the announcement of new property taxes by the UK chancellor back in March. During his annual budget, the Chancellor raised stamp duty for purchases of homes worth £2million plus (HK$24.3 million) from 5 to 7 per cent and trebled it to 15 per cent for those bought by a ‘non-natural person’. A ‘non-natural person’ is broadly defined as a company, a partnership, including a company, and collective investment schemes. There was evidence that the market largely absorbed these changes, but the Chancellor also said that possible new charges would be levied on properties owned by a ‘non-natural person’ – including an annual tax and capital gains tax (CGT) on disposals. It has been eight months since that initial announcement, and the effect on the market was clear, with many buyers adopting a wait-and-see stance. In fact, exchange volumes in the £2 to £5m bracket in prime London between July and September fell by 44 per cent compared to the same period in 2011. It was a definite fillip when the Chancellor finally announced the detailed proposals for these property taxes this month. This confirmed that while those owning properties through an offshore company will face paying an annual charge, capital gains tax on disposals of such properties would only be charged on gains from April next year – not from when the property was acquired, giving many owners more breathing room to decide how to manage their affairs. There were also some broadly welcomed reliefs offered – including to those renting out properties on a commercial basis and those developing or trading properties. The same exemptions will apply for the capital gains tax charges. This clarity over the new rules was much needed, and could see market activity pick up slightly. However there was also an anomaly - in that the Treasury pledged to cut stamp duty for those exempted from the annual charge and CGT levy from 15 per cent to 7 per cent, although not until summer next year. So there may be another case of pent-up demand in the market until then (so buyers benefit from paying the lower rate) unless policymakers address this quirk. Buyers of luxury homes once again have certainty in this area of the housing market.