Impact of a UK capital gains tax on foreign-owned property likely small
Foreigners' transaction costs in Britain will still be relatively low even if second homes are taxed
A possible capital gains tax on sales of British properties by foreign investors will have a limited impact on demand and will not stem price rises, property consultants say.
Even allowing for the possible extension of the tax, transaction costs in London - a magnet for foreign buyers in the UK - will remain lower than in major cities elsewhere, such as New York, Hong Kong, and Singapore.
Chancellor George Osborne is reportedly mulling the introduction of a tax on the capital gains made by foreigners from sales of residential property not used as their main residence. There is speculation Osborne will make an announcement in his so-called "autumn statement" on the latest economic forecasts for the country, due next month. The prospect of the new tax being announced by the government to curb price rises in the property market was first reported by British media late last month.
The average asking price of a London home surged 10.2 per cent month-on-month in September to £544,232 (HK$6.7 million), property website operator Rightmove said in a report last month. The rise was attributed to overseas buying and the government's programme to assist first-time homebuyers.
Currenty, UK resident taxpayers are exempt from capital gains tax on their primary residence and they are charged capital gains tax on the sale of a second or subsequent property. Non-resident property owners are presently exempt from paying any capital gains on properties they sell.