On the announcement that the Government will introduce Capital Gains Tax on property gains for foreign investors, Fionnuala Earley, Research Director at Hamptons International, commented: “The Chancellor is keen to be seen to be doing something to cool rapid house price growth in London and increasing tax on foreign buyers looks like a vote winner – but in reality the proportion of foreign buyers is a lot smaller than one might think. Our data shows that 70 per cent of buyers in London are British nationals with the majority of the remainder being resident in the UK. Over the course of this year, the proportion of sales to foreign buyers has been decreasing, as the mainstream market recovers.
“Inevitably any announcement on property tax will cause some ripples in the market for residential investment, but in reality it’s unlikely to have much effect on the wider market. We already expect the prime London market, which is characterised most by foreign wealth, to cool. With prices currently sitting around 40 per cent above peak levels in 2007 and with prospects for global economic recovery improving, yields on other assets becoming more attractive, foreign investment is being pulled away from prime London housing.”
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