- POSTED: 08 Jan 2014 16:32
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Foreign property investors are preparing for the imposition of a capital gains tax for non-residents in London. While the details are yet to be finalised, it has many investors in Asia worried as they consider the state of their London portfolios.
LONDON: London has been named as the world city with the best real estate investment opportunities for foreign investors, overtaking New York.
This is according to a survey by the Association of Foreign Investors in Real Estate.
But it comes as foreign investors prepare for the imposition of a capital gains tax for non-residents. The measure will come into effect in 2015.
While the details are yet to be finalised, it has many investors in Asia worried as they consider the state of their London portfolios.
Prime central London properties change hands for millions of pounds - and it is estimated that over US$10.5 billion was spent on high-end London homes by foreign investors last year.
Some in London are worried that the looming imposition of capital gains tax will give the wrong impression.
Jennet Siebrits, head of residential research at CBRE UK, said: "The difficulty is that we're giving this message that we're not open for investment and that's wrong - we want to have foreign investors, not just buying the properties but buying our land. London is a global city - we want to have this investment."
The government is working out exactly how it will impose capital gains tax on non-residents in 2015. It does so in the knowledge the UK housing market is not currently working from the perspective of domestic voters.
Brian Berry from Federation of Master Builders said: "Yes, the housing crisis in London is particularly acute - house prices in London are about 50 per cent higher than in other parts of the country. And this has been caused partly by foreign investment in the London property market - seen as a safe place to invest money - but the negative impact has meant that prices are much higher and local people can't afford to buy in the centre of London."
House prices in London are increasingly out of reach now for younger Londoners, with the cherished British dream of home ownership remaining out of reach.
The average London home now costs over US$550,000 according to the latest figures - well beyond the average wage for a Londoner.
But there is an argument that foreign investors can help the London housing crisis - the iconic Battersea Power Station is being turned into 3,500 homes by a Malaysian consortium.
Siebrits said: "If we didn't have these investors coming in the developers wouldn't have the funding they need to kickstart their developments and therefore none of this development would be happening."
For now at least - even with capital gains tax looming for non-residents - London's property market continues to soar.