U.K. Deputy Prime Minister Nick Clegg pushed the case for raising the tax on top-end properties owned by foreign investors in London, as the government examines the idea in the run-up to its end-of-year financial statement.
“We certainly need to make sure that people who invest very large amounts of money into property in central London locations, which more often than not then stands empty, that they pay their fair share of tax,” Clegg said at his monthly news conference in the capital today. “That’s why we are looking at options like the differential application of capital-gains tax to those kinds of transaction. Decisions haven’t yet been made.”
Chancellor of the Exchequer George Osborne is considering levying CGT on foreigners selling property in the U.K. to curb rising house prices in the capital, Sky News television first reported earlier this month. Overseas demand is adding to pressure on a market experiencing a shortage of supply.
“There are parts of the London property market now which are entirely divorced from and dislocated from the rest of the economy,” Clegg said. “That’s partly because they’re driven by market forces which are global and by very, very large amounts of money flowing into the residential property market as investment.”
Clegg’s Liberal Democrats, the minority party in the ruling coalition, have made higher taxes on the most expensive properties a key policy with demands for a so-called mansion tax on homes valued at more than 2 million pounds ($3.2 million.) Their Conservative partners have rejected the idea.
Asked about the possibility of extending the capital-gains tax to foreign-owned properties, Conservative Treasury minister Sajid Javid indicated in an interview this month that an announcement would be made in Osborne’s Autumn Statement to lawmakers on Dec. 5.
Prices for luxury homes have soared in recent years as the debt crisis in the euro region and uprisings across North Africa made London property a haven. Values of prime London residences have risen more than 60 percent from their low in 2009, with non-U.K. residents accounting for 25 percent of all purchases in central London in the 12 months through September, according to broker Knight Frank LLP.
Asking prices for London homes fell this month after a 10 percent jump in October as government measures to boost demand failed to offset the seasonal pre-Christmas decline, Rightmove Plc said. From a year earlier, values in the city were up 6.9 percent, while the national increase was 4 percent.