U.K. to End Speculation Over Property Tax on Dec. 4, Javid SaysSvenja O’Donnell and Robert Hutton
A U.K. Treasury minister signalled that foreigners who own British homes will find out next month whether the government will slap an unprecedented tax on property sales.
“You’ll have to wait for the Autumn Statement” on Dec. 4, when Chancellor of the Exchequer George Osborne presents new economic forecasts, Financial Secretary to the Treasury Sajid Javid said in an interview, when asked whether the government is planning a capital-gains tax on foreign investors selling property in the U.K.
Osborne is considering such a levy to curb rising house prices in London and the southeast of England, Sky News television reported last week, without saying where it got the information. Overseas demand is adding to pressure on a market experiencing a shortage of supply. Rightmove Plc said on Oct. 21 that values in the capital rose more than 10 percent last month.
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 for international investors.
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.
Osborne is under pressure to address the risk of a housing bubble in the U.K. after the International Monetary Fund and ministers including Business Secretary Vince Cable criticized his program to support home ownership. Help to Buy allows people to purchase a property costing as much as 600,000 pounds ($965,000) with a down payment of as little as 5 percent.
A tax on foreign-owned property “is definitely a political move, as polls in the past suggest this would garner huge support,” said Matthew Pointon, a property economist at Capital Economics Ltd. and a former Treasury official. The price increases seen in some parts on London mean “some buyers may be viewing this as a market that’s overheating.”
The British Property Federation said imposing such a tax may damage economic growth because penalizing people who want to invest in Britain may slow the number of homes being built.
Osborne raised a homebuying tax to 7 percent from 5 percent for properties priced above 2 million pounds in March 2012. He refused to comment when asked in a BBC interview last week whether he was considering a new sales tax on foreign homeowners.
“I’m not going to comment on specific tax affairs -- it’s not a leak that comes from anyone near me,” he said. “The only reason I don’t want to deny it is because I don’t want to then get into a whole list of other things you are going to ask me about.”