We warned recently that we can expect a lot of “talk” from politicians over the coming months as each party tries to cosy up to voters before the election. As said, it was likely that property in London is likely to become a topic for debate and the target of some “easy wins” for the government.
- No-one likes the rich…
- Only a tiny fraction of a percentage of the electorate would be affected by, say, a mansion tax on properties worth £2m+
- Rich foreigners are even less popular with your average voter
The fact that many voters seem to be swayed by what politicians say has always amazed me. It is a triumph of hope over experience which reminds me of the words of two reasonably well-known politicians:
“Since a politician never believes what he says, he is quite surprised to be taken at his word” – Charles de Gaulle
“The best argument against democracy is a five minute conversation with the average voter” – Winston Churchill
So what has this got to do with prime London property, I hear you ask?
It has been rumoured that the government is considering imposing Capital Gains Tax on foreign owners of British Property. Now in the first instance it should be noted that this is a rumour – a rumour that has no doubt been leaked by the Conservative party to curry favour with the more myopic voter. They have refused to comment on the story and any announcement will be made on 4th December.
Although don’t hold your breath…
But what would happen if they decided to impose CGT on overseas buyers? Well who knows but I would venture that it would have very little effect just as it has little effect on UK investors who own more than one property and have to pay CGT. This is not to say that there will not be any change in demand. This is an email I wrote this morning to a British client who asked my opinion on the rumour:
“Unfortunately I expect there to be a raft of such rumours and noise from politicians in the run up to the election. The treasury has admitted that the tax will not actually raise very much money and I expect that it will hit the new-build market more than the mainstream market as most overseas’ investors seem to focus on this type of building and are more motivated by the profit potential.
The international money that has piled into the prime central London market tends to have different motivations for buying and the favourable tax regime is the icing on the cake. If it were to ever become policy it would certainly have some effect on demand but I expect that it would be short lived – the rise in stamp duty and effectively abolishing the use of “company wrappers” to acquire property being a case in point.
Of course, there could be wider implications if it is perceived that London is becoming an unfriendly place to do business/invest. This is more likely to happen if Labour win the next election and some of their bleating – especially Milliband and that …………, Ed Balls – in the run up to the election could well be destabilising. Then again this could offer an opportunity to those who buy while others are waiting and watching.
I am afraid I cannot give you a definitive answer as to what the effect will be as I would be making it up!
If you do have any questions or thoughts on this matter, please make contact. I please get in touch with us here.