New rules that force non-residents to pay capital gains tax after selling a London home will not discourage foreign investment in the capital’s housing stock.
CGT will now be charged on any gain in value a residential property makes after 6 April 2015. While this could deter some overseas investors buying property in the UK, this country’s stable economy and political system plus its much-admired legal system make London an attractive proposition for investors from around the world, and in particular China and the Far East.
However, the shortage of good quality housing stock on the market in central London – which is demonstrated by the fact that just 3,900 homes worth £1m or more were sold in this area in 2014 – means that many of the 357 high net worth individuals from China who were issued investor visas in the 12 months to the end of September are looking to buy in well-established residential areas such as Wimbledon.
But investors from the Far East are not the only members of the super-rich class attracted to London. Buyers from across the world find the UK capital particularly enticing and Wimbledon also has strong appeal. Top buyers in SW19 including Iranians, Indians, Italians and investors from the Middle East. Wimbledon Village is particularly popular with overseas property investors because of the area’s proximity to the common and many properties are good value when compared with similar homes in Mayfair and Chelsea.
The enduring appeal of London
Another reason why London has retained its status as top of the property pops is the fact that there are so many opportunities available for those looking to succeed when it comes to business. London’s also a cultural and entertainment hub and has some of the best universities and schools in the world.
Therefore it’s somewhat predictable that many of these residents choose to put their money into London’s luxury property market, as traditional investments are failing to produce high returns. What could be better than investing in prime property in the best city in the world?
Prime property is currently the third most expensive in the world at 21 square metres for £800,000 and is highly sought-after.
The new CGT rules could well have an effect, especially when it comes to certain sectors of the market where quick wins are possible for smart foreign investors who snap up multiple units in developments and flip them; however, London property is still highly in demand. This is because the natural growth in values and the healthy rental returns offered in the premium market will assist when it comes to negating the CGT payable on the sale of the property.
We’re confident that London property will continue to be a fantastic investment and that the market will deliver strong returns into the future. The benefits of living in London and the returns that investors will see in both the medium and long-term mean that the CGT and recent stamp duty changes are unlikely to deter foreign investors from seeing the UK market as a safe place for their capital.
Image credit: Property Division