Asian, Other Foreign Investors May Get Cold Feet On UK Property After CGT Change - Advisors

Tom Burroughes

9 December 2013

Asian high net worth investors have been among the most enthusiastic buyers of UK prime residential properties, encouraged by London’s status as a global financial hub and stable jurisdiction. But last week’s move by the UK government to clamp down on tax breaks on such purchases could curb investment, industry figures warn. One commentator said the move may encourage investors to target commercial property instead.

UK finance minister delivered a 'relatively gentle' budget statement. If you are the owner/buyer of a prime property amidst the background chatter of potential mansion tax, the proceed CGT charge on disposals of property held by non residents will not effect the majority of the market, although it will certainly cool the ardour of foreign investors for London property. In general, an increase in growth and decrease in borrowing, will consolidate already growing confidence which is sure to translate into a very competitive marketplace in 2014.”

Nisha Singh, senior associate in the Singapore office of Berwin Leighton Paisner said: Many other countries charge non-resident property owners CGT so the proposed changes may not drive Asian investors away from the UK market. Clients from Asia are attracted to the UK property market due to London’s safe haven status, the relative weakness of sterling and the strong long term performance of the market."

"What will be interesting is to see whether the tax changes drive investors away from the more traditional UK residential market and towards UK commercial properties. We saw this pattern begin to emerge after the introduction of the new tax regime in April and if the proposed tax changes come into effect it is likely that this will continue," Singh said.