The British Property Federation (BPF) is warning that new taxes on foreign investors will only serve to damage the country's reputation as 'open for business', opposed to keeping a cap on prices. Chancellor George Osborne is currently considering levying Capital Gains Tax on overseas buyers in a bid to prevent the upwards pressure the market is having on values in London and the south-east. However, BPF claims his actions are misguided.
While action needs to be taken to prevent a bubble in the south, the problem doesn't lie with foreign investors. Instead, the main driving force behind the cost of homes is lack of supply. The BPF believes that discouraging foreign investors from entering the market will only prevent addition housing stock being built. What's more, the proposals constitute a political risk and could foster market-wide uncertainty that will affect investment on a range of assets, including commercial property.
Liz Peace, chief executive of the BPF, said: "House prices are rising due to a chronic shortage of new homes, not because of foreign investors, and until this supply issue is dealt with it makes no sense to slap kneejerk taxes on people who want to spend money in the UK and contribute to the UK economy. Uncertainty of this kind is hugely damaging to Britain's image as a country that is 'open for business', and far outweighs the paltry sums which this tax would raise."
She added that many important schemes taking place in London rely on foreign investment and by deterring overseas activity, the country will suffer. "We know from bitter experience that some foreign investors will have seen these headlines and will already be thinking twice about whether or not to invest in the UK," Ms Peace said. With just 6.5 per cent of sales by value across the capital as a whole coming from foreign buyers, there is certainly cause for doubt to be cast over the proposals. What's more, the majority of properties sold to this market are high-value. Therefore, the actual number of homes transaction to overseas investors would have been less.
The BPF claims lack of supply is the problem - but is it really? See how the numbers actually stack up and draw your own conclusion in this surprising report - Will more building really ease house prices?
- Tuesday 05 November 2013