Wealthy foreign buyers continue to view London as an extremely attractive investment destination in spite of the recent surge in tax liabilities for high value property owners, according to a new report published by property agent Aylesford International.
The UK is still viewed as one of the most favourable tax regimes by non-domicile residents as it does not usually tax them on their worldwide income, Property Wire reported quoting the report.
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"Added to this are the attractions of the relative political stability, sound legal system, and safe haven status. Many wealthy purchasers are attracted to London by the wealth of cultural and leisure facilities, along with the well regarded educational establishments that set London apart from other world cities," says the report.
The report also points out that residential property in prime central London continues to perform separately from the mainstream UK housing market. While property prices in other regions have struggled in recent years, average sale prices in London’s most prime borough of Kensington and Chelsea have risen by 53% in the last four years, with the average value of residential property in the borough now being well over £1 million.
And currently, the weakness in sterling compared to other currencies is advantageous to overseas purchasers, the authors of the report opined.
Owners of properties through British and offshore companies are affected by the introduction of an annual residential property tax (ARPT), which came into effect in April 2013.
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By GlobalDataAlso, offshore companies owning property worth over £2 million will also be affected by the extension of capital gains tax (CGT) to the gains made on the disposal of UK properties after 06 April 2013.
Although wealthy foreigners are not taxed on their overseas wealth if they are not domiciled in the UK, they are required to pay an annual levy of £30,000 if they have been resident in the UK between seven and 12 years, and £50,000 if resident for over 12 years. They can opt out of the levy if they agree to pay UK tax on their worldwide income and gains instead.
According to a recent Stonehage Group report, prices of typical luxury goods and services for the ultra-wealthy based in London surged by 4.9% in the 12 months ended April 2013, marking a significant increase in price inflation, following a 1.6% decrease the previous year.
On June 3, PBI also reported that property values in prime central London have risen by 0.3% month-on-month.
