The think-tank report cited the UK’s "highly favorable" regulatory and tax environment for foreign buyers as a major factor behind the flow of overseas demand into London residential properties.
According to the study, foreign buyers spent GBP5.2 billion on central London properties last year, compared to GBP3.7 billion in 2010.
The figure equates to almost a quarter of all money spent in 14 central London boroughs, or around 13% of the entire London market, the report added.
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The think-tank urged the Government to act to change this in next week’s Budget.
"There’s a lot of speculation that the Chancellor will use the Budget to tackle the anomalous treatment of foreign buyers of UK property, many of whom use property companies to avoid stamp duty," said Nick Pearce, IPPR director.
"If he does, it’ll be long overdue. Foreign purchases of London properties have reached such proportions that the capital’s prime properties have become a kind of global reserve currency for the wealthy elite of capital-rich countries."
In his last week budget, Chancellor George Osborne introduced new 7% stamp duty for properties over GBP2 million in UK. ?
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By GlobalDataWealthInsight believes that that new top rate of stamp duty may dampen the UK housing market and could encourage foreign buyers to start looking for other locations in which to invest.
Also given the considerable uncertainty regarding the prospects for the UK economy which will, to a large extent, depend on how events in the Eurozone unfold, London housing market’s growing status as new global currency may not last long.
