Meaures in the Autumn Statement, including CGT for foreign owners and a boost for regional cities, held few surprises for the property world
Autumn Statement: Winners and losers
To a recession-enfeebled British public, the Chancellor’s decision to impose a tax on wealthy foreigners comes not so much as a piece of bad news, as a positive shot in the arm.
Many people feel it is only fair that, as from April 2015, Mr Osborne has decided to make overseas investors pay capital gains tax (28 per cent) on the profit they make when they sell their UK properties. After all, that’s what British second homeowners are required to do.
“It seems perfectly reasonable to me,” says Hugo Thistlethwayte, of Prime Purchase property-search agency, 70 per cent of whose London clients are overseas buyers. “It doesn’t substantially alter the rationale for buying in London.”
“It will have only a marginal impact on demand and pricing,” agrees Liam Bailey, head of Knight Frank Global Research. “It brings the UK in line with other key investor markets such as New York and Paris, where equivalent taxes can approach 35-50 per cent”.
Phew, is also the reaction from estate agents Savills. “This is the least worst outcome for prime London and means that there will be no mass sell-off as foreigners crystallise past gains, and little incentive to exit or not buy into the London market going forward,” says Lucian Cook, head of UK residential research.
Less enthusiastic is Trevor Abrahmsohn, of Glentree Properties, who specialises in selling multi-million-pound residences in Bishops Avenue, Hampstead, to mainly foreign purchasers.
“It feels to me not so much like a tax to raise money, as an ideological and punitive political move,” he explains. “We have only just had a big rise in stamp duty on top-end properties and there’s still the prospect of a mansion tax on the horizon (an annual levy on homes worth over £2m). Which would be a tax not on profit, but a tax on wealth.
“We ought instead to be encouraging overseas property buyers, who create wealth and jobs in this country.”
And Nick Leeming, chairman of estate agents Jackson-Stops & Staff, agrees: “It will probably raise less than £100 million for the Treasury, and will send out a negative message to international investors,” he adds.
“Tinkering at the edges,” complains Ed Mead, of estate agents Douglas and Gordon, while Karelia Scott-Daniels, of Mayfair-based property search firm Manse and Garret, maintains money is not the defining motivation for international buyers.
“It is the safe political and economic position of this city which is the driving force behind non-resident property investments”, she says.
That said, opponents of the CGT-for-foreigners initiative are anxious that killing the golden Central London goose will stop ripples of prosperity spreading out across the UK pond. A report from Countryside Properties says that in real terms, since 2008, house prices have only risen in 11 out of 326 local authorities, all off those 11 in London.
Hence a welcome for Mr Osborne’s announcement that £1 billion of loan money is to be made available to councils wanting to fund new housing developments in Manchester, Leeds and elsewhere (expected to create 250,000 homes). This on top of news that, compared to this time last year, housebuilding is up by 29 per cent. It is a figure warmly welcomed by construction firms such as Persimmon, Barratt and Taylor Wimpey, though many large financial firms such as Legal and General insist housebuilding should be a much higher and more urgent priority.
It’s an increase which many believe has been kick-started by the government’s Help To Buy (HTB) initiative. Indeed, not only did the Mr Osborne not respond to fears that HTB might overheat the market, he welcomed Virgin and Aldermore into the HTB funding family, pointing out that “it’s not enough to build more houses, if families can’t afford the deposit”. And the National Association of Estate Agents (NAEA) weighed in on his side by declaring that Help To Buy was leading not to a housing bubble, but to market buoyancy.
But it was noticeable how many penny-counting phrases the Chancellor used in his statement, such as “tight disciplines”, “responsible recovery” and “living within our means”. And he warned that lower mortgage rates had been “hard won, but could be easily lost”.
Elsewhere, disappointment was expressed by retirement housing providers and estate agents that the Chancellor had not scrapped stamp duty on lower price houses, below the £500,000 and even £250,000 mark.
The National Association of Estate Agents also raised concerns earlier in the day.
“Owning a home is still out of reach for many people, as wages struggle to keep pace with prices,” declared the NAEA. “It remains a fact that first-time buyers still make up less than a quarter of all property purchasers.”
These minor grumbles, however, were drowned out by the roars from the Tory benches. The economy – and the housing market – seems to be back on its feet. This Statement was a check-up and an aspirin, rather than the open surgery of a few years ago.