Find out why the UK’s strong legal system, favourable tax rules and stable political environment are attractive to foreign investors.
London remains an attractive location for investors from outside the UK because of Britain’s favourable property tax rules.
Non-domiciled residents are not normally taxed on their global income, although from April this year they will be liable for capital gains tax Chancellor George Osborne changed the rules in the 2013 Autumn Statement.
However, the appetite for properties in prime areas of central London is likely to remain strong because the UK’s political environment is stable when compared with other parts of the world and the UK’s strong legal system.
In fact, commercial and residential property in London has become a popular safe haven for investors from Russia, China and southern Europe as a result of the financial crisis in Greece.
Estimates claim that some 70% of newly-built properties are purchased by overseas investors looking to make a strong profit.
Many investors from Russia and China are also attracted to London due to the outstanding cultural and leisure facilities plus the capital’s first-class education and universities.
They approach estate agents in Belgravia, Knightsbridge, Mayfair and other areas of prime central London, rather than other regions of the UK, because prime residential parts of the capital have long provided health returns on investments.
Since 2008, property prices in some UK regions have fallen, while the opposite is the case when it comes to Central London properties. As well as this, many countries in Europe have made life pretty difficult for property speculators, with France introducing a tax on foreign owners of second homes in 2012. The Spanish government has also brought in wealth taxes on worldwide assets for residents and Italy slapped a wealth tax on property owners during the Eurozone meltdown.
Even Switzerland, well known for its liberal tax regime, has introduced some changes to the law. The Lex Weber law emerged at the start of 2013, and has placed a limit of 20 percent on the number of second homes in any community. There are also restrictions on foreigners and companies purchasing property, which means it’s much harder to buy property if you’re a non-resident.
In the long-term, the outlook is positive for the London property market and foreign investors are keeping prices high in popular parts of the UK capital. This is despite the fact that there may be a mansion tax introduced if the Labour Party get in in May and that the market is stabilising in Central London. Other, more traditional investments such as bonds, are not producing high returns and interest rates look set to stay low or even be slashed lower for some time yet. Experts predict that the average house price will rise 25.7% by the end of 2018, meaning that property remains a sure bet for investors both at home and overseas.