Taxing Londons Property Market
Estate agents have witnessed a considerable rise in the number of second home-owners and long term investors placing their central London properties on the market as speculation mounts that the government is set to hike the capital gains tax rate in the 2010 budget, due to be announced in the weeks ahead.
Todays current flat rate of 18% was established in 2008 and replaced the variable rate that was linked to income tax rates and taper relief. James Hyman, partner for residential sales at estate agent, Cluttons, said: "The budget will be more important for the property market than the election. Many are concerned about a possible rise in CGT particularly investors and those with second homes in the form of city pieds-a-terre who are looking to sell. While stock in the capital remains historically low, we have noticed a trend that the properties that are coming to the market are from investors wary of a possible capital gains tax hike and cashing in on the current high prices being achieved.
At the time of their statement, Cluttons suggested that additional tax measures announced by the then Labour government would significantly reduce the buying power of London's better-paid professionals and entrepreneurs. Those measures included the levying of a 50% tax rate on income exceeding 150,000 per annum, the removal of personal tax allowances for those whose earnings exceed 100,000 a year as well as the 50% payroll tax on banking sector bonuses that exceed 25,000.
The previously announced changes to income tax bands and banks bonuses will already have severe repercussions for the Central London property market as liquidity is greatly reduced. A hike in CGT on top of this could have a serious impact on property values," Hyman observed.
Despite increasing dissatisfaction with the UKs tax system among investors, Cluttons predicted that London's property prices would rise sharply, by up to 6%, by the end of 2010 followed by an additional 4% increase during 2011.
Offshoreresource.com describes the forecast as wishful thinking and cites the imminent arrival of austerity measures designed to reduce the UKs vast debts as the 800lb gorilla in the room that many estate agents and other vested interests conveniently ignore. The Cluttons prediction - unsurprisingly -contrasts sharply with a mere 1% growth forecast for the rest of the UK.
The Cluttons house price report also predicted that rents were set to rise by 7% over a two year period, which would benefit those buy-to-let investors who hadnt simply walked away from their investments during the initial throes of the property downturn.
Offshoreresource.com say that there is little investors can do about the impending austerity measures or the price falls that it believes are on the way but suggested that sellers owning property outright, without mortgages or other encumbrances, could potentially reduce the impact of higher CGT by using offshore companies as holding entities for their properties.
Todays current flat rate of 18% was established in 2008 and replaced the variable rate that was linked to income tax rates and taper relief. James Hyman, partner for residential sales at estate agent, Cluttons, said: "The budget will be more important for the property market than the election. Many are concerned about a possible rise in CGT particularly investors and those with second homes in the form of city pieds-a-terre who are looking to sell. While stock in the capital remains historically low, we have noticed a trend that the properties that are coming to the market are from investors wary of a possible capital gains tax hike and cashing in on the current high prices being achieved.
At the time of their statement, Cluttons suggested that additional tax measures announced by the then Labour government would significantly reduce the buying power of London's better-paid professionals and entrepreneurs. Those measures included the levying of a 50% tax rate on income exceeding 150,000 per annum, the removal of personal tax allowances for those whose earnings exceed 100,000 a year as well as the 50% payroll tax on banking sector bonuses that exceed 25,000.
The previously announced changes to income tax bands and banks bonuses will already have severe repercussions for the Central London property market as liquidity is greatly reduced. A hike in CGT on top of this could have a serious impact on property values," Hyman observed.
Despite increasing dissatisfaction with the UKs tax system among investors, Cluttons predicted that London's property prices would rise sharply, by up to 6%, by the end of 2010 followed by an additional 4% increase during 2011.
Offshoreresource.com describes the forecast as wishful thinking and cites the imminent arrival of austerity measures designed to reduce the UKs vast debts as the 800lb gorilla in the room that many estate agents and other vested interests conveniently ignore. The Cluttons prediction - unsurprisingly -contrasts sharply with a mere 1% growth forecast for the rest of the UK.
The Cluttons house price report also predicted that rents were set to rise by 7% over a two year period, which would benefit those buy-to-let investors who hadnt simply walked away from their investments during the initial throes of the property downturn.
Offshoreresource.com say that there is little investors can do about the impending austerity measures or the price falls that it believes are on the way but suggested that sellers owning property outright, without mortgages or other encumbrances, could potentially reduce the impact of higher CGT by using offshore companies as holding entities for their properties.
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