A new report suggests Capital Gains Tax changes coming into effect next year are worrying a large majority of wealthy overseas buyers considering investing in UK homes.
Under the changes which come into effect in April 2019, non-resident investors will pay Capital Gains Tax when they sell their ‘additional’ UK homes on a similar basis to the regime that applies to UK nationals.
The rule changes are designed to create a single regime for disposals of commercial and residential real estate and a level playing field for UK and non-UK based investors.
A report by investment advice service Intertrust claims these changes have sparked a wave of uncertainty among investors.
Some 61 per cent of investors surveyed said they were worried in general about the impact of the new system.
The leading concern associated with the changes, cited by 57 per cent of investors, was the amount of transaction costs they will incur when selling.
When asked about their likely response to the changes 32 per cent said that they will need to alter their investment structures.
“With 40 per cent of investors having maintained or increased their allocations to UK property over the last 12 months, the UK has continued to be one of the most popular destinations for overseas capital” according to an Intertrust spokesman.
But he warns: “Whether the UK retains its appeal over the next year remains to be seen. This change to CGT is just one more area of uncertainty in a market already exposed to the unknown outcomes of Brexit.”
This latest survey comes as an estate agent is warning that London is already proving unattractive to many domestic as well as foreign buy to let investors.
James Cameron, director of property management company Vesper Homes, says: “Many investors, both from the UK and overseas, are holding back from investing in London at present. Property prices are just too high and this, coupled with the stamp duty surcharge for second home purchases, means London is not a viable buy to let opportunity, particularly when it comes to new build.
“This doesn’t necessarily mean landlords are choosing not to invest at all, however. We have seen a shift in interest from London to cities such as Manchester where there is great value to be had, lower entry points and the ability to get a decent yield, even with the tax changes.”