Filed under: Tax
George Osborne may be blaming London house price rises on foreign investors but he's conveniently glossing over the part his property policies have to play in the upward trajectory of living in the capital.The chancellor is planning a capital gains tax specifically for foreign owners of British property in the autumn statement in December.
Currently foreign property speculators get a pretty good deal in the UK, while Brits have to pay CGT if they make a profit from any house sale other than their home, overseas investors are exempt from any tax on profits they make on any property.
Under the new plans foreign investors would be liable to pay CGT.
This is an obvious money-raiser for the Treasury and a vote winner for a political party, which has made getting people on to the housing ladder its core policy. Who doesn't like the rhetoric of taxing those who don't live here and just rent out their properties at extortionate rates to Brits who can't afford to buy - apparently 65% of property bought by overseas investors is to rent out.
However, this is overlooking a crucial part of the property puzzle. It's not just foreign investors who are pushing up London house prices, Osborne's Help to Buy scheme is flooding the market with buyers eager to get on the ladder.
This demand is not matched by supply and the properties on sale are ticking up quickly. The latest Rightmove study states that London house prices increased 10% in October (although these figures are collated by asking prices, not purchase prices).
And these 'unsustainable' house price increases, as Rightmove puts it, are not just affecting the Kensington super mansions purchased by oligarchs they're affecting family homes and one-bed starter flats.
The point is that foreign investors may be pushing up the cost of a super mansion or a pied-a-terre in Chelsea but they're probably not investing in Haringey or Deptford, but the prices there are still rising.
Osborne said he wasn't worried about Help to Buy creating a housing bubble but maybe he has now rethought his policy, changed his mind and has now made up some spurious tax as a way to blame foreigners for house price rises when in fact it is his misguided policy that is to blame.
I've nothing against people investing in this country being subject to the same tax rules as we are, but Osborne needs to look further than the end of Kensington High Street to realise what's really going on in London.