The UK has had the problem that people around the world are buying up properties in the UK, especially London, while not living here. Why do that do that? As an investment. Why London? As house prices crashed in many parts on the world between 2007-2010, this didn’t happen in London. London house prices just only seem to keep going up. There are many reasons for that, one of which is the self-fuelling issue of overseas investors buying London properties which in turn keeps prices rising.
The UK government, from 6th April 2015 will put a spanner in the works to alleviate this problem, by not making it so lucrative for overseas investors. The additional reason why investors like London investments is because of our peculiar capital gains tax laws. In the UK, if you are not resident in the UK, even if you hold UK investments, there is no UK Capital gains tax to pay, so its a tax free investment. Most other countries in the world do not offer such a fantastic deal. Its amazing this tax free investment offer has been going on for so long.
From 6th April 2015, such overseas investors will now have to start paying capital gains tax on UK property investments when they sell them. This won’t have a massive impact at first, since the taxable gain will only be on the rise in property value since 5th April 2015, not when the investor first purchased the house. In this way, the UK government ensure there is not a drop in London house prices as overseas investors try to panic sell before April. However, hopefully, the long term effect will be that London won’t be seen as such a lucrative place to have property investments for those that do not even live here, and stop house prices from rising so fast.
Time will have to tell if house prices are affected. I don’t imagine it would cause prices to come down, just they won’t go up as fast (hopefully).