| LONDON, Feb 18 (KUNA) -- As the housing market hots up and prices continue to rise the debate has re-ignited whether measures should be imposed to curb property cash buyers at the luxury end of London, driven mainly by foreigners.
Analysts said wealthy foreign investors "could drive the housing market out of control" as they could afford the most expensive properties in cash.
The Governor of the Bank of England, Mark Carney, admitted in a recent interview that such foreign buyers are "immune to any measures his Central Bank may introduce to control an overheated sector".
The argument led to renewed calls for the need to introduce a mansion tax on millionaires' homes.
These proposals were already mooted last year by the Liberal Democrats and backed by the opposition Labour party, but opposed by the Conservatives, analysts noted. While Carney played down any immediate risk of a nationwide "housing bubble", he said the bank was ready to use mortgage rates and lending rules to keep it in check should the situation arise.
However, these measures are ineffective in London, where the price of an average house is rising by more than 1,000 pounds a month - because foreign buyers do not rely on loans, the analysts pointed out.
The Liberal Democrat and Labour politicians have proposed the annual charge of one per cent on the value of a house worth over two million pounds - meaning that someone living in a three million pounds house would pay 10,000 pounds a year. But those opposing this measure, including the London Mayor, Boris Johnson, argue that 10,000 pounds on a three million pounds house is not going to have "a catastrophic effect on the owner, when house-price inflation outstrips one per cent every year".
Meanwhile, the analysts observed that investors from the Middle East and Asia have decided to buy multimillion-pound mansions and apartments in fashionable areas of London, hence helping "to fuel the price war".
In addition, figures released here showed that South Asian buyers account for two-thirds of new London homes sold before completion, according to Land Securities Group, the largest U.K. real estate investment trust. In the meantime, it was revealed that four out of 10 homes bought for more than one million pounds in the British capital were purchased by foreign investors.
Russians, Indians and Italians were the biggest non-British buyers, according to official figures released last week.
Furthermore, in central London, about 28 percent of home buyers in the two years to June last year didn't live in the U.K, according to broker Knight Frank. Last December, the Chancellor of the Exchequer, Finance secretary, George Osborne announced a new capital-gains tax that foreign owners of property in the UK, that is not their main residence, will pay capital gains tax.
This means that the current exemption from this tax for non-UK resident owners of residential properties will be removed from April 2015 on future gains. A consultation on how best to introduce this tax and its percentage will be published in early 2014, Osborne announced.
But the experts cautioned that this is unlikely to have much impact on overseas buyers.
The change to the Capital Gains Tax rules was widely expected and brings the UK in line with other key property investor markets such as New York and Paris where equivalent taxes can approach 35% to 50% depending on the owner's residency status. Currently foreign buyers are credited with pushing prices in London, especially in the prime property sector, higher than in other parts of the country, the experts said. ' On the other hand, the experts said that Capital-gains tax rates for second homes of U.K. residents range from 18 percent to 28 percent. (end) he.rk KUNA 180923 Feb 14NNNN
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