Proposal: 5% annual property tax levied on all property owned by those not registered to pay tax in the UK.
By Henry Stewart : @happyhenry
The best taxes are those targeted at behaviours we want to deter. Apart from a small number of property companies, the purchase of UK property by overseas investors brings no benefit to any British voter. Indeed it reduces the number of homes available for people in this country and increases the prices.
I work in Aldgate in central London, where a succession of residential towers are being erected. For One Aldgate, the first to go on the market, I was told by a local estate agent that 40% of the flats were sold in one weekend in Hong Kong. Many of these flats will be left empty and only used occasionally, if at all, by the owners.
A report from Savills in 2013 (http://bit.ly/SavPropty) suggested that 70% of all newly built property in London is bought by overseas investors, with Hong Kong and China purchasers being responsible for 27%. Ironically one of the reasons for the London investment is “increasing restrictions on property speculation and multiple ownerships in many key [Chinese] cities”. There are currently no restrictions on property speculation in London.
There is an acute shortage of property in London and competition from overseas investors helps to ensure prices continue to rise. A targeted property tax, affecting only those not registered to pay tax here in the UK and thus not making any contribution, would either raise substantial revenue for the government or deter such investors altogether, thus reducing demand for property and hopefully reducing prices. Foreign-born individuals who are resident in the UK and pay taxes here would not be affected by the proposal.
There have been some moves even by the current government. In 2013 a special stamp duty rate of 15% was levied on property bought for over £2 million by a company. This April Capital Gains Tax (at 18% or 28%) was extended, for the first time, to non-UK residents that sold UK property at a profit. A Barclays report suggested this might lead to overseas investors selling in advance of the April deadline, but this does not seem to have happened. (http://bit.ly/BarcProp)
The exact level of the tax could be debated. If the main aim were to raise revenue then a rate of 1% or 2% might be best. However if the aim is to deter overseas investment in UK property, then a 5% rate (maybe introduced gradually, starting at 1%) would be preferable. If we agree that we want more UK property to be available to those who choose to live in the UK and pay taxes here, and that we want less demand increasing prices to unaffordable levels, then this new tax is surely common sense.
Contact Details Henry Stewart can be contacted on firstname.lastname@example.org,
or on Twitter: @happyhenry