Osborne says no to further tax hike on luxury homes

Bloomberg/London

UK Chancellor of the Exchequer George Osborne said he won’t levy new taxes on residential property as he announced other moves to cut a record budget deficit. The decision may boost London’s luxury-home market.

“We’ve already raised stamp duty on multimillion pound homes and next week publish the legislation to stop the richest avoiding” the tax on sales of residences, Osborne said in his Autumn Statement to lawmakers yesterday. “We won’t introduce a new tax on property. This would require a revaluation of hundreds of thousands of homes.”

Luxury-home prices in central London rose at their slowest rate in more than two years last month as investors delayed purchases ahead of possible new property taxes in Osborne’s statement, Knight Frank said on November 30. Brokers such as Knight Frank, Jones Lang LaSalle and Savills have predicted little change in prime central London home prices in 2013 after years of gains since the financial crisis.

The UK government is weighing an annual levy of as much as £140,000 ($225,000) on properties owned by offshore companies and may charge capital gains tax on the sale of luxury homes by non-residents who aren’t naturalized.

Osborne’s decision to increase stamp duty in March deterred investors from making luxury property purchases, according to Camilla Dell, managing partner at Black Brick Property Solutions, which advises prime-home buyers in southeast London. Those potential buyers may proceed with purchases, she said by e-mail.

“Raising stamp duty land tax has cooled the market by some 30% in the £2mn-plus bracket, so isn’t really achieving a higher tax take,” Dell said. “The autumn announcement should hopefully now restore some confidence in the property market and buyers that were adopting a ‘wait and see’ approach.

Residential real estate transactions are expected to rise 18% to 1.1mn in the year through April 2014 from a year earlier, according to a report by the Office for Budget Responsibility yesterday. Prices may gain 0.7% in the same period, said a non-partisan panel of economists.

UK home prices will gain 0.5% next year compared with little change in luxury property values, Savills said on November 9. Homes in the UK capital, but outside of its best neighbourhoods will rise 1.5%, the London-based broker said.

“The confirmation that there will be no new property taxes will give some reassurance to buyers and sellers in the prime markets of London,” said Lucian Cook, Savills’ director of residential research.