The Chancellor, George Osborne in his Autumn Statement 2013 has confirmed that as from April 2015 foreign owners of UK property will pay Capital Gains Tax.
Foreign investment into the London property market in particular has been hotly debated including in Property118 as a cause for concern. The London market has been rising out of step with the rest of the country with fears of a housing bubble and inflationary pressures putting at risk the UK’s economic recovery.
Indeed it lead to the Bank of England withdrawing its support of the Funding for Lending Scheme to the whole of the UK’s housing market recently in an effort to cool future prices.
Mr Osborne said, “Britain is an open country that welcomes investment from all over the world, including investment in our residential property, but it’s not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence while those who don’t live here do not.”
However I do think it is less about what is fair and more about protecting us from boom and bust pressures caused by the transient nature of foreign investment. Wealthy investors in particular from China and Russia have been buying properties in London as have Eurozone citizens hedging against a possible break up of the single currency.
There was also acknowledgement by Mr Osborne that housing supply must be encouraged to support a stable market and that £1billion will be offered in loans to boost housing developments in Manchester and Leeds, among other sites. Also that the Help to Buy Scheme will be further supported increasing demand and hopefully encouraging supply with Aldermore and Virgin Money adding to the availability of loans to residential purchasers.
Also the Housing Revenue Account borrowing limit which allows councils to borrow against its housing stock is to rise by £300m allowing greater flexibility in the provision of Social Housing. Councils will also be encouraged to sell off the most expensive social housing, Council Right to Buy Schemes will be further supported and rundown urban housing estates regenerated.
On the Banking side, which also has a direct effect on the supply and demand of housing, from the 1st of January 2014, the rate of the bank levy will rise to 0.156%. This is estimated to raise £2.7bn in 2014-15 and £2.9bn each year from 2015-16. Mr Osborne said that it was only right that the banking system continues to support the UK’s recovery.
£100 million of the fines raised from the Banking Libor manipulation scandal will also be given to military and emergency services charities.
Looking purely at Macro economics, growth forecasts for GDP this year increased from 0.6% to 1.4%. Next year revised up from 1.8% to 2.4%, and also up for the following four years to 2.2%, 2.6%, 2.7% and 2.7%. This would place GDP growth exactly where the Bank of England is targeting for the medium term without putting inflationary pressure on interest rates.
Government borrowing and how it is spending public finances and raising taxes is of a wider more political nature and not something I really want to get into in this report.