UK property industry fears Chancellor will scare away super-rich buyers

LONDON | The British Property Federation issued a warning Thursday to Chancellor George Osborne ahead of possible Treasury action to close a stamp duty loophole through with foreign fortunes would be avoiding tax. The bill, according to official calculations, amounts to £1 billion, but UK’s property sector said that Osborne

“must tread carefully with ‘super-rich’ stamp duty reform” and “tread lightly with any anti-avoidance intervention.”

The BPF admitted there is a the case for introducing targeted measures to ensure purchasers of high value residential property pay their share of Stamp Duty Land Tax, but it fears changes could be applied indiscriminately across UK property markets. The dynamics and economics of the commercial property market are very different from the top priced residential market, the statement of the Federation read, and

“the impact of a general clampdown could be disastrous, especially in regional commercial property markets.”

Peter Cosmetatos, director of finance at BPF, urged the government to correctly identify the target of any new measures aimed at stopping stamp duty avoidance by so-called super-rich foreign buyers of homes in the UK with a multi-million tag.

Why does the industry tremble over a government move that seems only fair? BPF’s own picture of the sector shows that the commercial investment market still is fragile, and confidence remains weak and liquidity limited particularly outside central London.

“The use of holding structures is widespread for a variety of commercial reasons, especially where there is, or may be, co-investment by a number of different parties […] changes could have a dramatic impact on transaction activity, investment volumes and, ultimately, asset values.”

Yet, this is not an economically healthy message, at least not for the rest of home buyers who suffer driven-up property valuations due to the pressure exert by the privileged’s club. In fact, if London’s conservative Mayor Boris Johnson keeps his word, the Chancellor will not even meet reticence from the one politician whose constituents would be the most affected.

“What all these people need to remember, humbugs or otherwise, is that hundreds of thousands of Londoners cannot afford the accountants to help with this kind of avoidance, and that there are hundreds of thousands who cannot afford any kind of property at all, let alone the fleshpots of Cricklewood or Mayfair,” Johnson recently wrote in his weekly column.

British Property Federation’s CEO Liz Peace, chief executive of the British Property Federation, reminded Downing Street that the sector employs over 800,000 people.

About the Author

Victor Jimenez
London contributor at thecorner.eu, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.