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London Still an Attractive City for Wealthy Foreign Buyers

A new report from property agents Aylesford International has shown that London is still attracting a vast number of overseas property buyers despite the high tax rates on London’s high value property owners.

The city remains attractive to international buyers due to its status as a global financial centre and it is currently top of the Christie’s International Real Estate Index as the most important city worldwide for luxury real estate. London is also a favourite as international buyers who do not reside within the UK do not pay tax on their worldwide income. This, along with London’s reputation for high quality educational establishments as well as good culture and leisure activities, has encouraged many international residents to purchase property in the city. Political stability and its sound legal system also factor in.

London’s property market is in a league of its own when compared to the UK as a whole. Average property prices in other regions have been static or have struggled in recent years whereas the prices in Kensington and Chelsea have risen by 53% over the last four years alone. The average house price in these areas can cost over £1 million. International buyers are profiting from the weakness in pounds sterling when compared to international currencies.

Although worldwide income is tax free for foreign nationals not residing in the UK, they may opt to pay tax on this income if they want to get out of the annual levy they must pay should they have resided within the UK for seven to 12 years. This costs £30,000 and it rises to £50,000 if they been resident in the UK for over 12 years. Despite these costs, international buyers are still attracted to London property.

Reforms have been made to the tax liabilities of owners of property worth £2 million or over. Buying through a company structure is the most expensive with the rate increased to 15% whereas the rise for those buying privately was 7%. The property tax regime for buyers in London differs from other countries. For example, Capital Gains Tax on the sale of a second home in France rose from 19% to 34.5%.

The international interest in prime central London accounts for the majority of property sales and purchases when compared to the rest of the UK. House prices have risen to a significantly high amount when compared to other areas of the UK such as the north.

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