Yep, the chart at the left. Prime property prices have jumped 51 percent since 2009, thanks largely to overseas investors pouring billions of dollars into places like Mayfair and Knightsbridge. L.A. prices during that same period rose less than 5 percent (that, of course, coming after a steep drop during the recession). But it turns out that all those rich people have been motivated by more than going to good theater. A loophole in the UK tax system has allowed the very wealthy to purchase properties through a foreign company and thus avoid paying a 15 percent stamp duty. But it appears as if the good times are over. In March, Budget Chancellor of the Exchequer George Osborne announced that the loophole is being closed. From Property Wire:
He also announced that the government plans to consult on introducing a 'large annual charge' on £2 million properties which have already bought through companies. Osborne said capital gains tax will also apply on residential properties through overseas companies, to ensure wealthy non UK residents have to comply with the changes. The Government has also issued legislation to close a loophole which allowed people to avoid stamp duty through sub sales relief by putting their home in a trust. "Let me make this absolutely clear to people. If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid. That is the clear intention of Parliament," said Osborne.
Not so fast. From the FT:
Some tax lawyers have already devised schemes to help buyers circumvent the new measures. One such loophole involves them signing multiyear leases that are automatically renewed on a rolling basis, rather than purchasing a property freehold, which would push the transaction over the £2m stamp duty threshold. However, the government and the Solicitors Regulation Authority have warned they will come down hard on anyone using, devising, or advising on such schemes. "There is a very real prospect that the prime London market will pause for breath for a period while buyers absorb the changes to the tax regime," said Lucian Cook, director or research at Savills.