Following the Chancellor George Osborne's suggestion today to levy a Capital Gains Tax on foreign property owners, Stephanie McMahon, Head of Research for Strutt & Parker gives some thought:

“There is no doubt that London has seen huge price growth. However, it has to be acknowledged that this has been curbed by other government interventions through various tax measures, including Stamp Duty Land Tax. Whilst it is clear that the government are proposing this new measure to take the heat out of London one must ask whether the idea of the ‘bubble’ has been sensationalised. London, Greater London and the country as a whole have very specific dynamics and markets and one cannot talk so generally.

There can be no doubt that further taxing will have an impact on transaction levels in the prime area where between 50-70% of buyers are foreign. The initial response might be almost opposite to the intention, however, as talk around the issue could cause a flurry of activity but it is likely that it will then slow the transaction levels down dramatically as it did following previous interventions.

It must be remembered that his taxation is not a new concept globally. New York for example, has increased their CGT tax from 15% - 23.8% and this caused a huge rush in sales during 2012 adding further heat before sales then dropped off this year. Singapore has an additional overseas stamp duty of 15% to cool their market too. 

Without knowing the full details of how this tax will be enacted and the figures involved it is hard to predict the full repercussions – the devil is always in the detail!

One thing is very clear is that governments around the world are looking very seriously at how they can raise revenue and control their markets. I cannot see these conversations going away, and as each government does this, the money moves to the next prime City further increasing the heat.”