What the UK is doing to curb high housing prices stemming from foreign ownership?

VANCOUVER (NEWS 1130) – One day after a report shed some light on Vancouver’s housing issues, we’re looking at how a city halfway around the world is responding to its own problems.

A reporter in London, England is explaining a capital gains tax recently brought in there to target foreign buyers.

People outside the UK who buy a home then sell it for a profit have to pay tax on the profit they make, explains Jonathan Savage with the BBC.

He says this was always the case for people who live in the UK with residential properties in addition to their main homes, but was brought in for foreign buyers last year.

“The additional change is that you used to have between ten and twenty-two months to pay that tax. From this April, you only have thirty days in order to pay that after you complete the sale of your property,” he says.

“So, this is targeting people who are foreign buyers to London, it’s been seen as a safe haven for investors but there’s a great negativity towards foreign buyers in London because there is what we call a housing crisis in London and we need to build 50,000 homes a year, we only have 25,000 homes a year being built, and it won’t be long before our population reaches 10 million. So they’re doing what they can I think to try to deter foreign buyers from buying property and leaving them empty before selling them on as a profit.”

Savage says the average cost of a home in London is 530,000 pounds (about $1 million Canadian), and the average cost of a home in the rest of the UK is 191,000 pounds (about $364,000 Canadian).

He adds prices in London went up 13 per cent last year.

“So, they’re looking at everything they can in order to make the market more affordable for people who have regular jobs because while there was a 13 per cent increase in property prices in London last year, salaries are certainly not keeping pace, and with London continuing to be a popular place for people to come and live, for companies to invest, they need to try and find a way to give people the opportunity to live here. The outcry isn’t specifically against foreign buyers and foreign investors, but that’s one of the things that has been highlighted. So people who are not living here, buying properties and investments and perhaps not living in it or not even letting it out is one of the ways they’re looking at trying to crack down on that and trying to make more property available.”

So, has it made a difference so far?

“It’s certainly too early to tell, although I would say that last year in London, house prices in the centre of London actually started to fall a little. Now these are right in the centre, the five burroughs we call them, the five districts in the centre of London where the wealthiest people live and the wealthiest people own properties. These are the super rich properties where the likes of you and I and I’m sure most of our listeners could never dream of owning a property there, but they have started to fall so it’s possible that this is starting to have some effect. Outside of the centre, the property market is still booming, it’s still very difficult for people who don’t have a property to sell to get on the property ladder,” Savage says.

One report out yesterday found vacancy rates in Vancouver have not spiked and seem to be in line with other large cities in the country.