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Foreign Uk Homebuyers To Be Subject To Capital Gains Tax

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Apologies if there is a thread on this already, couldn't see it. Might make things a bit wobbly at the top end maybe?

http://www.zerohedge.com/news/2013-12-04/its-payback-time-foreign-uk-homebuyers-be-subject-capital-gains-tax

Back in September 2012 when we, correctly, suggested that one of the main drivers of demand (and increasingly becoming the only one) for US housing, especially in the mid and high-end, was foreigners - particularly of the oligarch persuasion - who come to the US to park their embezzled and otherwise ill-gotten funds, courtesy of the NAR's anti-money laundering exemptions, which means that they can buy any house, sight unseen, cash upfront (recall that a record 60% of all home purchases are all cash, which explains why mortgage bankers are being fired by the thousands left and right), no questions asked. One thing we made very clear, though, is that since one never actually buys the real estate, but merely rents it from Uncle Sam (or any other Development Market host nation), there is little preventing the host from cranking up the tax system, or outright changing it, when the need to raise funds strikes. After all what rights do criminal foreigners with multi-million homes in New York (or San Fran, or London, or any other major metropolis that is the target of offshore capital) actually have.

Which is why, over a year after this prediction, we find that if not the US (yet) then certainly London, where the housing bubble is greater than anything seen in the US thanks to Russian and Asian hot money, is doing just this.

Earlier today, the London Assembly passed a motion welcoming a possible move by the government to bring in capital-gains tax on foreign investors selling a home in the city. The motion was passed today with 13 votes in favor and 6 against, according to an e-mailed statement by the 25-member assembly, whose main function is to hold the capital’s mayor to account.

The populist angle was naturally present to justify this decision: "Londoners’ right to own a decent home must be put before speculative investors in London’s property market,” assembly member Tom Copley from the Labour Party, in opposition nationally, said in the statement. “London property is becoming a global reserve currency for people to keep their money and to make money out of London property.”

That actually is a spot on and very accurate assessment, especially in a world in which the governments of these same nations (recall that the US Mint is the first to propose a gold-backed Bitcoin token) for clear reasons, turn a blind eye to various forms of below the radar money transfers, many involving Bitcoin. After all, what better way to "honeypot" and trap foreign capital than by making inbound cash transfers easy, and then once the real estate "reserve currency" has been acquired, to change taxes and force foreigners to pay up for the privilege of having been allowed to park their illegal capital there in the first place.

As Bloomberg reports, the full passage of this tax proposal is likely only a matter of time now:

Sky News television reported a month ago that the government is considering extending capital-gains tax to foreign investors. Treasury minister Sajid Javid indicated last month an announcement was likely when Chancellor of the Exchequer George Osborne makes his Autumn Statement to Parliament tomorrow.

Frankly, the only question we have is why it took London so long, although "building up a critical mass" of future capital gains taxpayers is probably the answer.

And soon, after this has been tested in the UK, where will it go... but to the US.

We would not be surprised if the ultra-luxury segment in US housing suddenly becomes just a tad wobbly as foreigners seek to quietly but promptly sell now and avoid capital gains, before, like in London, this becomes the law in the US next. Who knows: lesser things have popped housing bubbles in the past.

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They get a passport and eventually can become British if they buy a house so no capital gains tax paid.

Why wouldn't they have to pay if they become British? I thought the whole point about CGT was at the moment only the British do pay when they sell a second property, so sort of financial apartheid against the British?

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After all, what better way to "honeypot" and trap foreign capital than by making inbound cash transfers easy, and then once the real estate "reserve currency" has been acquired, to change taxes and force foreigners to pay up for the privilege of having been allowed to park their illegal capital there in the first place.

I suspect this as well. I think they're doing it now because the market has peaked and they have to spring the trap before too many investors pull out and London crashes big style. The recovery is locked in!

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After all, what better way to "honeypot" and trap foreign capital than by making inbound cash transfers easy, and then once the real estate "reserve currency" has been acquired, to change taxes and force foreigners to pay up for the privilege of having been allowed to park their illegal capital there in the first place.

I suspect this as well. I think they're doing it now because the market has peaked and they have to spring the trap before too many investors pull out and London crashes big style. The recovery is locked in!

Lets hope so!

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Why wouldn't they have to pay if they become British? I thought the whole point about CGT was at the moment only the British do pay when they sell a second property, so sort of financial apartheid against the British?

They would claim their UK house was their main home.

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from April 2015. London crash (followed by rest of UK) in the next year and a half? :)

He's clearly doing nothing material to disturb the bubble prior to the GE. Sentiment is another matter, of course.

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They would claim their UK house was their main home.

Not sure they would qualify for that if they have switched their "main home";

https://www.gov.uk/capital-gains-tax/capital-gains-tax-on-property

Private Residence Relief

You won’t have to pay Capital Gains Tax when you sell your own home if both of the following apply:

  • it’s been your only or main home for the whole time you’ve owned it
  • you’ve only used it as your home (for example, you haven’t let it out or used it as a business premises)

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The French way seems fair wrt Capital Gains Tax

http://internationalliving.com/real-estate/countries/france/taxes/

If you sell your French property during the first two years of ownership, you will be liable for capital gains tax at 33%. A discount of 5% per year is allowed after the second year of ownership, with the effect that after 22 years any gain is not chargeable to tax.

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Hmm.

Capital gains taxes on such properties will kill HPI, which IS the main motivation behind any GDP increases seen in the UK.

I don't know what will happen there, but I would lean towards nothing.

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from April 2015. London crash (followed by rest of UK) in the next year and a half? :)

Gives them time to sell up, bank the profits, reload and avoid paying any tax.

Like a massive bed & breakfasting exercise for billionaires from their best fwends forever George and Boris.

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