Could Bob Dylan lyrics could ring true for the London property market? As domestic buyers are pushed to the sidelines by prices and low wage increases, is the picture any rosier for foreign investors. Much of the investment generated by foreign investment falls within the non-resident sector, where property is purchased for mainly investment reason. This sector of investors have distinct tax advantages. They are exempt from capital gains on sales for the time being and if purchased through corporate entities avoid inheritance tax. The new tax on corporate entities owning properties (ATED) is seen by some as an acceptable price to pay. However, Ed Millband’s proposed new mansion tax may make the burden even heavier as a tax on London properties worth 2 million and above will hit the foreign investor sector the hardest. Also on the cards is a revision of the non-resident rules on capital gains tax, which is likely to be introduced in April 2015 taking away the previous exemption. In addition for the resident non-domicile community living in London, the removal of the use of foreign assets as security for UK bank loans may also dent confidence.Therefore, are we likely to see a cooling off from foreign investors in the London property market? Possibly, but in terms of capital accrual there is no better place to invest your Euro’s for the time being and provided you plan it right it could be a good pension pot for the future. However, Bob may be right when he sang
"There's a battle outside
And it is ragin'
It'll soon shake your windows
And rattle your walls
For the times they are a-changing"
London’s soaring home prices, which peaked this year, have pushed buyers to the sidelines. Lending restrictions and sluggish wage growth have also curbed demand, now at a more than six-year low, as buyers wait for values to decline further. It costs about 25 percent more a month to pay a 95 percent loan-to-value mortgage on a London property than to rent the equivalent home, according to broker Cushman & Wakefield Inc. “We may be at a point where it’s just not affordable for people to buy any more, so you get a ceiling effect,” said Philip Lachowycz, a U.K. economist at consulting firm Fathom Financial in London. “People have changed their view on the housing market.”