Possible Foreign Buyer Tax in Britain

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Britain may introduce new taxes on foreign investors as a response to the large increases in London's home prices, Deputy Prime Minister Nick Clegg said in a conference this week.  

A growing demand from foreign buyers, especially from Asia and the euro zone, has pushed prices and created concern of a property bubble as Britons are largely priced out of the market. 

The government is now reviewing a proposal to increase taxes for foreigners before Chancellor George Osborne's economic update to parliament on December 5, Mr. Clegg said.

"We certainly need to make sure that people who invest very large amounts of money into property in central London locations...pay their fair share of tax in those transactions," Mr. Clegg said. 

"That is why we are looking at options like a differential application of capital gains tax to those kind of transactions," he said.

Currently, Britons pay a capital gains tax of approximately 28 percent on any profit from the sale of a property that is not considered their primary home. However, foreign property investors are exempt, Reuters reports. 

Central London has witnessed recession-defying price hikes in the last couple of years. An influx of foreign money has left parts of the London property market "divorced from and dislocated from the rest of the economy," Mr. Clegg said.

However, the government must balance between keeping the market affordable for first-time home buyers and keeping Britain's status as an open economy.