London Prime Property has become an international asset in the same way as any other tradeable asset from gold to bonds. It may be that the majority of properties in Zone 1 are now owned by foreign non residents. Syrians and other Arabs, Russians, Chinese: the London Property market has attracted speculators from around the globe. Increasingly, however, these new owners do not let these properties, they simply leave them empty. Walking in some central London neighbourhoods at night is a sobering experience- there are few lights on, and the economic impact is growing ever more severe.
The reasons why London Prime property became so attractive are many and varied, but the primary reason is that the UK does not tax these empty properties. Council tax is not levied when no one lives at the property, and Capital gains and VAT can be avoided very simply.
This gross distortion of London Prime property prices is destroying the city and the country. As George Osborne seeks to reflate the property bubble, the fact is that this may simply lead to significant transfers of wealth away from the UK.
I have rarely seen a more obvious case where a land tax should be levied. It is ridiculous at a time of major housing shortages in the UK to permit such a significant portion of the housing market to simply lie idle. In my view, apart from a land tax, foreign non-residents who own UK property should at least pay a punitive capital gain rate: announced early enough this might provoke major activity and begin to de-stress the property market and create more normal investment conditions. As the rest of the UK market stagnated, London Prime has doubled over four years: this is insanity caused by our failure to tax efficiently and it is time that some of these ill-gotten gains were returned to the UK.