'Tax foreign owners to burst bubble'

By  Anna White, Enterprise and property correspondent

It is understood that Mr Osborne could be preparing to announce a capital gains tax on the sale of second homes in the UK that are owned by overseas investors as early as the Autumn Statement in December. 

The policy would address concerns that there is a price bubble in the housing market around London and the South East, which has been created by foreign buyers from countries such as Russia and Greece. 

If introduced, the legislation would also close a loophole that has allowed thousands of wealthy non–resident British expatriates to sell second properties in the UK without paying tax on their profits from the sale. 

Mr Osborne has come under repeated pressure from the property industry to clarify his position on the introduction of a mansion tax amid fears that such a fee on homes worth more than £2m would trigger an exodus of foreign investors from the UK market. 

However, some analysts remain critical of the proposals for a capital gains tax, which it is thought would still do damage to Britain's property market, which is heavily supported by demand for real estate in and around London. 

"This move could make some foreign investors reticent to buy property in London or current owners reluctant to sell," said Lucian Cook, head of research at real estate advisers Savills, commenting on the new proposals that are understood to be under consideration. 

Proposals to introduce a mansion tax that would target Britain's wealthiest homeowners have been strongly encouraged by the Liberal Democrats in the Coalition. 

The Treasury, which declined to comment on the capital gains tax proposals, is understood to have provisionally costed the measure that is contingent on a final decision by the Chancellor. 

Mr Osborne has already targeted homeowners at the top of the ladder, when in the 2012 Budget he introduced a 7pc rate of stamp duty for properties costing more than £2m and annual charges for buyers who transfer homes into a holding company. 

"Following increases in stamp duty of high–value homes and the introduction of associated anti–avoidance legislation, it is very difficult to argue that high–value property is under–taxed," said Mr Cook. 

House prices in the affluent south–western belt around London have increased by 11pc this year, driven up by foreign investors buying in the capital. 

Nationwide Building Society has said in its latest survey that average house prices in October gained 5.8pc compared with the same period a year earlier, but cautioned that prices remain below levels which peaked in 2007. The average cost of a home hit £173,678 last month.