A report from Bloomberg said the status of London as a property magnet for foreign buyers may be diminished by a new capital gains tax which will be levied on homes sold by people living overseas. A strengthening pound may also make the city lose its appeal to foreign buyers. George Osborne, Chancellor of the Exchequer, announced on December 5 that the capital gains tax would go into effect in April 2015 but did not specify the rate.

According to the report, foreign investors have been buying London mansions and apartments that cost millions of pounds. As a result, the homes have become unaffordable to many British buyers and development has increasingly become dependent on foreign investors who purchase the homes before they are finished.

Trowers & Hamlins Head of Tax Law Andrew Sneddon expressed his concern about the new tax. He told Bloomberg that the government will put people off by its constant changing of the rules and has made it less tax-friendly for those who want to acquire these properties. He said, "If these wealthy buyers choose to go to Monaco, Paris or New York to spend their summers and their money, what's that going to cost the U.K. economy?"

Citing data from UK real estate investment trust Land Securities Group, the report said two-thirds of new London homes that are sold before they are completed were bought by South Asian buyers. In a Bloomberg interview, University of Westminster lecturer Michael Lister said the luxury real estate market relies on pre-sales to buyers abroad to help finance the development and deal with the increasing costs of land.

Lister, who formerly headed Bank of Ireland's UK property lending, also said that the UK market "only needs a bit of an international hiccup for the buyers to hold back, and then you're really stuck."