Russian property owners with a home or property in London have made record returns on their investment

Russian property owners with a home or property in London have made record returns on their investment, owing to a combination of the capital’s recent housing market boom and a weakening rouble.

The value of a luxury property in London has appreciated by 102.7pc over the last five years for Russian homeowners as at the same time as property prices rising the number of roubles to the pound continues to increase.

Russian investors have capitalised on a 71pc rise in prime central London house prices, the strong pound and the rouble’s fall, the rouble has weakened by a third over the last 18 months, mainly due to the situation in the Ukraine.  In comparison a British buyer made a 69pc return, due to the comparatively strong pound, a difference of 33.7%.

According to a new report, Currency Matters 2014, over the last year to the end of the first quarter of 2014, Russian property owners in London have made 33.8pc returns, next to US investors at 17.9pc and British buyers at 7.5pc.

The Malaysia Airlines tragedy which has resulted in David Cameron calling for stricter sanctions on Russia will continue to put pressure on the rouble, further benefitting Russian property owners in the UK capital.

The growth in the property market could lead to a tax headache with the new rules for capital gains tax currently being consulted on and scheduled to be introduced in April 2015.  In the past the planning was simple you waited until you were non-resident and then realised the gain and avoided capital gains tax, but from April 2015 there will be capital gains tax charged on UK based residential property owned by non-residents.  As yet we do not know what form this tax will take, what rate it will be at and what reliefs will be available to non-residents.  We will continue to monitor the situation as property owners could be sitting on a large capital gain which they may look to protect from the new rules.  At the moment it is a waiting game but all such property owners should be aware that planning action may be needed in the first quarter of next year.