A range of property and investment experts have warned the government that the new capital gains tax, imposed on foreign property investors, will damage Britain's ability to compete across the world.
Following UK Chancellor George Osborne's Autumn Statement, foreign property investors would have to pay CGT in a bid to prevent a housing bubble from forming and to rake in lucrative reserves for the Treasury.
However, experts warn that it could potentially ward-off future foreign investors from entering the country and therefore place a strain on economic growth.
"Although [the foreign property CGT] may represent a valuable 'landgrab' of tax revenue from wealthy foreign property owners, today's announcement could have significant effects on the UK's attractiveness as a destination for property investment from a number of emerging economies," said Ronnie Ludwig, partner in the Private Wealth Group at Saffery Champness.
"The potential knock-on effects of these changes cannot be ignored, as many foreigners who invest in prime London property also make beneficial investments in UK businesses and other assets. We may find, as a result of today's announcement, that they start to look elsewhere."
Impact on Investors
People living in Britain pay 18% CGT and 28% if they make a profit when reselling a property that is not classified as their main home.
"Britain welcomes investment from overseas but it's not right that those who live here have to pay CGT, but those who are non-residents do not," said Osborne.
"From April 2015, non-UK residents will have to pay CGT on property in Britain, including selling of that property."
However, the property industry expressed concern over plans to charge a CGT on foreign residential investors from April 2015, but has welcomed the Chancellor's decision to at least consult on the proposals before their introduction
"If the government seriously wishes to make housing more affordable then it must encourage investors to deliver more homes, not fewer," said Liz Peace, chief executive of the British Property Federation.
"The positive benefit that overseas investment brings to the UK is therefore vital, and government should do all it can to nurture it.
"This measure will raise little more than £40m a year, and yet may do far greater damage to institutional investment in the private rented sector, and to housing supply more generally.
"Nevertheless, we are pleased that Government has heeded our warnings and has committed to consult on these proposals."
Other experts say that the government should now release a guide into how the foreign property CGT will be implemented.
"A consultation on how best to introduce this will be published in early 2014," said Andrew Sneddon, Head of Tax at law firm Trowers & Hamlins.
"Hopefully this will be limited to bringing individuals within the scope of CGT and will not involve a reconsideration of the existing reliefs, such as those available to companies which own high-value residential properties in the UK for business purposes.
"It is unclear whether there will be any reliefs available to people affected by the change and whether it will apply to all properties and not just to properties worth more than £2m.
"This is yet another attack on wealthy foreigners who, by the way, do not vote, and there must be a concern that this will be a further disincentive to invest in the UK."