Changes that could toughen the capital gains tax regime for wealthy foreigners could further cloud a darkening backdrop in real estate, experts said yesterday. Financial Times

The Treasury wants to clamp down on offshore trusts that allow 'non-domiciled' residents to escape tax on their UK investments. The move comes as prices are already falling in commercial property amid widespread fears of a prolonged slowdown.

More than half the £1m plus properties in central London are sold to 'international' buyers, according to research from Savills. Most of those are 'non-doms', says Lucian Cook, head of residential research at the group.

'They would be quite concerned about possible changes to the tax environment, given that this is one of the handful of reasons that have attracted them here,' says Cook. 'The tax-favourable status is one of the four pillars which make London popular, along with its financial status, its secure political environment and the idea that it is the place to be.'

In residential property, non-doms accounted for more than 70% of homes over £4m sold in the 18 months to June 2007, according to Savills. Their spending power has been a crucial driver of rapid house price growth in central London, where values have leapt about 40% in a year.