Proposed New Property Taxes Will Damage The Market

Britain’s most popular property website, Rightmove, has joined the chorus of housing market insiders calling for caution following a run of rumours and leaked policy proposals from the government ahead of the Autumn Budget.

The property portal has outlined some of the potential ramifications of various tax options floated by the Treasury, using its data to “ask the government to carefully consider the impact of any changes to property taxation to avoid unintended consequences which would risk stalling parts of the market.”

Options thrown on the table in August include replacing Stamp Duty and/or Council Tax with a new annual levy based on property values above £500k, hitting primary residences with Capital Gains Tax, and imposing a new charge on high-value homes (>£1.5mn). Spokespeople from HM Treasury have been at pains to say nothing has been decided yet – but it seems likely that there will be major changes to the property tax landscape before the end of the year, and that changes will target the prime market.

But these are just rumours for now, and important details – such as the mechanics of property valuation for an annual tax – are scant. New proposed taxes are below:

National property tax

- Just under a third (30%) of homes for sale in England are priced at over £500,000, and would be subject to the proposed new annual property tax which would replace stamp duty
- In London, more than half of homes (59%) have an asking price of over £500,000 and would be subject to the rumoured annual property tax if it came in, versus just 8% in the North East
- A fifth (19%) of agreed property sales so far this year in England have been for homes over £500,000 but this varies regionally:
- In London, more than half (52%) of agreed property sales so far this year have been over £500,000
- In the North East, just 4% of agreed property sales have been for homes over £500,000 so far this year
- The average asking price for a home in Great Britain is £368,740:
- The average asking price for a home in London is £666,983
- In the South East, the average asking price for a home is £479,634
- In the North East, the average asking price for a home is £194,799

Mansion Tax

- Just over 1% of all home sales agreed this year have been for properties over £1.5mn, and would be subject to the potential new capital gain “mansion tax” if it came into effect. However, the regional impact is varied:
- In London, one in ten (11%) of homes for sale are in this price bracket, with 5% of agreed sales so far this year being for homes above £1.5mn
- In the South West, 0.7% of agreed sales are in the £1.5mn price band, with 2% of available homes for sale in this price bracket
- In the North East, just 0.1% of agreed sales are in this upper-end bracket, with only 0.5% of all properties available for sale priced at over £1.5mn