A corollary or two leading from current Mansion Tax speculation

Tuesday, February 19, 2013 by Ed Mead

A Mansion Tax would lead to forced asset sales in Central London and the S/East. This will destroy the capital and balance sheets of property owners above £2m leading to a loss of investor confidence in this significant group of consumers. This in turn could lead to significant redemptions of equity portfolios to make up the hole in domestic balance sheets. It will also, in many cases, destroy pension funding plans for families; 

It is likely that as values fall in the £2m and above category so those who have sold at this price point seek to buy new homes at the sub-£2m level leading to properties in the lower price brackets rising in value so quickly that it takes much of this part of the market away from first time buyers / “average” buyers looking for homes; 

A new residential tax based on asset values will be seen as an indicator that Government cannot resist tinkering with the taxation regime for residential property and will make UK residential property, from the perspective of conservative Institutions / Pension Funds/ Life companies a “high risk “ proposition;

 If the objective of any Government is to raise extra revenue from high value residential property the trick must be to get the owners/occupants to stay in those houses, not sell them and move to houses of lesser value. The best way to do this would be: 

(a)        Introduce new Council tax bands;

(b)        Introduce a supplement charge for those houses that are unoccupied.

One thing this political posturing does NOT do is create a good environment for wealth creation which would ultimately benefit everyone.