The party conference season is in full swing, tax is on the agenda, and Vince Cable, the Liberal Democrat shadow chancellor, has lobbed a hand grenade at the top of the housing market. He wants to levy an annual 0.5% tax on properties worth more than £1m. It would raise an average of £4,000 per affected household (the first £1m on a property’s value would be exempt), or £1.1 billion a year, which he would direct towards the lower-paid.
The Lib Dems will not form the next government, but opposition ideas are there to be stolen. What’s the betting somebody stands up at Labour’s conference in Brighton this week to say that it makes sense (although I’m not sure it will fly at next week’s Tory conference)?
Plenty of countries have property taxes, but so do we. The Lib Dems also want to reform council tax, turning it into a local income tax, but acknowledge that this would take a long time if they got into power. The proposed property tax is a super council tax, except that it is, in the jargon, hypothecated. Local authorities would not receive the revenues, which would be used for raising the income-tax threshold to £10,000.
Is it a good idea? No taxes are without difficulty, but this one has more than most. If no two estate agents can agree on the precise value of a property, think of the rows over official valuations, particularly those taking properties into the £1m-plus bracket.
Then there are regional variations. Liam Bailey, head of residential research at Knight Frank, points out that a £1m house may be a mansion in some parts of the country, but relatively modest in London and the southeast.
The mega-rich did not get where they are without serious tax planning. Mike Warburton, of the accountants Grant Thornton, says many superexpensive homes are owned by “non-doms” and held offshore. Although he applauds the aim of taking the low-paid out of tax, he doesn’t think much of the property tax. “This idea doesn’t stack up,” he says.
Last, there are the perverse incentives. Just as the windows tax, introduced in the 17th century, had the unintended consequence of encouraging householders to brick up windows, so this would discourage people from enhancing properties. A few cards on bricks in the drive should be enough to keep a property below £1m. Back to the drawing board on this one, I think.
– The property market in prime central London is continuing its recovery, with prices up by 4% from June to September, according to Savills. The price of top-end properties in south west London rose by 8.4% during the same period – the fastest such increase since the boom time of the first half of 2007. Yolande Barnes, head of the agency’s research department, says that the rises are due largely to a combination of low supply and high pent-up demand. The market for “ultra-prime” (£15m-plus) properties, however, remains largely flat.
– There are signs that the neww-build sector is coming back to life. The National House-Building Council says that in the period from June to August, it received 24,246 applications to build new homes – an increase of 2.5% on the previous quarter. Half of the regions across the UK showed an improvement; the northeast reported a rise of 16%. (David Smith, The Sunday Times)
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