Press Release: Mansion Tax would penalise London's Long-term homeowners
Fri 09 Mar 2012
- 2m mansion tax would hit long-term London owners, with a 2m London home costing 524,326 in 1995
- By 2021, the average property in Kensington & Chelsea would face 2m mansion tax
- Mansion tax would disproportionately hit London, with 81% of all 2m properties sold in the capital
- Practical issues surrounding valuation would make tax unviable
An annual levy on properties worth more than 2m would not just affect cash-rich buyers and homeowners, but long-term homeowners in areas which have seen rapid price growth. Analysis of Land Registry data shows that in Kensington & Chelsea, the average property now valued at 2m would have cost just 392,082 in 1995, while the average 2m London property would have been worth 524,326. In contrast, an average property in England and Wales now worth 2m was worth 771,903.
The rapid rise of house prices in Central London means that if the 2m threshold remained stationary, the average property in Kensington & Chelsea would be liable for a 2m mansion tax by 2021. In the City of Westminster, given the annual rate of house price inflation, the average property would be affected by a mansion tax by 2025.
Peter Rollings, CEO of Marsh & Parsons comments: "Its clear that its not solely super-rich buyers who would bear the brunt of a new mansion tax - but long-term homeowners that may not be cash rich but happen to have lived in an area that has seen house prices climb rapidly. In effect, such a tax would simply penalise long-term ownership in areas that are now highly sought after."
London would be disproportionately affected by a 2m mansion tax. 81% of sales of property worth more than 2m in England & Wales take place in London, with increasing prices meaning the number of 2m homes sold in London is currently rising by an annual rate of 10%. In fact, 2m property sales make up 1.3% of monthly sales in London, compared to 0.2% in England and Wales as a whole.
Peter Rollings continues: "At a time when the housing market is fragile, targeting the only vibrant part of the market is sheer folly, and risks undermining Londons global appeal to wealth-creating business. The government should be considering how to boost UKs housing market at all levels rather than considering any new deterrents to home ownership in central London."
"The current stamp duty tax is already outmoded and iniquitous, failing to take into account the fact that house prices vary regionally. An additional property wealth tax would only exacerbate the existing bias in the property tax system against London and the South East, where prices continue to rise while they weaken in other parts of the country.
"But there are practical flaws too. If an annual levy is to be accurate and fair, it would require regular revaluation to take account of changing house prices at a local level. Not only would the sheer logistics of this exercise be a costly undertaking, but the tax could even stimulate price bunching under the threshold. Its conceivable that buyers like families trading up would simply look to avoid moving into homes beyond the 2m mark to avoid the added expense, and vendors would have to price accordingly undermining the number of properties actually able to be taxed."
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For further information please contact:
The Wriglesworth Consultancy, Dan Pike / Neil Mackwood, 0207 427 1430 / 0207 427 1434
Marsh & Parsons, a multi-award winning estate agent, has been part of the London property scene since 1856. With 15 offices situated in prime positions across central, west and south west London, they have an intimate and extensive knowledge of the area. Marsh & Parsons services include residential sales and lettings, property management, new homes, developments & investments, professional surveying and corporate & relocation services.
A business that is built on energy, agility, professionalism and knowledge, Marsh & Parsons business aim is to be the agent who not only understands the local area around their offices better than any other agent, but is also at the heart of the community. They believe that Local know-how will achieve better results and make the difference for their clients.