Mansion Tax Threat Crippling Housing Market
According to estate agents there is a problem at the upper end of the property market. Fears of a council tax has caused sellers of expensive homes to pause and consider the implications of moving to more expensive home. The number of upmarket homes coming onto the market has dropped considerably because sellers are concerned that a Labour government would slap a mansion tax on homeowners with properties valued at over £2m.
Ed Milliband has said that his government would introduce the tax as soon as possible and sellers are now waiting to see the outcome of the general election. If the Conservatives get back into power there is no chance that the mansion tax would be introduced so in theory the market would resume its recent trajectory.
Shortage Of Expensive Homes Coming Up For Sale
The problem that we now have is that the shortage of expensive homes that are available means that the ones that are coming up for sale are increasing their asking prices. There is still a good demand for these homes and so they are having to pay more. This problem appears to becoming more acute as we head towards the election. Sellers are holding off until after the election and this is causing a problem for the rest of the market.
According to some experts any mansion tax would be damaging for the housing market and the concern is that it will trickle down to the lower end of the housing market affecting first time buyers. It would effectively put a cork in the top of the property market and this would have a ripple affect through the rest of the market.
Labour could spell disaster for the housing market
There are reports from estate agents that the number of more expensive homes that have come to the market has reduced by 40% whilst the number of buyers have gone up by 38%. This is already impacting on the middle classes because there appears to be a log jam developing. Experts are warning that the worst outcome for the general election is that it does not produce a viable government.This would more than likely mean that we would need to have another election in months time and this could spell disaster for the housing market. We are always told that markets hate uncertainty and this would be no exception.
The mansion tax is at the heart of all of this because buyers do not want to pay the full price for a home that could be clobbered. The Labour party have not yet disclosed the banding for the proposed tax. They have produced very little detail about the tax but it would definitely be introduced if the get into power. The upper end of the market would see prices coming down which would compensate for the tax but this would take time to filter through. It is impossible to say how badly prices will be affected until the Labour party give more detail on the tax.
Fewer Homes Available
RICS data just released has said that March saw a reduction in the number of homes coming to the market for the second month in a row. Figures also show that properties in London where sales have been agreed has fallen for the eleventh month in a row. Homeowners at the upper end of the property market will be hoping the conservatives regain power and the the market can get back on it's feet. They will be hoping that Ed Milliband does not get the keys to Downing street as he is likely to bring in new measures to curb house price inflation as well as bring in rent controls that will impact on the buy to let industry.