With the general election looming in May 2015, more and more people are talking about what effect it might have on the London property market. Much of the speculation of course centres on who might win – as it could be anyone’s call this time around – and what changes the subsequent government or coalition would make to the tax regime affecting property.
The key proposed changes to the tax regime affect both UK national and foreign investors in London:
1. The so called ‘Mansion Tax’
Labour has pledged to bring in a new tax on properties worth over £2 million if it gains power. As recently as a few days ago, Shadow Chancellor Ed Balls sought to reassure London homeowners that the tax is nowhere near as onerous as previously thought. He said that those in the lowest band of mansion tax with property worth between £2 and £3 million will only be liable to pay £250 per month or £3,000 per year. In addition to this, people with lower incomes (those earning less than £42,000 a year) will be guaranteed a right to defer the charge until the property changes hand. It is those with homes over £3 million who will be hardest hit.
2. CGT changes for Overseas Owners
A consultation is currently underway by the Conservative/Lib Dem coalition to bring Capital Gains Tax (CGT) liabilities for overseas owners in line with UK homeowners. At the moment, only UK residents are subject to CGT on gains made on residential properties, but if these new plans are introduced overseas owners of UK property would become liable for CGT from April 2015. While this will mean increased costs for overseas owners disposing of properties in the future, it looks likely to exclude any gains made up to April 2015.
Although these changes are looming, the threat isn’t having as negative effect on the market as I thought it would. Whilst people are talking about the election more regularly now, it hasn’t affected buyer confidence. Yes, people are making more considered and measured decisions but that isn’t a bad thing. We have sold two properties in the last two weeks and both of them had multiple bids with one going for 8% over the asking price and the other achieving just over the asking price; what is interesting both were above the £2 million mansion tax mark. It seems that the threat of the mansion tax isn’t putting people off. The next five months will be quieter – they always are with an election looming – and properties will take a little longer to sell but I don’t think we are in for another tumultuous spell like we had in 2008. As long as people’s expectations are managed with good, honest and sensible advice I think the start of 2015 could be interesting and see plenty of activity in the local housing market, regardless of who wins on May 7th.
Associate Director – Sales, Mountgrange Heritage
24 October 2014