Experts have sounded the alarm about Labour’s potential introduction of a mansion tax, describing it as a looming threat to the housing market.
Following Housing Secretary Steve Reed’s repeated refusal to dismiss the idea publicly, estate agents have predicted it could accelerate the trend of homeowners exiting the country.
Chancellor Rachel Reeves is contemplating a substantial tax on high-value properties in the upcoming Budget.
This initiative would impose a 1% levy on property owners with homes valued at £2 million or more, translating to an annual cost of £10,000 for a £3 million home.
Economists and real estate experts have criticized the proposed tax, noting its potential negative impact on the housing market.
Trevor Abrahmsohn, who leads Glentree International, shared with the Daily Mail that concerns are already influencing market dynamics.
‘Mansion tax is hanging like a sword of Damocles.’
He warned that introducing a mansion tax would mean Britain had ‘one of the highest property tax regimes in the world’, adding: ‘This would hasten the stampede of people leaving the country – the very people who should be our wealth creators.’
After Housing Secretary Steve Reed (pictured) refused four times to rule out the proposal yesterday, estate agents said it would ‘hasten the stampede’ of people leaving the country
Chancellor Rachel Reeves is considering a punitive levy on high-value homes in next month’s Budget. Pictured: File photo
Dominic Agace, chief executive of the agency Winkworth, said: ‘The Government is driving away the wealth generators in our country.
‘Speculation of this kind has already affected the market and it’s hard not to see how such a tax won’t cause wealth destruction.’
Will Watson, head of London at The Buying Solution, a property consultancy, said the housing market had been ‘very slow’ since the mention of property taxes in recent weeks.
‘The speculation is causing the people who were prepared to move to think, “Let’s just pause”.
‘People will be agreeing sales, but I think the number of actual exchanges until after the Budget will be very few.’
After The Mail on Sunday revealed that Ms Reeves was plotting a mansion tax, estate agents were swamped with calls from worried clients.
Becky Fatemi, executive partner at Sotheby’s, said customers had told her: ‘Look, whatever price I need to sell at, just reduce it to that so I can get it away.’
There are major concerns about how such a tax would work, with experts warning there was no way of fairly valuing property in the current market.
Lucian Cook, head of residential research at Savills, said: ‘A mansion tax which targets homes worth more than £2million would be a very blunt and crude instrument that was unlikely to truly target the wealthy.
‘It would be very difficult to get an accurate valuation of all properties worth over £2million as such houses tend to be quite specific properties, so administering this tax is going to be expensive because any valuation is likely to be contested.’
There are fears that a mansion tax could lead to higher rents, too, with young professionals sharing four or five-bedroom homes that are likely to be affected.
The tax may also lead to a loss of stamp duty revenues.
Asked yesterday whether he supported such a tax in the Budget on November 26, Mr Reed told LBC: ‘It’s never a good idea for a minister to come in and speculate.’
Pressed again on whether he would support such a levy in principle, the Housing Secretary said: ‘You are asking me to speculate, given that we’ve got the Budget coming up soon.’
Challenged for a third time, he replied: ‘It’s best for me not to answer that.
‘With the Budget coming up and the speculation that’s around, it will sound like I’m giving the Chancellor advice on what she should or shouldn’t do, and that’s never a good idea for a minister.’
Under the plan, owners of properties worth at least £2million would face a charge of one per cent of any amount over that value. Pictured: The Chancellor on a visit to Berkeley Homes’ Glasswater Locks Development in Birmingham last month
Dodging for a fourth time, he added: ‘We do need to wait and see.
‘We need to make sure we have a system that is fair, that is proportionate and that brings in the investment we need to get our economy moving again and our public services functioning.’
The mansion tax is the latest in a string of soak-the-rich measures being touted ahead of next month’s Budget.
Yesterday, Ms Reeves defended the Government’s approach to the wealthy.
Asked why some were leaving the UK, she said: ‘Everybody knows that countries are having to spend more on defence, that we need to rebuild our public finances and our public services, and everyone who makes Britain their home should contribute to that.
‘We don’t want to drive anyone out of the UK, but we do want to make sure that we tax people fairly, people who make Britain their home, whichever country they or their parents are originally from.’
A Treasury spokesman said: ‘We do not comment on speculation around future changes to tax policy.’
