Tax on homes worth more than £1m

Figures out today (from Rightmove.co.uk) confirm that average asking prices of homes for sale have risen to £224,000 but are still 1.5% below the average this time last year. New stock is coming onto the market at a rate of 3,797 per day while the number of homes actually selling is around 2,600 – about 10% more than a year ago but below the long term average of 3,785.

At the same time, the Liberal Democrats have announced an initiative to charge owners of homes worth more than £1m an addition £2,500 pa and those whose properties are worth over £4m an extra £15,000 pa.

The value of the country’s housing stock tripled in the decade that peaked with the boom of 2007 but only about 190,000 homes (out of 21.8m liable for Council Tax) are currently worth more than £1m with half (57k of the 127k) of the highest Council Tax Band ‘H’ properties over £320,000 currently in London.

The housing market remains extremely fragile. The number of new homes coming onto the market is only just replacing the trickle that are selling. The total volume of stock is now below 700,000 significantly below the six year average of just over a million. This lack of property for sale is helping underpin prices although I expect supply to increase over the next few months. The Gap between asking prices and actual sale prices is still over £63,000 on average.

In it’s most recent report along with the number of Band ‘H’ properties the Communities and local Government department confirmed that nearly 245,000 properties were classed as ‘2nd homes’ – a category that might have been expected to be targeted by the Lib Dems whose strongholds have traditionally been in areas such as the South West where the impact of second homes has been debated for years.

Sadly, the Liberal Democrat contribution to the yawning gap in public finances is unlikely to produce much more than £395m a year. The drop in Stamp Duty revenue as a result of the downturn cost the Exchequer £2.7b last year alone. Just 127,000 properties fall into Band ‘H’ at present according to the Valuation Office. This is the band for homes worth more than £320,000 so the Lib Dem plan will have to wait until the huge re-valuation exercise that controversially Rightmove have contributed to has been concluded. A massive task but still something that is more likely to happen before we see a Lib Dem administration who can actually enact an idea like this.

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