Thursday, 21 October 2021

Downsizers driving recovery

DAVID CAMERON has ruled out mansion tax on high-value residential properties if he is still leading the country after the

DAVID CAMERON has ruled out mansion tax on high-value residential properties if he is still leading the country after the general election in 2015.

The Prime Minister made the announcement as he launched the Conservative conference in Manchester.

He has long spoken against such a policy, although it still represents a plan of action for the Liberal Democrats.

Nick Clegg has hinted that the mansion tax on homes worth £2 million or more could feature among his party’s post-election coalition negotiations, but this is yet to be confirmed.

Going forward, however, Mr Cameron’s ruling on the matter could prove to be a major obstacle to any renewed coalition deal.

Speaking on the BBC’s Andrew Marr Show, the Prime Minister insisted that his future tax policies would not punish people who generate wealth and save their assets responsibly.

“I have never been in favour of this idea (mansion tax). I think it’s a bad idea,” he said. “Stamp duty yes, council tax yes, but I think wealth taxes are not sensible for a country if it wants to support wealth creation, wants to reward saving and people who work hard and do the right thing.”

Michael Fiddes, head of agency at Strutt & Parker, agrees with Mr Cameron, believing that the fundamental problem with the idea of a mansion tax is the blurring of lines between capital and income taxation.

He said: “A tax levied annually on a capital asset, and not on disposal of the asset, can lead to inequity — there will be people who are asset-rich and cash-poor who will not be able to afford this tax.”

A flurry of policy announcements were made at the conference in Manchester, including the acceleration of the Help to Buy state-backed mortgage scheme and confirmation of no post-election tax rises.

Under the second part of the Help to Buy initiative, people buying a property worth less than £600,000 can get a loan of up to 15 per cent of the price guaranteed by the government if they can afford a five per cent down payment.

Several major lenders have already signed up to the second phase, which will be launched three months ahead of schedule as part of Conservative efforts to show they are tackling the cost of living.

CASH buyers — particularly those who are downsizing — are driving a large part of the recent property market recovery according to new research from Hamptons International.

In the first half of this year, more than a third (35 per cent) of house sales in England and Wales were made by cash buyers, an increase of 11 per cent compared with the same period in 2012. The number of people buying with cash today is at its highest point since 2008.

At a time when mortgage availability is improving and confidence in the property market is returning, Hamptons International’s research suggests that the number of cash buyers in 2013 has grown at a much faster rate than mortgages.

Of the additional 20,000 property sales in the first half of 2013 compared with the same time last year, Hamptons International estimates that 70 per cent can be attributed to cash buyers with a 13,600 (11 per cent) increase in cash sales and just 6,300 (three per cent) increase in mortgaged sales.

Johnny Morris, Hamptons International head of research, says: “Contrary to popular belief, much of the recovery in house sales in recent months has been driven by increased cash buyer activity rather than simply increases to mortgage lending.

“While there is no doubt that increased mortgage activity helps to improve sentiment and increase liquidity in the market, the growth of cash buyers in the market has overtaken that of mortgage buyers.”

Perhaps surprisingly, the South West has the highest proportion of cash buyers (39 per cent in the last 12 months) compared with an average of 33 per cent across England and Wales. By contrast, London on average has the smallest proportion at just 24 per cent, although this figure rises to 60 per cent in prime central London. The average price of a house in the South West is £173,000, in London it is £386,000 and in prime central London it is £935,000.

Mr Morris continues: “Many cash buyers are downsizers planning to take advantage of the capital locked away in their properties. The South West has both the highest rate of owner-occupation in England and the highest proportion of older age groups in its population. London on the other hand, has the highest property values in the country and while cash transactions in prime central London are more commonplace than anywhere else in the country, less than seven per cent of London sales over the last 12 months happened in this market.”

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