If Andy Burnham’s takeover is meant to usher in a new era, it starts with the old mistakes made by interim leaders of recent years. That is, with promises of major disruptive change that casts a cloud of uncertainty over the entire market.
We should have enjoyed a period of political stability after the chaos that created last year’s much-anticipated Budget. Now we come back to the big changes and new taxes that are being circulated in the newspapers. This has a negative impact not just on the housing market, but the wider economy as people get fired up and pressured to stop making decisions.
Burnham would have been wiser to point to safety. Our revolving door of leaders keeps shaking things up in an attempt to solve our problems when what the country needs most is a firm hand on the tiller to keep us on track.
Stability and certainty can provide the basis for confidence, investment and economic growth. Mr Burnham’s continued promises of radical change to cure all our problems are likely to have the same effect as ever before.
Scompletion of tamp work
The completion of the Stamp Duty would be a very good thing. This tax prevents people from moving house, stops the property market from functioning properly and leads to family homes remaining empty instead of being freed up for parents who are eager to have a place for their children. It has a negative impact on commerce and the effects on the wider economy are significant.
However, all this talk about the possibility of spending is wreaking havoc on the property market. We even see agreed sales being put on hold and deals falling apart because no one wants to pay the huge stamp duty before it’s done. All this noise does not grow the economy and the stock market, it destroys it.
A clear signal needs to be sent immediately as to what will happen to those people who pay Stamp Duty now. At the moment, many people are delaying buying decisions because they are afraid of paying a lot of money in Stamp Duty at home and then being charged this new tax on top of it. Anyone who has paid Stamp Duty on a property before any land value tax should get an exemption for a period equal to what they have already paid. Without this, the market will cease to function.
The government has a duty to instill confidence and maintain stability that has been completely forgotten.”
Land Value Tax
Imposing an annual land value tax can lead to disaster if not used properly. Above all, there should be an appreciation that the London market is different from the rest of the country. Blaming ordinary people with eye-watering tax bills just because they live in London makes no sense. If left unchecked, this could see property prices in the capital and the South East crash, with mortgage holders trapped in bad equity and families unfairly hit with eye-watering debts.
There are also big questions about logistics. It will take three to five years to implement because all assets across the country will need to be measured. This will be a very expensive and difficult undertaking, which will outweigh any income earned in the first few years.
LVT rental market results
The effects of the rental market also need to be seriously considered because landlords are already leaving the market as it is. If there is a rent freeze that prevents more costs from being passed on, they will have no choice but to sell, which will further depress housing prices.
CGT and income tax changes:
Any possible tax increase in capital gains or wealth tax will backfire as all previous efforts have done. All it will do is stifle investment and growth. If CGT becomes too high it will reverse the huge benefit of removing Stamp Duty. Those risking huge debt will simply avoid selling and wait for the next government to lower taxes again.
Simon Gerrard is chairman of Martyn Gerrard Estate Agents,
