Mansion tax possibility continues to hit prime London property

Mansion tax possibility continues to hit prime London property

As Labour's campaign trail for May's general election having started in Salford today (January 5th), its proposed mansion tax on the property market is still causing problems further south, with fears of its repercussions continuing to hit prime property prices in London. 

In December, the government announced a new calculation process for stamp duty, which many predicted would negate the need for mansion tax. However, the fear that Labour will introduce the tax should it come to power in May's election has not gone away. 

The proposals would see anyone who owned a home worth more than £2 million subjected to the tax from the 2015/2016 financial year. For those with houses costing between £2 million and £3 million, this would mean them paying around £3,000. For those in more expensive homes, the charge would rise. 

At the moment, it is a worry that continues to hit price rises in London. The problem comes when homes need to be discounted in order to make sure they sell. Many won't pay more than £2 million, so people who should be selling at this price will drop it below in order to secure a buyer. 

And in the first few months of the year, experts predict that this could damage sales in the capital. Winkworth estate agents said that in the first six months of the year, prices at the prime level of property in London could fall by as much as five per cent as uncertainty reigns. 

While it could temporarily harm the market, however, others believe that the long-term prospects remain strong in London property as the city remains a potential investment prospect for those looking to invest from overseas. 

Alex Newall, managing director at Hanover Private Office, said: "Compare taxes in London to those in New York City, and London will still remain a global draw. Security, education, business, a completely multi-cultural society, and despite operating a tighter tax system, it is in fact one which is now more in line with other global cities."