The “mansion tax” on homes worth more than £2 million announced in the Budget is “unlikely to have a significant impact on the housing market.” a leading mortgage lender said today.
Rachel Reeves revealed in her speech that a “high value” council tax surcharge on the most expensive houses and flats in England will come into force in 2028 raising around £430 million.
This will range from £2,500 a year for homes valued at £2 million to £2.5 million up to £7,500 annually for properties worth more than £5 million.
But today lender Nationwide played down the impact of the extra tax on the market as a whole pointing out that it will apply to less than 1% of homes nationally and even in London to just 3% of properties.
“Rental supply has been constrained for some time, with the potential for this to maintain upward pressure on rental growth, which has been running at all-time highs in recent years.”
The comments came as the building society revealed that average annual house price rises slowed from 2.4% to just 1.8% - half the rate of inflation - in November as pre-Budget speculation and uncertainty put a dampener on the market. However, the monthly rate of increase ticked up from 0.2% to 0.3% leaving the average price at £272,998.
Robert Gardner, Nationwide's chief economist, said: “The housing market has remained fairly stable in recent months, with house prices rising at a modest pace and the number of mortgages approved for house purchase maintained at similar levels to those prevailing before the pandemic.
“Against a backdrop of subdued consumer confidence and signs of weakening in the labour market, this performance indicates resilience, especially since mortgage rates are more than double the level they were before Covid struck and house prices are close to all-time highs. “
Tom Bill, head of UK residential research at agents Knight Frank, said: “UK house prices have essentially been flat since the pre-Budget speculation began in the summer. Like many other parts of the economy, buyers sat on their hands until there was more clarity. Property-specific tax hikes are unlikely to affect house prices, particularly in the short-term, but the array of other rises will eventually take their toll.
“The good news is that mortgage rates should continue to edge lower as the Bank of England lowers rates into next year and the base rate bottoms out at around 3.25%.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The housing market continues to demonstrate underlying strength in spite of the many challenges facing it, not least the speculation surrounding the Budget, which in the end didn’t turn out to be as bad as many had feared.
“While the market has been a little quieter as some adopted a ‘wait and see’ approach, lenders have remained keen to lend, with funds available to do so. Falling swap rates, which underpin the pricing of fixed-rate mortgages, have given added impetus to reduce rates and drum up business at a time when there has been less of it around.”
