A prominent housebuilding company is warning that increased property taxes will make social mobility even harder and have a detrimental effect on housing supply.
In a management statement released on Friday, Berkely Group says the UK has “one of the world’s highest property taxation regimes,” which plays a part in perpetuating the “persistent and acute imbalance between housing supply and demand.”
In the Autumn Statement, the government announced an increase in stamp duty (a tax on property purchases of over £125,000) to 3% on all second homes, coming into effect this April. While the measure aim is to quell the runaway buy-to-let market, it could also make homeowners wary of selling, stifling the supply of housing.
Sales of expensive properties have flatlined, according to the report. Berkeley says: “Since the last half year, we have sold 62 properties at prices over £2 million — a similar number to the same period in 2014/15, when the market slowed in the run-up to the General Election.”
The report blames the slowdown in sales on the increase in property taxes and say that the slowdown “will have consequential effects on both social mobility and the supply of new homes.”
If the wealthy house buyers are not buying upwards, they leave no room for middle-income buyers who want to climb the ladder. And if middle-income buyers aren’t rising, then lower-income buyers can’t move up either.
Housing is one of the most important instruments of social mobility at the moment because of rapidly rising property prices — someone who buys a rundown flat in Peckham now could trade up to a nice semi in a few years time if the market goes their way. Or, at the very least, they will have earned a nice nest egg from the equity they have in the house that can them some security.
Berkely said that despite reservations being 4% lower than in 2014/15, underlying demand for homes “remained strong,” suggesting a house price collapse won’t be happening anytime soon.
Earlier this year, the government also said it would build 13,000 affordable homes in 2016 and 30,000 over the next five years.