The housing market enjoyed something of a boom during the COVID-19 pandemic for a number of reasons. People working from home started to re-evaluate what their homes mean to them and realised that they could move away from the cities and find a quieter life, wanting more space and outside areas and a dedicated area for a home office. Added to this was the stamp duty holiday, which made moving house more affordable.
There’s some concern that this may be all about to change though as there’s a worry that the Chancellor may make changes in the budget that will affect the housing market. David Alexander, joint chief executive of property management platform Apropos and a prominent figure in the Scottish industry, has voiced concerns over making changes to property taxes to try and help with the Government deficit caused by the pandemic. There are rumours and speculation that the Chancellor may look to revise Capital Gains Tax, re-evaluate Council Tax and make further changes to stamp duty. David Alexander says such tax rises could have “an unprecedented negative impact” on the market.
Implications of Property Tax Rises
There’s a number of concerns about the rumoured changes to property taxes, you can see more details on these here: https://www.lettingagenttoday.co.uk/breaking-news/2021/2/sunak-warned-on-property-taxes–dont-use-us-to-pay-covid-debts but the main worry is that these changes could send out a negative message which may undo the positive effect of the stamp duty holiday. If landlords and investors start to offload their properties amid growing concerns over the taxation implications, a slump in the housing market would depress the finances of all homeowners as well as having a negative effect on the wider economy.
Costs of Moving House
The conveyancing process of moving house involves a hefty outlay of money, especially for first-time buyers. It’s expensive because it’s a complex process with many stages involved, you can find out more about the lengthy process here:
https://www.samconveyancing.co.uk/conveyancing-process. If property taxes were to rise, this may make it more difficult for people to cover the costs of buying and selling houses.
Why Put Up Property Taxes
It’s easy to think that a rise in property taxes will help with the deficit caused by spending to ease the effects of the pandemic. Property can’t be hidden away like other assets and a rise in Capital Gains Tax, for example, might be considered as a way of generating more revenue from taxes without affecting too many people. The problem would be, though, that landlords and investors may decide to hold on to properties for longer to avoid the tax penalties and there will be fewer houses available in the private rented sector. The negative implications of a stagnant housing market are that the wider economy will take a hit if property prices start to fall. The risks are that if the Chancellor decides to increase property taxes it could have a long-lasting effect on the housing market, which could last for many years to come.