As London Buyer’s Agents we were interested to read a recent interview with The Telegraph (http://tgr.ph/n7WTGf) where Eric Pickles, the secretary of state for communities and local government has said that it would be a, “very big mistake”, to go ahead with any form of the Liberal Democrat’s proposed “mansion tax” on properties worth over £1 million.

A 1% annual tax applied to houses worth more than £1 million was first proposed at the Liberal Democrat party conference of 2009. The suggested threshold was later increased to properties worth more than £2 million, and this year the policy was refined further, with the Liberal Democrat Party suggesting that there should be a levy of 1% on capital gains tax from the sale of a property after the first £1million. .

This is an obvious attempt to make owners of high value property in the UK, whether British or foreign citizens, to pay up in order to share the burden caused by the national deficit, a questionable source of revenue when you stop to consider that an overhaul of the current council tax system has been estimated to cost upwards of £250million.

Although unlikely to temper overseas buyers’ zeal for good quality, high-end property in prime central London, a “mansion tax” is likely to dissuade middle-class British buyers from progressing up the property ladder. They are instead likely to decide to remain where they are, which would decrease the amount of property below £1million that comes onto the market, negatively affecting both ends of the market.

It is also possible for an astute property investor to buy property below the £1 million mark, and develop the property sufficiently after its official government valuation and still benefit from their investment, which makes the £1 million threshold seem rather arbitrary indeed.

There would be an uneven burden on home-owners in London and the South-East where the value of property continues to increase despite the recession. Eric Pickles rightly said last week that it would be, “imposing taxation on the back of changes in property value”. Following Eric Pickle’s interview it seems unlikely for now that any version of the “mansion tax” is likely to be passed under this coalition government, however much the Liberal Democrats want to replace the 50p tax rate for high earners with a tax for so-called “unearned wealth”. This would negatively affect people who are house-rich, but cash-poor, and whose life earnings have been channelled into their property, with a view of it being a retirement safety net, or a legacy for their children. Many people view their home as an investment, and I don’t believe that people should be taxed for choosing to invest their money well, and having their savings in bricks and mortar.

Technorati Tags: Buyers agents, government policy, Hackney house prices, House prices in London, London property, mansion tax, Property News, recession

Tags: Buyers agents, government policy, Hackney house prices, House prices in London, London property, mansion tax, Property News, recession

Musings of a London Property Search Agent

After a rather depressing budget yesterday – this morning everyone has an opinion on whether or not the Chancellor is right to predict an end to the recession by the end of the year.  With the news that GDP is forecast to drop by 3.5% the Chancellor is essentially saying that the position at the end of 2009 could be so bad that the only way is up.  It’s hard to see how this will affect property prices.

Some pundits have already predicted an almighty bounce in 2010, with a similar Spring property market to that of 2007, when Property Search Agents had to get buyers in prior to properties being marketed to have a chance of securing them.

Given the preponderance of relatively high asking prices which we discussed on April 20th, see link below, I suspect that although there will inevitably be a flood of buyers to the market, as people realise they have waited too long, any bounce will very much depend on what has happened to pricing in the interim.  So those areas where asking prices are still relatively high or have jumped in comparison with 2007 and sales are going through, will fare much better than areas where there are many vendors keen to sell who have brought prices for the area down overall.  What will be interesting to see, is how fast prices in these areas jump back.  This London property search Agent will keep you informed.

http://www.manseandgarretproperty.com/property/market-news/asking-prices-up-33-in-kensington-and-chelsea

Technorati Tags: affect of recession on house prices, GDP, London property, London Property Search Agents, recession

Tags: affect of recession on house prices, GDP, London property, London Property Search Agents, recession

Musings of a London Property Search Agent

In a speech to the European Business School in London given by Sir John Gieve, Deputy Governor of the Bank of England, Sir John said that complete seizure in the money markets had been averted but warned that we are at the beginning of a recession and that further action may be necessary.  He cited hedge funds as an area of concern, although banks are now more secure following the national Bank’s pledge to underwrite capital issuance of £50 billion which has underpinned confidence.

In addition to considering the causes of the current global financial turmoil which has led to recession in the US, the UK and several other advanced Western economies, the Deputy Govenor set out 4 lessons for the medium term, declaring the need for “… far better coordination of policy internationally and the need for some new policy instruments alongside interest rates to dampen the financial cycle.”

 1. Closer International Co-ordination of macroeconomic policy

International cooperation at global level is necessary in a global economy.  Sir John reiterated that cooperation among members of the EU and G7 was not wide enough and welcomed the G20 and the IMF as playing key parts in macroeconomic coordination, citing inflationary oil prices as an external event beyond the reach of national policy makers but not of the global economy.

2. Better ground rules for cross-border financial crises

“In particular emergencies there are often different national interests at stake and the sheer pressure of events can limit cross-border consultation.  However, if we do not tackle this we will see the growth of national restrictions on the terms on which cross-border operations are permitted – in terms of capital, liquidity and legal structure – and that could have great economic costs.”

3. Strengthening banks’ resilience

There is a need for agreement on liquidity and capital requirements of banks.  ” The FSA is developing proposals for UK which will deliver tougher standards.  But we are pressing for international agreement in the Basel Committee.  Events also brought home the need for a fundamental review of both the amount and definition of capital requirements.”

4. Developing macro-prudential tools

The Deputy Governor outlined three schemes which could decrease the impact of future financial crises, highlighting the need to “bridge the gap between macroeconomic policy and the regulation of individual firms.”

He continued, “We need a third club in our bag which can directly dampen the financial cycle.  This is needed both for financial stability and for wider economic management.”

“But we have seen how the financial sector can drive the wider business cycle, by becoming over-confident in the upswing and over-constrained (by lack of financial resources – capital and liquidity) in the downswing.  It seems to me that mechanisms which oblige banks to build up resources in good times can serve a second useful purpose of dampening the economic cycle.  I think of this as ‘protecting the cycle form banks’.”

In brief the 3 schemes described were

• The Spanish System of dynamic provisions which requires banks to build a general reserve that can be drawn on in downturns
• Growth related capital requirements which make it more expensive for banks to expand their balance sheets faster than normal when confidence is high and could be a useful means of dampening banks’ contribuition  to the business cycle
• Less stable sources of funding could be treated as an added risk factor in assessing a banks liquidity needs.

http://www.bankofengland.co.uk/publications/speeches/2008/speech367.pdf

This London Property Search Agent is not daunted by these comments as buyers can find bargains with the right advice and support – call us!

Technorati Tags: Averting Financial Meltdown, Banks, credit crunch, Financial Crisis, liquidity, London Property Search Agent, recession

Tags: Averting Financial Meltdown, Banks, credit crunch, Financial Crisis, liquidity, London Property Search Agent, recession