Property Starmer-geddon?

There’s suddenly a lot of noise, in this sleepy mid-August week, about property taxes new and old.

In pretty short order we’ve had leaks about the Government considering tearing up Council Tax, switching Stamp Duty from buyers to sellers and the removal of a Capital Gains Tax exemption on principal residences.

Whilst the first two received muted-to-positive responses, broadly, across the industry, the latter has injected the storm of outrage that was presumably intentional. Shout-pieces from tabloids combine with punchy anecdotes in columns and comments from agents who have seen the negatives of some of these ideas first-hand already – and are terrified of what it’s going to mean for prices and transactions.

But are we really staring into property ‘Starmer-ggedon’?

Whenever there are new taxes to be paid, those in line to lose out will make their presence felt – for a very recent cf, just recall how the 5% whose children attend private schools felt very much more than that, as those with a platform protested the imposition of VAT on school fees earlier this year.

This will be similar. No one knows yet – not even the Government – how many people are going to be hit by this, how much they are going to have to pay and when anything will be introduced. Judging by the noises unleashed already, it’s going to be a loud, concerted campaign from commentators looking at fresh or increased tax outlays.

And this, I think, will be the problem.

I find it helpful in these moments to focus on facts;

1. The Government has a £40Bn hole in its finances

2. People’s homes have accrued value – describing it as ‘unearned’ is not a judgement, it is a fact – through happy accidents (in most cases) rather than astute decision-making

3. This property wealth is about to be transferred en masse to a younger generation who will similarly have little claim to have gained it through hard graft and smart thinking.

   
   

For me, these facts make it pretty inevitable that the hole is going to be fixed by finding a way to tax this wealth accrual. Again, I'm not saying this is a great idea, just that this is too much of a target. There is little left elsewhere to cut and other taxes have been ringfenced to remain where they are.

One might argue that it’s unfair on many at the margins where any additional tax will hit harder than those in the middle but this is similarly true of our current taxation system.

We need to brace. Whilst the CGT idea might well be a kite flown to draw out fury that then allows a slightly milder form of tax to be rolled out, it did not come from nothing. These thoughts are part of creating Government policy in the lead-up to the autumn Budget.

The market will take a hit, as it always does when taxes on property change – we saw this just a few months ago with Stamp Duty, where discretionary sales were brought forward to maximise the opportunity the change wrought. But things have, as ever, settled back into a balance until the next cliff-edge tax change – and this is my biggest concern.

The longer uncertainty abounds, the less people do. They just stop. And wait. The three D’s continue – death, divorce, debt – but those discretionary sales evaporate until the smoke clears and people are able to make rational judgements again.

Which is why a prolonged period of angst and rage will be counter-productive. This is particularly true if there is even a sniff of the Government U-Turning on the issue (as it has on other unpopular-to-the-newspaper-reading-public initiatives already). That way lies a serious depression in transaction volumes, over a longer period of time, and everybody loses.

So let’s have the debates now. Let’s put forward the cases and listen to the responses. Let’s try and keep it unemotional - what are the numbers? What is the least-worst option bearing in mind the state of the nation? And then if (/when) the Government decides that it has no other option but to plough on with some form of property taxation, let’s quickly understand what it means for clients and how everyone can work in the new regime.

Hard taxation choices hurt the market, for sure. But nothing kills it like prolonged uncertainty …