In response to the Autumn Budget, Nick Leeming, Chairman of Jackson-Stops, comments:
“Reforming the country’s property taxes was always going to be radical. Years of unprecedented house price inflation have widened the wealth gap across generations, and today’s Budget will define the very future of the Starmer administration.
"Since the Conservative Party announced its pledge to scrap Stamp Duty altogether; this tax was unlikely to be tweaked by the Chancellor with a direct comparison of raising taxes verses abolishing them creating polarised optics. The stick we've received instead in the form of a mansion tax, or a council tax surcharge for properties priced above £2m, is one of the most significant changes to the UK housing market for decades. For every high-end homeowner moving out, you also need someone to move in. By choosing an annual council surcharge that stays with the house, it has the ability impact both buyers and sellers, creating an uncertain outlook for prime houses.
"An economic lesson long learnt is that the more you tax an asset class, the less liquid the market for it becomes. Property is no different, yet the ability to buy or rent a home is essential as families grow, employment opportunities arise, and personal needs change. What we have seen today with mansion tax is that a decision has been made for politics, not economics. An alternative policy choice, such as abolishing Stamp Duty for downsizers, for example, would have stimulated more sellers to move out, whilst not impacting buyers moving in.
"What concerns me is the greater economic consequences beyond the Chancellors tax grab, leaving £2m homeowners who are mortgaged having the potential to slip into negative equity as prices realign. We know house prices in London and the South East reflect decades of inflationary growth and chronic undersupply, where as a result, asset-rich and cash-poor homeowners will be disproportionately affected. A £2m threshold is arguably too low for these regions where a single blanket threshold fails to recognise regional nuances. What we would rather have seen for council tax is a complete rebanding with greater laddering to avoid cliff-edge rates and continued fiscal drag. Few dispute that revaluation is necessary from outdated 1991 values, but a piecemeal approach risks embedding existing imbalances. As it stands, questions will be raised about valuation accuracy, how homes are assessed, and whether this could spark legal challenges. Taking the time to get the revaluation process correct before the 2028 implementation deadline will be absolutely key to its success, where one legal challenge may open the floods gates to others.
“In the immediate term, we are likely to see values for homes just above the threshold adjust, impacting prime market demand, and making government valuations at those levels even harder if short-term fluctuations occur. In the long-term, having a wider lens and a level head will be key to regaining pricing stability in the coming months. We know for decades the prime market has defied gravity, consistently outpacing every other segment since 1995, where expanding wealth among high-equity buyers has widened the affordability gap for many others. Our data shows that 2022 was likely the peak of that 30-year cycle, with realignment happening in the £2m plus market ever since. If prices soften at a stable rate, we are likely to see demand pick up again and an equilibrium reached.
"A stable but functional property market is an essential requirement for the country’s prosperity. If we have a workforce that can move to new areas of opportunity, then we help to create the environment for economic growth. The kite flying of various taxation scenarios that we have seen over recent months has all but frozen the residential markets. We hope now that, despite the news of the mansion tax, we will have a period of certainty that has been so lacking under the current Chancellor. With clarity now replacing months of speculation, home movers can proceed with greater confidence. While transaction volumes often dip in the months following a Budget, the significant number of downsizers and lifestyle movers in the market means activity is likely to recover in the longer term.”
