Mansion tax - tales of the unexpected - ideas please

[MarriedDadOneSonOneDaughter]

Given that it applies to such a small group of voters isn't this almost certain to happen isn't it? In fact, I wonder if even the tories might adopt it (see below).

Rather than debate whether its fair or not, perhaps we can come up with some unreported potential benefits or otherwise. I'm tired of the lazy political/media debate on it.

PLEASE ADD SOME POTENTIAL UNEXPECTED OUTCOMES TO THIS THREAD

For example:

ANOTHER HIT ON NHS LONDON
I wonder if it will lead to yet more key workers leaving London? For example, there will be plenty of senior doctors who managed to buy a house 10-20 years ago that now provide key service to central London hospitals. That's a small population of people (1,000?), but likely to be caught in the middle income mansion tax trap that no politician cares about. How will they run an NHS service when these doctors need to be no more than 30 mins from the likes of UCH, Chelsea and Westminster, Royal Free, Hammersmith, Charing Cross etc. The doctors can move out of London, make a killing on their house and continue to earn the same (almost) outside London. Bit of a no brainer. Shame if you happen to need one in London though.

TAX DRIVEN DIVORCES
My prediction is a slight rise in the divorce rate too. If you are in a "mansion" - better known as a normal family house that happens to be in central London - you will have to get divorced and split your house into two maisonettes. Another boost for the building trade though.

SOCIO-ECONOMIC ETHNIC CLEANSING
Overall, it's actually a bit of a Tory policy in a trojan horse. I think the mantra is "You can only live in London if you PAY TO STAY" - that means only very high income people can stay. If you're not high income, please leave:

• stick and carrot
  
• stick high taxes
  
• carrot sell your house for a profit.
  

Isn't that what the tories want - further ethnic cleansing of London in favour of super wealthy that like to make tory party donations.

[AuntieStella]

I thought it was the Tories who opposed this?

It was the LibDems who wanted to bring it into the Coalition, and I'm sure I heard recently that Labour was toying with it.

[TheHammaconda]

Houses reclassified as business premises?
People vandalising their own homes to reduce their value at the time the tax valuation is determined?

[MarriedDadOneSonOneDaughter]

"TheHammaconda"

[TheHammaconda]

I was half joking about people vandalising their homes.

I think a lot of large homes will be made into separate dwellings/ bedsits. It's the value of the property that will determine the tax rate not the amount of properties that you own.

There may be attempts to reduce the sale value of the house by greater use of part exchanges or under the table deals to set the value of the house at £tax-£1.

[MarriedDadOneSonOneDaughter]

I can think of several families who did the move out of London over the last 5 years. I think people will downsize to a real "mansion" in the country and keep the cash in flats that get rented out in London.

[vitaminz]

This is why they should introduce a land value tax as opposed to a mansion tax as with the mansion tax there are too many ways to get around it.

Other unexpected results - London house prices falling? An end to the housing ponzi scheme? That would definitely be unexpected but I am sure all the rich, multiple home owning politicians will find a way to keep the housing bubble from popping after all turkeys don't vote for Christmas!

[MarriedDadOneSonOneDaughter]

Vitaminz

I don't think the tax would can a fall in prices for the London "mansions". If anything it might lead to an increase as the super wealth take advantage of those forced to leave to buy up more property. Once the only remaining house owners in London are the super wealthy that can afford £40k per year on mansion tax then the prices will be "cemented" as none of them have any interest in causing a crash by selling and, being super wealthy, they will also be immune to a recession or rise in rates that will make the market crash outside super-prime London.

[Isitmebut]

What value of property would fall under a Mansion Tax, £1 mil, £2mil, £3 mil, what, and how many properties would be affected?

Many people will be home asset rich (possibly having owned for decades) yet cash poor, so such a tax would cause most of those people to sell up and buy cheaper, 'compressing' the housing market in smaller/cheaper properties, causing those prices to go up.

Maybe good for the Exchequer, but hardly helps the affordability problem for family homes in numerous expensive areas in the South East or elsewhere. IMO.

FYI the coalition already brought in several new measures to raise the tax take from expensive homes e.g. raise and close Stamp Duty loopholes for foreign buyers etc, but the 'politics of envy' always goes down well with the masses at election times, even if many may be caught in tax trap who are only home valuation wealthy.

[User100]

It all depends how it's brought in which (last time I checked) wasn't completely cleared up; will it be a new higher council tax band, a separate tax addition to council tax etc.

[User100]

"I don't think the tax would can a fall in prices for the London "mansions". If anything it might lead to an increase as the super wealth take advantage of those forced to leave to buy up more property."

But even the super wealthy will only buy more property if the prices fall; it's basic supply and demand that if demand falls (as you are suggesting it will) then price will fall. The rest of what you say is already true; London is by farthe least affected area when there is a house price crash (look at the stats from 2008).

[Isitmebut]

So then, it would appear that all this NEW effort to tax ‘mansions’ (see recent taxes implemented below) will be for just under 100,000 properties over the £2 million that looks to be the starting point, few asset rich/income poor will be affected, so what is the downside of governments spending their time micro managing taxes/markets?

Well apart from buyers trying to get out of paying it whichever way that can (like the 50% income tax rate that raised diddly squat), as I thought, it will COMPRESS DEMAND/PRICES BELOW £2 million, as buyers look elsewhere e.g. outside London, for homes well away from the £2 million valuation. This then has a knock-on affect further down the price chain e.g. ‘normal’ family sized homes.

“How households are preparing to avoid mansion tax”

www.telegraph.co.uk/finance/personalfinance/tax/10965835/How-households-are-preparing-to-avoid-mansion-tax.html

“Guy Meacock of buying agency Prime Purchase said investors were now "thinking harder" about buying property in London, while those with a second home were considering selling up and buying outside London for less than £2m"

"The bulk of interest from my clients is in the sub-£2m market," he said. "Talk of a mansion tax has simply reinforced the appeal of that market."

“Mr Meacock said the main issue was that the tax proposals came "hot on the tail" of a number of other measures affecting housing. These include two new stamp duty bands introduced in the past five years, "non-domicile" tax measures and capital gains tax on foreign-owned properties.”

“Stamp duty, a tax on house purchases, jumps from 5pc to 7pc on properties worth more than £2m following a change made in the Budget of 2012.”


Recent history shows that Labour love to attack the wealth on any homes, especially as they give (broken) promises not to raise income tax, so their ‘cunning plan’ allows them to tax wealth via the homes you own e.g. Council Tax going up 110% under Labour, where the larger your home the more you pay - so will this be the thin edge of the wedge AGAIN?

Labour have form on this, Mr Balls was financially advising Mr Brown before the 1997 General Election, there was NO MENTION that after the election, a Labour government would change the FLAT 1% Home Stamp, to a graduated 2, 3 and 4% Tax. Governments can be tricksy here, as like not changing tax allowances you get what is known as Fiscal Drag, when homes prices rise, it DRAGS more people into the higher Stamp rates

“Stamp duty: millions more being dragged into tax trap”

“Boom in property prices means that a quarter of homebuyers are paying stamp duty of 3 per cent or more, up from just one in 10 in 2003”
www.telegraph.co.uk/finance/personalfinance/houseprices/11004647/Stamp-duty-millions-more-being-dragged-into-trap.html

The irony in all this is thanks to Labour’s immigration, (lack of) housing and loose banking regulations balance sheet explosion (and subsequent crash), when Uk mortgage lending went up from around £21 bil in 1997 to £115 bil in late 2007 – UK home prices went up from an average £73,000 in 1997 to £232,000 in early 2008.

So even if Labour accidentally creates a form of prosperity, they spend a month of Sunday’s trying to tax it, as the rest of the economy under them can go boobs ups. Marvellous.

[Dad164]

There is some irony for the central London hospitals that the "mansion tax" is supposedly going to "help".

No doctor and certainly no support staff can afford to move within 30 minutes (on call radius) of central London hospitals.

With the Mansion tax, those that have been living close enough will now be taxed out of London and move to the home counties or further afield.

NHS London is going to suffer a epic skill shortage as a result of the "mansion tax".

Nice one politicians.

Bunch of idiots.

Why can't they focus on international money and those with "cash wealth" instead of "accidental" owners of houses who ... guess what, LIVE IN THEIR HOUSE AND MAKE NO MONEY FROM IT BECAUSE ITS A HOUSE TO LIVE IN not an investment for a Russian oligarch.

Sorry for the CAPs rant.

[Isitmebut]

We had a property situation, where all the really hot and foreign money was mainly contained and buying up Central London.

This Central London property bun fight affected very few of us, and could have been a good tax cash cow for the Exchequer, once a tax or two went up, and a tax loophole or two were closed, as the Coalition had done.

Then along comes a socialist Mansion tax, on top of new taxes that would have been bearable, and as I predicted MARKET FORCES are now evident in WIDENING the area where hot investment and foreign money will buy.

Market forces are not rocket science; whether talking about income tax, a property tax, conditions affecting a nations stock market, individual companies being told they would have to pay more - THOSE AFFECTED LOOKING A YEAR OR SEVERAL AHEAD, HAVE A CHOICE, they either sit back and get rear ended, or adapt their investment focus, maybe their location.

Similar to taxing UK power companies when we have a power shortages/rationing ahead on the first heavy winter, taxing tobacco companies when we need to have less people smoking, taxing Hedge Funds that only need to a decent telephone/internet connection anywhere in the world - and RELY on those taxes to pay for increased spending, is like playing whack-a-mole, as trying to hit a target than can move quickly - as finding below.


“Oct 2014; Mansion Tax Cutting London Luxury Prices Before It Exists.”
www.bloomberg.com/news/2014-10-27/mansion-tax-cutting-london-luxury-prices-before-it-exists.html

“High-value London homes, which rose even when average prices were still dropping across the U.K., now trail the rest of the capital’s residential market. The average price in the 13 neighborhoods that Knight Frank defines as prime central London rose 7.7 percent in the 12 months through August. Houses and apartments in the U.K. capital climbed by 19.6 percent on average in the same period, according to the Office for National Statistics.”

“By April, Cameron’s Conservative-led government will have introduced or extended taxes on luxury homes at least seven times, according to broker Savills Plc.”

“The measures include a 7 percent stamp-duty tax on home purchases of more than 2 million pounds. Chancellor of the Exchequer George Osborne also introduced a 15 percent tax on empty homes owned by companies and he’s introducing a capital gains tax for overseas owners of U.K. homes.”

“Serious developers are now looking at peripheral areas of London, which we see as growing more,” Pankhania said in an interview near Berkeley Homes Plc’s 375 Kensington High Street project, where a two-bedroom apartment is priced at 2.1 million pounds. “Central London is sort of a transient place at the moment.”

“Pankhania said he’s changing focus to districts with prices of 600 to 700 pounds a square foot because that’s a level that local buyers can afford.”

[Solopower1]

I think they'll they'll build a huge underground city for the workers, and you'll need to show your pass before you are allowed to come to the surface to clean the rich people's houses.

By the way I think they do have vast underground shopping malls in some cities in the Far East, and there are also areas - in Beijing, I think - where only posh people are allowed during the day. If you look like you might have come from the countryside to work, you get shooed away (after you've cleaned the streets, that is). You're only allowed in after dark. (Not entirely sure of my facts here).

[Isitmebut]

Or like me in a distant past, even with a decent salary, chose to move out of expensive London and commute 1 hour to work.

'Market forces' determine how far ones budget can stretch when weighing up life/work options, and how far one can move out.

If head-up-bum socialist penal taxes both distort market forces (driving the property prices up much further out of the centre) needing every high speed train line we can get to ease the commute - and bring in less taxes than planned, you have to wonder why some parties spend more time trying to tax an economy, rather than grow it for all.