Rightmove is calling on the UK government to carefully assess the potential impact of any changes to property taxation, warning that poorly planned reforms could risk stalling parts of the housing market.

The property portal has released key data to support its position, aiming to highlight how tax changes could affect affordability, mobility, and overall market activity.

Data:

+ Just under a third (30%) of homes for sale in England are priced at over £500,000, and would be subject to the proposed new annual property tax which would replace stamp duty

+ In London, more than half of homes (59%) have an asking price of over £500,000 and would be subject to the rumoured annual property tax if it came in, versus just 8% in the North East

+ A fifth (19%) of agreed property sales so far this year in England have been for homes over £500,000 but this varies regionally:

In London, more than half (52%) of agreed property sales so far this year have been over £500,000

In the North East, just 4% of agreed property sales have been for homes over £500,000 so far this year

· The average asking price for a home in Great Britain is £368,740:

The average asking price for a home in London is £666,983

In the South East, the average asking price for a home is £479,634

In the North East, the average asking price for a home is £194,799

Mansion Tax:

Interestingly, just over 1% of all home sales agreed this year have been for properties over £1.5 million, and would be subject to the potential new capital gain ‘mansion tax’ if it came into effect. However, the regional impact is varied:

In London, one in ten (11%) of homes for sale are in this price bracket, with 5% of agreed sales so far this year being for homes above £1.5 million

In the South West, 0.7% of agreed sales are in the £1.5 million price band, with 2% of available homes for sale in this price bracket

In the North East, just 0.1% of agreed sales are in this upper-end bracket, with only 0.5% of all properties available for sale priced at over £1.5 million

What could the impact on first-time buyers be?

Johan Svanstrom, Rightmove’s CEO, said: “We would like any changes to current property taxes to put affordability and mobility first. It’s already hard for first-time buyers to save up their deposit to get onto the ladder, and many must fund a large stamp duty payment too. According to our data, around a third of all sales currently going through the legal system are for typical first-time buyer properties, so it’s a big part of the market which supports the wider ecosystem. Affordability is very stretched and so putting the tax burden onto the seller could be beneficial for first-time buyers, however the saving could be wiped out if sellers simply build some of the charge into a higher asking price.”

How could the mass-market be affected by the potential changes?

Svanstrom: “If the responsibility for property taxes shifts onto the sellers’ side, the government will need to really think through how this transition will be phased in to avoid slowing down the mass market. Those who have recently paid stamp duty as a buyer and would face paying property tax as a seller in the future would clearly be at a disadvantage. As we’ve seen around moments such as stamp duty changes, we could see some distortion in the market for properties at or close to the £500,000 mark if this does end up being the threshold, with movers at this price range understandably keen to avoid the new tax if they can.”

How could the top-end of the market be affected?

He went on: “We need to make it easier and more attractive for those at the top of the market to consider downsizing if they are in a position to do so. There is no real incentive for someone in a large home to downsize to a smaller one unless they truly need to and can still afford the stamp duty bill. The current rumours to stamp duty changes would only seem to exacerbate this, as it may deter some at the top of the market from moving if they would then face a new annual tax.

“As our real time data shows, a proposed mansion tax would only affect a small proportion of the market. However, the government needs to be cautious over the cumulative effect of taxation on higher priced areas of the country as it simply risks stalling this part of the market, since the importance of mobility for people and the overall economy is strong in those areas too. A slower market can affect all types of movers, from first-time buyers to key workers and families, even if a tax is aimed at higher value properties.”

What about the impact on renters?

Svanstrom continued: “If under the rumoured proposals, buyers no longer pay added property taxes, it could make the transition from renter to first-time buyer a little easier. Five years on from the pandemic, rents have seen a 44% increase and average supply is 26% less, so renter access and affordability is very stretched. The rumoured stamp duty changes don’t appear to apply to buy-to-let properties, so we wouldn’t expect any immediate impact on landlord supply, although they face many other tax pressures adding to the concerns of adequate supply going forward in the market.”

He added: “It’s encouraging that changes to stamp duty are being considered as there are many ways the current system can be improved or made fairer. Under this week’s rumoured proposals, there would appear to be some benefits to first-time buyers, but more consideration needed for the mass-market caught between two systems, and downsizers. The key question is whether these changes would actually generate more income for the government. It depends on the designs of reforms for taxes and fees, as well as the rates, but if they reduce mobility through these changes, they risk having the opposite effect and losing out in the long run.”