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Savills: Mansion tax could wipe 10 per cent off value of top London homes

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10/11/2014
Labour's mansion tax could knock millions off the value of some streets in prime central London, according to a report by Savills.

If Labour wins the election, homeowners whose properties are worth more than £2m would face a monthly levy of £250 upwards.

Savills said the new tax could mean a price drop of up to 10% for properties valued at £10m or more, while those valued above £5m could see an 8 per cent fall. It predicted a property worth £7,500,000 now would rise to £8,424,043 in 2017 without mansion tax but just £7,601,040 if the tax was introduced.

“Rarely have the prospects for the prime property markets potentially been so dependent on the tax policy adopted by a future government, making it impossible to give a single forecast for the UK’s prime housing markets without a plethora of assumptions and caveats. Much hangs on the fate of proposals for a mansion tax,” said Savills researcher Sophie Chick.

“Already we’ve seen previous increases in the tax burden on prime property curtail price growth in London, interrupt the flow of wealth into the prime regional and country house markets and create a two tier market above and below a £2m price threshold.”

Chick said that increased stamp duty rates for high value homes and a clampdown on property owning non-doms had already compounded buyer caution.

Savills estimated there were about 40,000 properties valued between £2m and £3m, 30,000 between £3m and £5m. and another 17,000 between £5m and £10m.

To raise £1.2bn, the tax charges for properties worth between £3m and £5m might be in the order of £7,000 per year, rising to £125,000 for properties over £20m.

“Because of the expected graduated scale of charges it is likely that a mansion tax will have different impacts in different parts of the market, potentially having a more modest effect in the lower bands,” said Chick. “Correspondingly, it has the potential to have more of an impact in prime London than in the lower value prime regional markets.”

If Labour come to power and the tax is introduced, Savills expects a sharp fall in prime prices initially and then values to recover to more accurately reflect the financial impact of the liability.

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