House Ownership at a Low and Mansion Taxes

Across the UK, home ownership is expected to fall to under 64 per cent in 2021 from a peak of 72.5 per cent in 2001 – not far from a 10 percentage point drop.

This is according to the National Housing Federation, using data from recent research by Oxford Economics. At present, 67 per cent of the UK population own their home.

The same research predicts the average house price in England will rise by over a fifth over the next five years to £260,000 by 2016 and average rents in England are also expected to rise from £486 a month in 2011 to £582 a month by 2016.

The factors driving this are well known – a key one is an under-supply of new homes. In 2011 just 105,000 homes were built in England – the lowest level since the 1920s. Meanwhile plans for more than 220,000 new homes have been abandoned since the Government announced the abolition of regional house building targets a year ago.

The other factor, which some might brush over, is the rising population, driven mainly by an increase in net inward migration – which rose by 20% last year to an incredible 239,000, roughly the population of Derby in a single year.

Rocket Sciences

So, we have more people and not enough new houses built, so rents and house prices are up. Not exactly rocket science.

In a previous blog post I reported how, based on extrapolating growth rates from 2 years ago, it is almost certain that the private rented sector has now grown larger than the social housing sector, for the first time since the mid 1960s. Read more here: (Official figures, when they come out will almost certainly confirm this to be the case.)

UK Picture is Varied

Of course, the figures from NHF are average figures and they hide huge UK-wide variations. Some areas continue to see falling house prices and rents while other areas – London especially – continue to boom and suck in ever larger numbers of people from elsewhere in the UK, from the EU and other places around the world, with the net result being rising residential property prices and rents.

I feel this is all rather like watching a slow motion of a train about to crash into a car stuck at a level crossing. You can see its going to happen before it does and everyone else can see that the car is stuck too but the signalman is just too pre-occupied with other things or simply can’t find the button to override the signal and stop the oncoming train.

Taxes and Housing

One thing that may result from all this concern is a change to the tax system that underlies housing. The Liberal Democrats have proposed an annual mansion tax on the largest homes and there are increasing calls elsewhere for a review of the tax regime that landlords face. (We will return to the issue of landlord taxes in later blogs over the next few weeks.)

We have written before about the impact that London’s position as a tax haven for the worlds’ mega rich has, in that it draws in huge amounts of money from around the world. This drives up top end property prices in London and up market suburban towns in the south east.

But this mass of money, parked in property must surely flow through into the rest of the property market, pushing up house prices and also rents right down to the smallest flat.

People are increasingly questioning the social impact of this and the Lib Dems are calling for taxing the mega rich via an annual mansion tax on properties over £1m or £2m.

Despite what some say, I don’t think it will make the mega rich sell in Holland Park and invest in a football team somewhere else or even take their cash away to Zug. (Zug is a Swiss tax haven, which I’ve heard is pretty, but as dull as ditchwater.)

Opinions of the Mega Rich

Opinion polls show the proposal is popular with voters. And it might even be popular among the mega rich too.

Comments from some of the uber-rich in France and the USA (including Warren Buffett) indicate they are OK with paying a little more tax on their mostly untaxed capital gains, most of which are sheltered in an offshore subsidiary of well known banks in somewhere like Cayman anyway.

They say it’s just their pesky tax lawyers and accountants whose clever ruses stopped them from paying more in the past. They say they wouldn’t mind paying a bit more tax on their wealth to “help out in these hard times” – heck, they may even be happy to pay at a marginal rate of tax on their capital gains as high as their swimming pool cleaners pay on their meagre incomes.

So, what is the government waiting for? Surely, this is a golden opportunity for the Conservatives to show they are not “the party of the rich.”

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