London House Prices Fall Amid Tax Levy Concerns, Hometrack Says
London house prices fell in November for the first time in a year as the prospect of a new tax on the most-expensive homes deterred buyers, Hometrack Ltd. said.
Prices in the capital fell 0.2 percent from October, dragged down by a 1.2 percent drop in central London, the property researcher said in a statement today. Values in England and Wales declined 0.1 percent. A separate report by the Engineering Employers’ Federation showed a measure of manufacturing output slid to a three-year low in the fourth quarter.
Chancellor of the Exchequer George Osborne may confirm in his autumn statement on Dec. 5 that he is introducing levies on homes valued at 2 million pounds ($3.2 million) or more. The Treasury has been consulting on proposals announced in the March budget to levy an annual charge of as much as 140,000 pounds on properties owned by offshore companies and to charge capital- gains tax on the sale of luxury homes by non-residents who aren’t naturalized.
“Fears of an announcement in the forthcoming autumn budget statement of a possible annual charge on high-value homes” are weighing on London house prices, Richard Donnell, director of research at Hometrack, said in the statement. The report points to “a continued slowing of the housing market.”
Business Secretary Vince Cable said Nov. 18 that his Liberal Democrat party and its Conservative coalition partners were close to an agreement on taxing the wealthy and that a levy on expensive properties is the “obvious” place to look for revenue. Another option is for the government to increase stamp duty on home purchases after the Tories rejected calls for a one-time “mansion tax” or a new local-authority tax band, analysts say.
Home prices in England and Wales have fallen in each of the past five months, leaving them 0.3 percent lower than a year earlier, Hometrack said.
In the rental market, 59 percent of tenants said that while they’d like to buy, they’re unable to afford a new home, according to a survey by property website operator Rightmove Plc published today. It said 61 percent of landlords plan a rent freeze over the next 12 months, and increases will slow to about 2 percent from the 4.5 percent average of the last three years.
Osborne should take steps to help first-time buyers and invest 14 billion pounds in infrastructure projects to stoke the recovery, Ernst & Young’s ITEM Club said in a statement today.
For the housing market, “an easy and relatively cheap solution to get things moving again would be to reinstate the stamp-duty holiday for first-time buyers, or even abolish it altogether,” said Andrew Goodwin, senior economic advisor to the ITEM Club. An exemption on purchases of homes costing less than 250,000 pounds expired in March and the limit now stands at 125,000 pounds.
Construction projects needed are those “for which all of the planning and logistics have already been completed, and where all that is missing is the funding to put the shovel in the ground” in areas such as transportation and hospitals, Goodwin said.
Osborne’s statement comes amid signs the U.K.’s recovery from recession is struggling to gain traction. Services shrank 0.5 percent in September from the previous month, while retail sales dropped 0.8 percent in October and jobless claims rose at the fastest pace in more than a year.
Still, a Lloyds Bank survey published today showed its measure of business expectations for trading prospects rose 9 points to 35. A gauge of perceptions on the wider economy held at 17.
The EEF’s index of total output fell to zero in the fourth quarter from 4 in the third quarter, its report said. A measure of new orders was negative for a second quarter, at minus 4, and a gauge of export new orders dropped to minus 8. The EEF surveyed 391 companies between Nov. 2 and Nov. 23.
“In the short-term, growth prospects for manufacturing as a whole continue to look uncertain,” with the sector set to contract 1.2 percent this year and grow 0.7 percent in 2013, a cut from its previous forecasts, the report said. The turmoil in the euro region, Britain’s biggest export market, has acted as a drag on manufacturing growth.
“We’ve seen growth ebb away during the course of the year and many manufacturers are steeling themselves for a continuation of tough trading conditions in the next few quarters,” EEF Chief Executive Officer Terry Scuoler said in a statement. “This week the chancellor must send a strong signal to industry that it is getting a firm grip on the levers of growth.”
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