Agency says mansion tax is unfair to London

Labour proposals for four tiers of mansion tax - graduated with owners of homes woth £5m-plus paying the most and some owners of homes around £2m eligible for tax relief - would still be particularly damaging to London, according to Knight Frank.

Labour, which is set to debate the tax at its annual conference in Manchester next week, made the changes to introduce four tiers after criticism by property experts who felt it could unfairly hit equity rich, cash poor' owners.

Previews of the conference and discussions about housing have been lost in the noise of the Scottish independence referendum, but Knight Frank remains critical of the effect of the tax and the starting point of £2m - a figure first mooted by supporters of the tax some five years ago.

If the original £2m-plus threshold from 2009 had increased with house price inflation in the areas where most expensive properties are located [central London] it would now be £3.2m. The lack of indexation means properties as low as £1.2m in 2009 have been bought within the ambit of the proposed tax says KF research head, Liam Bailey.

Additionally, the graduated tiers of Labour proposals would still risk dragging lots of additional properties in high growth areas into the remit of the tax simply because their local market had outperformed the national average he says.

In Greater London and central London all those properties valued at £1.5m and £1.2m respectively in 2009 have now become mansions through capital appreciation he says.