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Written by rosalind renshaw

A proposal that the Government should look to raise more money from property taxes has met with furious opposition from the estate agency industry.

The idea has come in a policy document published by the Organisation for Economic Co-operation and Development.

It suggests that property taxes make more sense than trying to raise existing taxes on companies and individuals.

It also says that property taxes could limit future housing market bubbles.

While other countries do charge property taxes, usually a yearly levy on the value of a home, Britain does not – yet. However, Britons do pay Stamp Duty on the purchase, and next April, buyers of properties worth over £1m will be paying it at the new ‘mansion tax’ rate of 5%.

David Newnes, estate agency managing director at LSL, owners of Your Move and Reeds Rains, said another tax on residential property would not make the UK any safer from the cycle of boom and bust.
 
He said: “Property owners already pay through the nose for council tax and capital gains on property other than their principal home and Stamp Duty.

“Any additional levies will force an already slow market into a standstill. Far from protecting the UK from ‘boom and bust’, squeezing more tax from home ownership and residential property generally would weaken consumer demand, reduce home owner equity and force thousands more people into the already white-hot rental sector.
 
“The impact on the supply of rental property also cannot be ignored. Taxing landlords further on property ownership could remove thousands of rental properties from the market, and this already stretched sector would quickly see under-supply, increasing demand and pushing up rents even further.

“Those who own property are already paying more than their fair share of taxes.
 
“Any further tax hike in this sector would put home ownership out of reach of millions. Such measures could ultimately remove the boom, leaving us only with the bust.”

Paul Hunt, managing director of mortgage software provider Phoebus, said: “A recurrent tax on property sounds dangerously like a council tax, which is already at punishing levels. 

“We already have a massive housing deficit and need an incentive not to build more property like a hole in the head. I think the Coalition would be daft to pursue this idea further.”
 
Nicholas Leeming, commercial director of property website Zoopla, said: “More property taxes in Britain would be enormously damaging, wildly unpopular and politically suicidal.

“Landlords would pass the tax on to their tenants in the form of higher rents. This would be the poll tax writ large, and yet again it’s working families who would bear the brunt.

“Squeezing hard-working families for even more tax until the pips squeak is not the solution.”

Comments

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    Back to the lead story; On paper it is a way to find another tax income for any government. However not all ideas do come to fruition, thankfully.

    “More property taxes in Britain would be enormously damaging, wildly unpopular and politically suicidal".

    " ....the coalition would be daft to pursue this idea further.”

    The public don't have the disposable income at this time to cough up. Just wait for a labour government in a few years!

    • 13 December 2010 11:51 AM
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    PeeBee: "but the majority of landowners 'value' their asset highly, and know either by experience or recommendation that what goes round, comes round: prices will rise again and they will achieve higher prices in the future. Look back in time for the answers to what will happen in the future."

    You appear to be confusing yourself. On one hand, you're acknowledging that introducing some form of land rent will change the dynamics of the market, on the other, you're suggesting that it will do nothing and landholders can continue to use the past as a perfect guide to the future. It makes no sense.

    • 11 December 2010 14:19 PM
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    Wardy:
    Your remarks about Zoopla and the perceived influence of advertisers seem to be spot on.
    Also what about the intrusive adverts that now overpower the so-called professionals site NFoPP!

    • 11 December 2010 12:29 PM
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    Sorry, the massive Zoopla add at the top of the screen has just answered my own question.

    • 11 December 2010 10:13 AM
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    I dont give a fig what the director of zoopla thinks. Why do we ask the boss of a website his opinion on issues like this?

    • 11 December 2010 10:09 AM
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    Paul Lockett: Some may well do so - but the majority of landowners 'value' their asset highly, and know either by experience or recommendation that what goes round, comes round: prices will rise again and they will achieve higher prices in the future. Look back in time for the answers to what will happen in the future.

    • 11 December 2010 09:41 AM
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    WHICH laws of physics? Surely you mean economics - and there are no 'Laws' of economics that work when the real controller is the whim of the human mind...

    You forget that in the main, people buy and sell houses because they get the urge. If it suits them at the time; if they think they can afford to do so; and if they see something they fancy. Which written or unwritten rules apply that control those factors - or can account for them?

    • 11 December 2010 09:34 AM
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    The point I was making was that taxes on property (land+buildings) were a bit iffy BUT a tax on land values would work by edging speculatively-withheld land onto the market and into construction.The clue was in the word 'but'in my original: a bit of a pointer.
    LVT might work for estate agents in providing loads of cheaper properties for sale instead of the present paralysis and a few over-valued sales.
    But clearly they know better :that's why they're going out of business in droves .Tough titty for colluding in the politically-motivated and ,hence ,artificial shortage of houses.

    • 10 December 2010 23:14 PM
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    The free market is here and vendors sell at what they are happy with and only sell at low prices when needs must. What tosh you all seem to write as us agents value and vendors instruct and the corporate mugs never say no to an instruction whatever the price. They only put offers to vendors if the punter uses their mortgage services. I had one last week who was told he could not use his own solicitor as it was not on the agents 'panel'. Who are they kidding? If you want to know which agent post a request and I will satisfy the curiosity.

    This business is in a pickle to say the least and for some mindless numpty to start suggesting tax property is going to get his political party the boot.

    Why do we live in this elected dictatorship? Because is probably the only sensible answer - unless you know otherwise.

    • 10 December 2010 18:43 PM
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    PeeBee: "Taxing the land adds to its gross cost, thereby reducing its viability further again, thereby reducing the chance of it being built upon EVER."

    That's wrong, I'm afraid.

    It reduces the chance of the person who is keeping it empty holding onto it, because they'll be faced with having to pay for the privilege. That means it's more likely to be sold to somebody who wants to make use of the land in some way which will justify the expense.

    • 10 December 2010 18:40 PM
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    Peebee: good points. When I talk I talk about the distribution of wealth for ALL, not the few. So can you tell me, on the whole, what fraction of EA fees are on commission compared to the rest? Is that number bigger or smaller?

    The main point is to ask if EA are pretty dumb to ask for higher house prices, when more transaction (real productive work) would logically benefit them more?

    You cannot have both, the laws of physics prevent it... unless a monopoly privilege is at play. And even if it is, which I suspect it is, its a zero sum game, so if one wins the other will loose. Will you be the winner or loser?

    • 10 December 2010 18:34 PM
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    I thought the council tax was a property tax. Originally it was a poll tax - a tax just for breathing air. That was deemed unfair and the council tax was introduced based on a valuation of the dwelling a person lived in, generally paid for by the occupant not necessarily the owner. But a tax based on property value none the less. A second property tax would have to relate back to the first one in some way, I'd have thought.

    • 10 December 2010 17:19 PM
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    DBC Reed: "A tax on property may or may not work."

    Now THERE'S a well-thought out statement.

    Thanks for that. Or not...

    • 10 December 2010 15:50 PM
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    Robin Smith: Interesting theory. But a theory which I would respectfully suggest is wrong for a number of reasons.

    Firstly, you suggest that Agents' income is proportionate to selling prices. You forget to factor in the huge number of Agents who work on Fixed Fee basis, therefore the price achieved is irrelevant. These Agents work on volumes, therefore turnaround is the key for them, not values. So why then do many of these Agents value HIGHER than those who work to commissions?

    Secondly, you say commission goes up when demand (from buyers...) falls. Show me ANY other business that operates on the basis of "We're making less money - ah, well, never mind!" Now, and for some time already, many Agents are in 'survival mode'. ALL businesses are. Many have already failed; many more will follow. Those which survive will do so by maximising revenue on each deal done - there is no other way.

    Thirdly, you seem to be confusing 'the going rate' with a cartel scenario. In my experience there is no such thing as a Fee cartel among Agents - quite the reverse. Those that sit 'mid-table' in the fees scale pour equal scorn on the high-end fee chargers as they do the bargain basement boys, which I find perversely amusing - methinks they are simply jealous...

    Your theory of properties reducing to " free market clearing value" resulting in far more transactions relies on one basic premise: that there will be an increased availability. I would argue that probably 90% of property bought between 2003 and today will be immediately removed from the equation, as those buyers will not want to/be able to sell their asset due to negative equity. So what if the next one is cheaper - if the figures don't stack at the outset then the deal never gets a chance to get done.

    With regard to land usage (more properties built on currently redundant land putting more downward pressure on prices generally - I like your style...), the land you claim as being held 'speculatively' is more often than not land which has limited or no value in todays market; or land which has been bought at top-end prices and now financially unviable as a development opportunity. You expect taxes to be paid - on what? Most of the land has supplied quite a substantial tax benefit already to GB Ltd, and is now worth considerably less than the market price paid. So does there need to be rebates paid first? Or is a tax on a tax on a tax okay in your world? (silly question - of course it is otherwise the whole theory collapses...) Taxing the land adds to its gross cost, thereby reducing its viability further again, thereby reducing the chance of it being built upon EVER.

    I could go on - but I'm a bored of this as I expect everyone who reads it to be, so I'll leave it at that.

    So your "net effect of higher wages for Agents all round" is a flawed proposition. Fatally flawed - although eloquently put, nevertheless. Most theorists just rant and blow smoke... ;0)

    • 10 December 2010 15:48 PM
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    What puzzles me is that the people in the article claim that all the following things would happen.

    1. LVT would push house prices down
    2. LVT would make houses less affordable
    3. Landlords would be discourage from renting out
    4. Landlords would be able to increase the rents anyway (which is only true if income tax were reduced)
    5. People would be 'forced' to sell
    6. Nobody would be able to buy
    7. Existing owners would be disadvantaged
    8. Potential buyers would be disadvantaged relative to existing owners
    9. There would be no new development.

    It must be plain to see that all these things are entirely contradictory. I wish they'd make up their minds so that we could have a proper grown up debate...

    • 10 December 2010 15:27 PM
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    A tax on property may or may not work .(The old Schedule A on owner occupation taxed house-price increases straight out of income!)But a land value tax will increase the number of properties because speculators cannot leave land unbuilt on. Look up Smart Taxes Network>Site Value Tax to see what is happening in Ireland.The days of buying land and leaving it unoccupied are numbered.

    • 10 December 2010 13:58 PM
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    A couple of points.

    Firsty this idea is truly bonkers, and will not happen - I think we have a "no news" day today, sorry Rosalind.

    Secondly Robin, you are totally misguided if you think EA's are bright enough to think like you suggest.

    At the moment, we have plummeting sales volumes and falling sales prices, but in the main plummeting agency fees, as agents cut commission rates, and overprice houses to win business - there is your "turkeys voting for Xmas" argument.

    If agents continue like they are in my area, they will put themselves out of business, and worse than that leave many unsold, unhappy vendor clients in their wake.

    • 10 December 2010 12:58 PM
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    The supply, in the main, is provided by the current owner.
    Look at the EA's adverts.
    Most are second-hand homes. A considerable number were purchased within the last 5-10 years, many on interest only mortgages but even if on re-payment mortgages the owners would not be in a position to reduce their asking prices by the amounts that being suggested by some because the mortgage would not be covered! They will probably sit it out until 'supply & demand' kicks in again and the market balances?

    • 10 December 2010 12:24 PM
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    Lets think carefully about the vested interest at play here. And if that lobby is serving its constituents well. How do EA's make their money?

    In principle from a proportion of the sale price. Not from the number of sales they make. Have you noticed that it cannot be a free market charge, because their commission goes up when demand goes down. A monopoly charge for exchanging homes.

    So it “seems” in their best interest to get house prices as high as possible first, then worry about the number of transactions later. Transaction quantity is only a matter of competition between EA’s. They operate as a price fixing cartel when it comes to the general rates.

    So any policy, no matter how economically sound on the whole, will ALWAYS “seem” like a bad policy for them as a private economy.

    But lets look closer at this idea. If the price of housing came down to its free market clearing value, would more or less estate agent transactions take place. MORE! Much more.

    This would also be the effect of the tax swap proposed here by the OECD. Speculative price would fall out of the sale price and more sales would be transacted. Then the million empty homes would come onto the market for sale too. And also the idel land held speculatively out of use for higher price would also come on to the EA’s books.

    BINGO! The net effect would be for higher wages for estate agents all around.

    So by not thinking with care about this, the EA lobby is a turkey voting for Xmas.

    • 10 December 2010 11:53 AM
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    Ian. I think you have identified the wrong guy. Try Tony

    • 10 December 2010 11:41 AM
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    Always consider this.....
    NEVER support ANY new tax or tax increase and
    NEVER trust a career politician.
    In ones best interests say no to everything!

    • 10 December 2010 11:35 AM
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    Wesbland, buying property does not enrich its citizens it costs them money. When property inflates massively it costs them a massive amount and is unsustainable especially when funded by debt to point where market entrants cannot afford to buy. The property market or land market needs to be damped. We also need to consider the best way to use our limited land, again land value tax would dampen land banking.

    • 10 December 2010 11:20 AM
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    This article is pure propaganda by vested interests. Not a single thing that any of them says is factually true or logically correct. You can go back to Adam Smith for explanation of why taxes on land values are the best kind of taxes, which is borne out in practice when they are implemented.

    • 10 December 2010 11:00 AM
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    May I respectfully suggest that 99% of MP's have the same mental capabilities as Ann Widdecombe, hence the ridiculas legislation we have piled on us

    • 10 December 2010 10:58 AM
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    Wesbland....use your real name..."Citizen Smith".

    • 10 December 2010 10:56 AM
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    A body with a name like the Organisation for economic Co-operation and Development has to come up with something to justify its' existence, even if it is boll*%+$.

    Nick Leaming nailed it "damaging, unpopular and political suicide".

    • 10 December 2010 10:43 AM
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    The Government is voted into power based on their election manifesto, then they do what they like.Nothing changes. "There is something rotten with state of (Denmark) British politics" to plagiarise Sir Winston Churchill.The comment from Wesbland hit the nail on the head.

    • 10 December 2010 10:17 AM
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    We all have choices dont we - Im sure the government like nothing better than to have people bemoaning schemes like this on internet forums. It would appear that the only way protest about proposals like this and VAT increases and Petrol prices etc etc is to publicly demonstrate -
    People should stop moaning and be a little more pro-active about preventing this kind of rail roading. PS I do agree with what the students are doing - more backbone than the rest of the population in this country IMO

    • 10 December 2010 10:07 AM
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    I'm with Jimmy.

    Along with making an agent purchase a house that they do not sell within 3 months, this is one of the most ridiculous ideas I have ever heard.

    Its crazy in it's own right with the already mounting expenses that are involved with housing transactions. It is even more of a shambles given the state of the market already.

    • 10 December 2010 09:50 AM
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    I agree with your opening statement sensible (but not necessarily with the rest of your comments). Both the residential and commercial proerty markets are attractive targets for those trying to sort out our financial woes. The effect on the market will be impossible to predict until any details are released. Those that are complaining already will just give certain elements of the population more justification for seeking to ensure that the burden is switched from the propertyowner to the agent.

    • 10 December 2010 09:44 AM
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    What we all have to realise is that we signed up to a Communist State of Europe which will merge into a World Government run from the UN, where the doctrine is against home ownership, which, over years enriches its citizens. This is not what the Rulers want, as access to Cash (equity) gives individuals power and Freedom.

    In the New World property will be owned by the few and the majority of people will rent.

    This is just another step towards the removal of wealth from the population and into the hands of Government to be passed on in interest payments to those who have loaned the Country money

    • 10 December 2010 09:30 AM
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    "the Organisation for Economic Co-operation and Development." Who?

    • 10 December 2010 09:24 AM
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    The Country is in financial trouble and I wouldnt have a problem looking at these taxes or any other........but stop giving billions in overseas aid, paying for wars where the locals dont appreciate us and other wastes first before expecting the same people to pay for Labours blunders!!....oh, and I dont agree with students rioting, but why is it only england that gets effected, were expected to feel British but not treated that way...oh and did you know if your a student from Madrid you still get full subsidy but not if your from Maidstone!!!???....(its against EU Law for Countrys to decsriminate against others, but they can against their own people)

    • 10 December 2010 09:21 AM
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