Debate Magazine

More Mansion Tax Double Think

Posted on the 17 December 2014 by Markwadsworth @Mark_Wadsworth

As reported in The Times this week by economics and property correspondent Kathryn Hopkins,
" Young professionals in London could experience large rises in their rent if a mansion tax is introduced next year, an estate agent has warned."
"Knight Frank said that if landlords had to pay Labour’s proposed tax on properties worth more than £2 million, they would be highly likely to pass the extra cost on to tenants."
Any additional costs would make landlords’ investments less viable, Knight Frank said. The impact would be particularly marked when landlords were paying a mortgage on the property.
"“There has not been any clarification as to whether the proposed mansion tax would be the responsibility of the landlord or the tenant, but our assumption is that it will be the landlord,” Tim Hyatt, from Knight Frank, said."

Hopkins faithfully regurgitated the above. But in the very next paragraph.......
"Meanwhile, Hamptons International has said that George Osborne’s changes to the stamp duty system will boost prices and transactions in the first half of next year in all but the most expensive areas of England and Wales.
Its analysis of home sales this year suggests that 72 per cent of buyers would have been better off under the new regime, it would have made no difference to 27 per cent and only 2 per cent would have been worse off.
The typical gain is equivalent to 1 per cent of the purchase price."
So, increases in property taxes (Mansion Tax) raise prices (rents)......but decreases in property taxes(SDLT) also raise prices (capitalised rent/selling prices).
Granted, economics isn't Kathryns main subject, but surely she should at least try to highlight this obvious contradiction.
 Rents are set affordability(inelastic supply) not costs. Landlords are not a charity, they are already charging the most their tenants can afford. The incidence of taxation on immovable property always therefore falls on the landowner. So, it doesn't matter who pays property taxes. The landlord or tenant, the buyer or seller. The effect is the same.


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