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Think tank proposing annual property levy

Council tax should be scrapped and replaced with annual payment equivalent to 0.5% of homeowner’s property, says think-tank

  • Labour-leaning think-tank suggests council tax should be replaced by annual levy
    The Institute for Public Policy Research called for a ‘proportional property tax’
    Under their system, someone living in a house worth £1million would pay £5,000

As well as replacing council tax, the new levy would also replace the stamp duty which people pay when they move house.

The think-tank said the move would lead to a fall in house prices of 3 per cent in London and other well-off places in the South.
Shreya Nanda, IPPR economist, said: ‘Those who did not own property during the long house price boom have been locked out, and too many face steep rents, cramped flats and eye-watering mortgages.
‘A proportional property tax would instead ensure that these gains were shared more fairly across society.’

A property tax of 0.5 per cent could mean three quarters of households in England paying less than what they do now.

Last night, a Treasury source said there were no plan to introduce such a property tax.

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Stamp duty boost for first-time buyers? Not a bit of it, claims research

First-time buyers are £25,000 worse off thanks to the stamp duty holiday, according to estate agent comparison site GetAgent.

The website revealed that the stamp duty holiday has increased the price of first-time buyer homes by an average of 11.7% in England in the last year, and by as much as 31.5% in some areas of the country.

The stamp duty holiday was introduced by Chancellor Rishi Sunak in July 2020 as a financial incentive to keep the housing market buoyant during the pandemic and help galvanise the UK economy.

Heightened demand has, however, pushed house prices to an all-time high, and GetAgent claims that first-time purchasers are now facing bigger challenges than ever when it comes to getting on the ladder for the first time and securing homeownership.

Its analysis found that the average price of a first-time buyer home in July 2020, just before the stamp duty holiday was introduced, stood at £212,166 – but the latest figures reveal the average first-time buyer home now costs £236,982, a rise of £24,816 or 11.7%.

Regionally speaking, the North West has witnessed the largest rise, with the average first-time buyer in this part of the world now paying £168,820 – a 16.9% leap since July of last year.

First-time buyer price increases at a greater rate than the national average have also been seen in Yorkshire & Humber (14.8%), the North East (13.4%), West Midlands (13%), and East Midlands (12.9%).

GetAgent claims that, when analysing the market at local authority level, the bad news for England’s first-time buyers continues. In Richmondshire, North Yorkshire, for example, the average price for a first-time buyer was £178,974 in June 2020 – rising to £235,425 today, an increase of £56,451 or 31.5%.

In Rossendale, Lancashire, the average first-time buyer home costs £147,417 now, having increased 24.3% since the introduction of the stamp duty holiday.

Other areas to experience very high price rises include North Norfolk (23%), North Devon (19%), the Cotswolds (18%), and Hastings (18%).

Not all areas have seen an increase, though, although these areas still remain largely unaffordable for the average first-time buyer.

In Kensington & Chelsea, for instance, the average first-time buyer home cost £1.1 million in July 2020 – a figure which has since dropped to just over £1 million, a decrease of £75,093 or 6.5%.

A similar story has taken place in increasingly fashionable Hackney, where the stamp duty holiday caused a price drop of 4.1%, with the City of London (-4%), the City of Westminster (-3%), and Southwark (-1.4%) also seeing a reduction.

“There’s no denying that the stamp duty holiday has been a roaring success in terms of fuelling property market demand and keeping the market moving in an otherwise uncertain time,” Colby Short, founder and CEO of GetAgent, said.

“However, while many existing homeowners will have benefited from a boost in the value of their home, the reality is that the nation’s first-time buyers are worse off when it comes to taking that first step onto the property ladder.”

He added: “Although mortgage costs remain very favourable at present, the sheer increase in property values and the deposit required will see many either forced to save for longer, or priced out of the market completely.”

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Conveyancing – is industry-wide UPRN adoption on the cards?

Industry-wide adoption of Unique Property Reference Numbers could be one step closer after an announcement by a major trade body.

The Conveyancing Information Executive (CIE) yesterday published a detailed whitepaper, entitled ‘Property Passports: the role of Unique Property Reference Numbers (UPRNs)’, to address the practical challenges of transitioning the property industry to universally using UPRNs, ‘to help improve the property transaction process’.

Chris Loaring, a spokesperson for the CIE, commented: “It is commonly agreed across the industry that Unique Property Reference Numbers will offer the best solution towards creating a unique, non-transferable and universal reference for every property. Our whitepaper offers the first analysis of what practical steps are needed to make the implementation possible to get all stakeholders aligned.

“At the CIE, we collectively have more industry experts in one place who are immersed in property, geospatial and UPRN data. We are therefore very pleased to present to the market a whitepaper that breaks down the role UPRNs will play in providing one true record for each address, which will ultimately help towards reducing transactional delays and improve the overall experience.”

At a later date, the CIE will be hosting an industry roundtable event to discuss the details of the whitepaper. The date and joining details of the event will be announced soon.

The overall purpose of the CIE is to raise data quality and content standards in property searches used within the UK conveyancing process, with a membership that includes Argyll Environmental, Geodesys, Groundsure, Landmark Information, Mining Searches UK, PinPoint Information, SearchFlow, Ambiental, Glenigan, JBA Risk Management and Barbour ABI.

Momentum behind wider use of UPRNs – which are similar to car license plates – has been growing in the last couple of years.

In July last year, trade body Propertymark urged agents to start being trained in the use of software operating the UPRN system, while in January this year Countrywide and Foxtons were among the names backing a new scheme to speed up the conveyancing process.

The agencies, along with Savills and a string of agency trade bodies, threw their weight behind an idea to identify every single UK residential property with a unique number, signing a letter sent to then-Housing Secretary Robert Jenrick outlining the potential advantages of the Unique Property Reference Number concept.

Most recently, in late June 2021, the Unique Property Reference Number concept was backed by the government as well.

Housing minister Chris Pincher said at the time: “We know that the current buying and selling process is besieged by long and arduous and byzantine processes and inefficiencies.

“When a buyer is found, old and dusty deeds, half-forgotten documents lying in solicitors’ safes or basements of town halls – they have got to be located, they’ve got to be shared, they’ve got to be pored over by both parties in great detail.”

With UPRNs, he argued that “the processes can be streamlined. Information like the number of previous owners, boundaries, that can all be shared digitally at the touch of a key helping to speed the whole house buying process along.”

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Listings crisis as sellers still reluctant to come forward

Parts of Britain are so short of homes for sale they have only half the number of listings to be expected at this time of year.Rightmove says Newmarket in Suffolk is the very worst location with the number of sales being agreed up 79 per cent on last July, while new sellers putting their properties up for sale is down by 49 per cent.

The top ten new supply shortage hotspots are all in South East and East of England, with average asking prices in three of the hotspots – Newmarket, Berkhamsted and Bushey – up by nine per cent since 2019.

The portal says that nationally the average number of available properties on an agent’s books is 16, down from 29 in July 2020.

The stock shortage is being felt across the country, with the average available stock per agent on Rightmove dropping from 29 in July 2020 to just 16 properties now.

Around two third of properties have already found a buyer, and some of the hotter areas like Newmarket are seeing a higher rate of three quarters of homes already sold subject to contract.

Tim Bannister, Rightmove’s director of property data, comments: “If we think back to July last year the market in England had been open again for around six weeks, the stamp duty holiday was announced, and a summer frenzy was just beginning.

“Twelve months on, the combination of fewer sellers coming to market and sustained demand has resulted in a summer seller shortfall, and so the challenge for agents now is to try and replenish the stock to meet the demand from buyers.

“For those considering coming to market this year, now could be the time to find out what your home could be worth from a local agent.”

To give an example of the stock drought in the worst-hit area, Neil Harris – director at Cheffins in Newmarket – says: “There’s a real shortage of houses for sale which means that for every property which does come available, we see huge levels of interest.

“We’ve consistently benefitted from Cambridge’s house price growth, and as Cambridge becomes increasingly expensive, coupled with its fast-growing population and booming economy, buyers have continually looked to move to Newmarket in search of more space for their money. Similarly, as the days of the five day a week commute appear to be coming to an end, we’ve seen a growth in buyers from London coming to the area, seeking out countryside and village homes at lower price tags.”

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Buyers hopelessly ill-informed on mortgage process, survey suggests

Many Britains are apparently under-estimating the impact of furlough on their ability to get a mortgage and buy a property.A new survey claims that 64 per cent of Britons believe that lenders do not consider whether an applicant has received support from the furlough scheme in mortgage applications.

The same study, of 2,000 UK adults, found that 42 per cent believe that being self-employed is not usually a factor considered by lenders in mortgage applications.

Compared to all age groups in the study, young people aged 18 to 34 are the most likely to under-estimate the impact of furlough on their ability to borrow.

Richard Eagling, senior mortgages expert at comparison website NerdWallet – which commissioned the research – says: “A lender will always determine the risk level that a mortgage applicant presents and whether they can afford the repayments,  and it seems that many lenders are excluding furloughed income when assessing affordability.

“Likewise, some high street banks are declining mortgage applications from those who took the government’s self-employment income support scheme grant, or are asking them for larger deposits. This is another sting in the tail for those that have been financially affected by Covid and presents a challenge to their dreams of homeownership.”

The research also highlights that only 22 per cent of adults aged 18 to 54, and just 15 per cent of those aged 18 to 25, knew that the government-backed mortgage guarantee scheme could apply to them.

Some 78 per cent of working age adults also said that they do not have a good grasp of the support available to help them buy property, while 76 per cent of 18-to-54s feel they lack good knowledge about how to secure a decent mortgage.

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Complaints about estate agents jump by a third says Ombudsman

The Property Ombudsman says there’s been a big increase in enquiries to its service in recent months, despite the pandemic.

In its annual report – which is out today but covers only the 2020 calendar year – TPO says enquiries increased year-on-year with a record 39,285 reported, up 29 per cent on 2019.

Over 34,000 enquiries were resolved at first contact and 5,122 enquiries were accepted as complaints by TPO. Whilst this was a rise of only 0.3 per cent as the bulk of enquiries were in the latter part of the year, this meant an even busier start to 2021.

The number of cases resolved by TPO grew by 12 per cent; of these, 2,907 cases were supported by the Ombudsman and 2,473 financial awards were made totalling £1.9m, down 13 per cent on 2019.

TPO dealt with 2,737 complaints relating to lettings, 1,656 relating to sales, 1,194 for residential leasehold management and 120 for other property professionals.

The biggest awards were £20,838 (lettings), £24,139 (sales) and £10,642 (RLM), and the average awards were £612, £653 and £339 respectively.

Once again, the top causes of complaints being referred to TPO were management for lettings and communication and record keeping for sales, with complaints handling as the top cause for RLM disputes being referred to TPO.

TPO recorded a 99 per cent compliance rate with awards in 2020, with just 40 referrals made to TPO’s Compliance Committee, 34 per cent fewer than in 2019.  Despite members totalling 40,097, only 19 agents were excluded for non-payment of awards.

In the sales sector, some 65 per cent of complaints were supported by the Ombudsman; 68 per cent of complaints were received from sellers, while 30 per cent came from buyers.

The top causes of complaints were communication & record keeping, instructions/terms of business/commission/termination, marketing and advertising, and complaints handling.

Rebecca Marsh, The Property Ombudsman, comments: “Our customer services team responded to another record volume of consumer enquiries with an ever-increasing number of people opting to contact us via TPO’s complaints portal, launched in February 2020. The pandemic is not over yet, so it will be interesting to see if this trend continues or adjusts as we slowly get back to normal.

“TPO helped over 34,000 enquiries that did not need to go on to become accepted cases by signposting them to organisations that could help, or giving advice and guidance to promote a local resolution between them and the agent. Providing a front-end enquiry service is one of the unique functions of an ombudsman. Its importance in helping consumers in such a complicated sector, whether or not their issues fall within TPO’s remit, should not be understated, as often straightforward guidance and advice can help stop disputes from arising in the first instance.

“Enquiry levels in 2021 are already showing further year-on-year increases and we are expecting this to continue as the impact of the pandemic on peoples’ relationships with their homes continues to play out.”

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Politicians “worried” after house prices rise £100,000 in one year

Politicians “worried” after house prices rise £100,000 in one year

Politicians in one of the most exclusive property enclaves are complaining after average house prices have risen around £100,000 in just 12 months.The latest house price index for the Channel Island of Jersey shows the average cost of a home at £629,000 compared to £574,000 three months ago and £532,000 12 months earlier.

A Jersey home now costs, on average, 2.5 times more than in the UK and almost £200,000 higher than on the neighbouring Channel Island of Guernsey. During the second quarter of 2021, the UK national average went from £253,000 to £257,000, with London now standing at £504,000.

The average cost of a two-bedroom flat on Jersey is now £494,000 while three- and four-bedroom homes are £806,000 and £1,277,000 respectively.

The Jersey Evening Post newspaper quotes Deputy Graham Truscott – a politician who sits on the Environment, Housing and Infrastructure Scrutiny Panel – saying: “It is concerning and house prices have been historically high in Jersey when compared to other areas of the world. It could have a negative impact, not just on the younger generation, but in attracting people we need to the Island – doctors, for example, as they might now be looking at a house costing over £1 million.

“It’s certainly going to have a knock-on effect across the population. We have got to knuckle down and build more.”

The same report says advertised rental prices in Jersey rose by nine per cent in the last three months, taking them four per cent above the corresponding period of 2020.

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MPs push for proportional property tax

A group of MPs has suggested the government consider a “proportional property tax” to replace the current council tax, in a bid to fund the growing cost of social care.The idea has come from the all-party Housing, Communities and Local Government committee, which is led by Labour MP Clive Betts but with the majority of members being Conservative MPs.In a new report the committee says “reforms are needed to ensure the sustainability of local government finances, including an urgent solution to the funding of social care in England.”

One of its recommendations says the government should “implement changes to council tax and consider wider options for reform” while Betts states specifically: “In the longer term the government should consider options for wider reform of council tax and business rates, including possibly replacing them with a proportional property tax.”Other recommendations include widening the funding base of local government to make it less vulnerable to shocks such as the pandemic, including by giving councils more flexibility over local taxes and other revenue-raising powers.Various bodies have called for proportional property taxes in recent times.

Most recently a cross-party think tank called Bright Blue wants the government to introduce such a tax as a replacement for stamp duty, urging instead an annual proportionate property tax on the current capital value of houses with a tax exemption for properties worth up to £50,000 and a 25 per cent surcharge for second home owners. Liability to pay would be with owners, not occupants.

For over a year now there has also been speculation of possible changes to Capital Gains Tax on the sale of homes to help fund additional spending to cope with Covid.

The latest proposal from the Housing Communities and Local Government committee of MPs is in response to the need to fund social care.

Clive Betts says: “A solution to social care funding would go a long way to restoring local government finances. Covid-19 has also hit councils hard and, while the government responded to the pandemic with substantial financial support, they now need to come forward with a long-term sustainable way of funding councils and the services they provide.

“The system of local government finance should enable councils to increase revenue by growing their tax base while protecting those councils who are less able to do this, through no fault of their own.”

This is a statement by Andrew Dixon, founder of ‘Fairer Share’

The Government has a problem when it comes to its “levelling up” the UK agenda. It has promised to make a meaningful difference in the lives of their voters, particularly in the ‘red wall’. But doing so requires the combination of long-term investments in transport, broadband, education, and dispersion of private enterprise across the country. In other words, not a lot that voters will notice any time soon.

This is where tax comes in. Changing the tax code can be done in a matter of years rather than decades. Effective change can put cash in the hands of voters between election cycles, making a difference to household finances that voters can feel when their MP next shows up on their doorstep.

The most egregious part of the current system is our property taxes. Council tax is regressive, forcing millions into debt, while stamp duty puts a brake on mobility, and hinders economic growth.

At Fairer Share, we advocate council tax and stamp duty abolition replaced by a proportional property tax where owners would pay 0.48 per cent of their property value every year. Across England, 76 per cent of households would gain under the system, seeing a reduction in the amount of tax they pay on their primary residence. The biggest winners are, helpfully for the Government, located in the North and Midlands – areas that the Government so desperately wants to level up.

Council tax in particular is antithetical to levelling up. Council tax values are 30 years old, a year older than the first text message and four years older than DVDs. They result in distortionary costs that hit the North and Midlands hardest. A resident of Hartlepool, for example, in a £150,000 home would pay over £2,000 in council tax whereas a £10million mansion in Westminster would pay just £1600. On average every resident in Hartlepool pays 2.5 times the rate of council tax to property value than the national average.

Revaluation is desperately needed and valuations need to be done continuously so that we never reach this absurd system again.

Work done by the International Property Tax Institute shows that there is no technical problem with revaluation. A wide variety of different jurisdictions (including New York City, Ontario, British Columbia) and countries (including Netherlands, New Zealand) use some sort of automated valuation model to aid their property tax systems.  Zoopla, Rightmove, and Hometrack provide a pretty decent example of private companies in the UK who do this work and if we wanted to maintain the system wholly with the state, the Valuation Office Agency already has the required data in order to implement the system itself.

We would not have to go far to find a model of similar type. Property tax in the Netherlands is based on much the same principles as a proportional property tax and undertakes re-evaluations on an annual basis.

But the Government knows this because it does a similar but harder job already. Business rates revaluations are undertaken on a regular basis. There is a broad consensus that this is much more technically challenging than valuations of residential property with higher levels of resulting challenges to valuations.

Resultingly the Government should not worry about overwhelming the VOA with challenges. Residential property valuation challenges internationally are less than two per centt of the stock, and less than half the rate of challenges for business rates. With bills coming down for the vast majority of properties, most people will take their cash and run before they worry about their valuation. For those whose bills rise, the cap at £100 per month will limit the need for revaluations at the top end of the market as well.

The only reason revaluation has not happened already is that it has been deemed too politically difficult to do while maintaining the old, unfair system of council tax. And therein lies the real problem.

But by sticking with the status quo, both the Conservatives and Labour are missing a trick. Both parties know that voters in and around the red wall will be crucial to their prospects in the next general election. They should also know that current proposals around infrastructure are unlikely to shift the dial with these voters by the time the next general election comes around.

Economic analysis by Fairer Share makes clear that a proportional property tax would lead to lower bills for most households in England. A number of Labour and Conservative MPs want their leaderships to get behind the policy, along with think tanks from both sides of the political spectrum. More than 120,000 people have also signed the Fairer Share petition calling on the Government to replace council tax, stamp duty and the bedroom tax with a Proportional Property Tax.

Our analysis also makes clear that concerns about valuations are a red herring. A fairer system would clear the hurdle for valuations. It should not stop either Labour or the Conservatives from doing what is needed in the UK and reforming our outdated unfair residential property tax system.

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Still a Seller’s Market – demand dips but supply shrinks further

Still a Seller's Market - demand dips but supply shrinks further

Yet another housing market snapshot is reporting the stock of property for sale plummeting further downwards.Property website Home says that while the tapering stamp duty holiday will have dampened buyer demand in many areas, supply is falling faster, ensuring that most parts of the UK remain a market for sellers.

Home specifies that the supply rate of new sales listings remains remarkably low across all English regions, Scotland and Wales, despite the fact that properties outside of Greater London are achieving record valuations.

While still below their May 2016 peak, London prices are beginning to rise and look to be entering a new period of growth, supported by a rapidly recovering rental market especially in the more central boroughs. Home says that after an 18-month battering by the pandemic, confidence is returning to the capital’s property market.

The sales stock total in London has been steadily eroded by 16 per cent since the oversupply peak in late 2020; it suggests demand looks set to increase on the back of rapidly rising rents as investors, both private and institutional, spot yield and capital gains opportunities.

Outside London, shrinking sales and rental inventories continue to push up both prices and rents.

Even so, the number of new instructions entering the sales market across the UK continues to be very low compared to pre-Covid levels (down 24% July 2021 vs. July 2019). The number of newly available rental properties entering the market is also down considerably across the UK (down 27 per cent between July 2020 and July 2021).

Sales supply looks set to remain low until mortgage payment deferral schemes end, says Home – no date has been set for these, but they may coincide with the end of the current furlough scheme at the end of September.

The East of England and Wales now lead in terms of regional price growth, with annualised home price inflation of 11.2 and 10.7 per cent respectively, supported by high demand and low supply.

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HMRC targets property transactions after slump in tax income

HMRC targets property transactions after slump in tax income

HM Revenue & Customs is reported to be targeting recent home buyers after a slump in income from property taxes during the pandemic.An investigation by Boodle Hatfield, a private wealth law firm, has shown that the number of Stamp Duty Land Tax investigations by HMRC fell 75 per cent over the past 12 months as resources were diverted into handling tax issues arising from the pandemic.

But the firm says it’s likely HMRC is now starting to examine property returns submitted over the past 18 months and may be about to pounce on suspect returns.

Boodle Hatfield says the applicability of SDLT relief can be subjective and HMRC may challenge claims by property owners who are not trying to defraud the taxpayer but are merely uncertain of how the rules apply or legitimately believe they are entitled to relief.

Ways in which some property owners may legitimately reduce their SDLT cost on a property purchase include claiming their property is a mixed-use property to qualify for the lower commercial rate of stamp duty, or claiming multiple dwellings relief if their property has a granny flat or annexe.

SDLT enquiries may also detect fraud, where individuals deliberately make dishonest or inaccurate disclosures in an attempt to underpay or evade stamp duty.

Boodle Hatfield partner Kyra Motley says: “It is an astonishingly sharp drop in SDLT investigations, especially when set against the boom in residential property transactions.

“It seems unlikely that this drop in investigations means there has been a similarly sharp drop in wrongly claimed SDLT reliefs.

“HMRC will be keen to make up for the shortfall in investigations over the past year. We would expect them to scale up activity now that lockdown restrictions have ended and all the HMRC teams return to a more normal working environment.”