Isn’t it remarkable how everybody else seems to know best for the UK property market especially when the market is one of the best performing in the world? The IMF has been a constant thorn in the side of the UK property market with a whole range of recommendations over the years to increase property tax income. So, what are the latest recommendations from the IMF and do they make sense?
Property tax reforms
Before looking at the subject of UK property tax the IMF recognises that the UK has a significant shortage of housing. This is nothing new, this has been an issue for many years now and despite the fact governments have promised to increase the number of newbuilds nothing substantial has been forthcoming. However, the IMF has a very detailed opinion upon how the UK property tax regime should be structured and who should be penalised.
Reduced tax on property transactions
Historically some of the comments emanating from the IMF have been difficult to reconcile against the economic background of the time. However, the suggestion that the tax burden on property transactions should be reduced makes sense as this will bring more people into the marketplace.
The UK government has been fairly active in the area of property transaction taxes in recent times amid signs that other areas of the UK economy would not be able to support such a move. In some ways the government is fleecing the UK property market at a time when demand is high and prices continue to push ahead. Quite how investors will react when markets weaken and returns turn south remains to be seen but in the good times it is quite easy to accommodate creeping cost rises.
Increased tax for those holding property
While on one side the IMF is attempting to encourage more people to enter the UK property market on the other side it is recommending an increase in property taxes based upon property values. In layman’s terms the IMF is suggesting an increase in property rates and maybe even hinting at the introduction of a new rate for those houses at the top end of the market. This is not a new suggestion but it is one which the UK government has already attempted but scaled back in order to curry favour with voters.
One interesting discussion point which the IMF has brought forward is the recommendation that single occupiers should not receive any form of council tax discount for their properties. This is one potential change that could significantly increase government income at a time when budgets are being stretched to the limit. However, is it fair?
The UK property market has been one of the better performers for some time now, especially the London market, and this has not gone unnoticed by the likes of the IMF. From a property investors point of view it seems that everybody wants a slice of the UK property market pie which inevitably means an increase in transaction and holding taxes. The question is, can the market withstand this creeping increase in costs and still remain competitive in the eyes of investors?