Get the latest News direct to your inbox

The Election Effect

By Andrew Ellinas LL.B.Thursday, 9 October 2014

Election fever looks like dampening next year's spring property market, so householders considering selling would be well advised to put their property on the market now.

Fears of an interest rate hike from the current low of 0.5 per cent and the introduction of a mansion tax may also lead to a slow market in the opening months of 2015, until the uncertainty is resolved on election day, May 7.

Two of the major parties are committed to a mansion tax. The Labour party's manifesto proposes a tax on properties worth more than £2 million. Although the LibDems have now reversed out of their original mansion tax they are now advocating adding new bands to the existing Council Tax system, at £2m and £5m, with increased tax levels at each band. This proposal will be slightly less divisive and unfair than Labour's, but has attracted some support from the Conservative Chancellor, George Osborne, in the past so may stand some chance of implementation if a hung parliament results in the re-birth of the coalition.

All these factors will create an atmosphere of uncertainty that is never good for the property market.

Our advice to householders is to grasp the opportunity to sell at an excellent price now. Buyers are still in the market, especially from abroad, and sensibly-valued properties in good condition are selling well.

We are also confident that although the prime central London market is likely to remain flat in the spring of next year, it will bounce back after the election.

Fears of an interest rise are overhyped. The International Monetary Fund has just urged the Bank of England to consider raising rates to avert a property bubble, but as property prices are stabilising that seems unlikely.

We also believe that the mansion tax will prove to be so complex and manifestly unfair that no political party will ever impose it. Even defining what a 'mansion' may prove to be impossible - no two analysts agree on how many UK homes are worth more than £2m. Hometrack estimates there are about 58,500; Savills 97,000; Knight Frank 110,000. Clearly, identifying the right places to tax will be extremely difficult.

Reforming council tax will require a revaluation, a hugely expensive and time-consuming operation that was last performed in 1991. No government embarks on a revaluation unless absolutely impelled to do so.

In summary, we believe that the long-term prospects for the prime central London property market are excellent, but the likelihood of a blip in the spring caused by pre-election jitters makes now a very good time to sell.

Get the latest Properties direct to your inbox

How much is my property Worth?