A Taxing Time: the property industry is set for increases

By the time I next write this column, we’ll be just days before the next Budget and Autumn Statement. So I’ll get my prediction in now - and it’s not a good one for our industry.

The pandemic spending, the cost of Brexit, rising fuel costs for government as well as citizens - they all have to be paid for. And that’s before the Levelling Up infrastructure.

So the mood music right now is one of increasing taxes, with both the Conservatives and Labour on the same side, despite rhetoric to the contrary.

Sir Kier Starmer’s speech may have shown a return to a significantly more moderate party than espoused by his predecessor, but Labour’s spending programme, especially on environmental issues, comes with a large price tag.

Boris Johnson has already given the game away from the Conservative side - for social care, he has instituted a £12 billion a year tax increase. Whether one agrees that this should be in the form of National Insurance is neither here nor there: the issue is that Johnson has painted a picture of the government being happy to increase tax.

Which brings us to property - it’s become the obvious target for tax rises. That may be an unfair target, but it’s become an obvious one for four reasons.

Firstly, grubby politics. Both Conservative and Labour want young voters, who are no longer automatically regarded as radical (that was back in the 1970s and 1980s) and are nowadays ripe for backing any political party that speaks their language.

Therefore both major parties are listening to lobby groups, ranging from the generally well thought out research of Shelter to the more shouty posturing of Generation Rent.

Secondly, much of the property sector - everyone from owner occupiers to agents to developers - has prospered in the 18 months since the pandemic began.

House prices are up 10 per cent, there’s been a rapid acceleration in transaction numbers since the market reopened in spring 2020, and chief executives of publicly owned firms in the property sector have looked after themselves very nicely with bonuses, thank you. All that makes it hard to say the property sector couldn’t pay more by way of taxation.

Thirdly, property is in the fiscal frame because - in political terms - there’s nowhere else for the industry to go but the Conservatives.

If Boris Johnson upsets the property industry, what happens? Starmer may be turning over a new leaf for Labour but he is also suggesting higher landlord taxes to fund social care, while his Shadow Chancellor is promising to review every tax break, including those for property, should she enter 11 Downing Street. The Tories know they are safe in attacking landlords, agents, developers and others - because there’s nowhere else for them to go.

Fourthly, and finally, tax may rise because some elements of the property industry have been…well, simply out of order.

Foxtons has notoriously resisted returning furlough money despite flamboyantly talking up senior management bonuses and snapping up rival Douglas & Gordon for a surprisingly large sum. It’s not the only agency that might be expected to repay furlough money, although it is undoubtedly the most forthright in its refusal to consider doing so. At the other end of the scale, it seems hard to justify holiday home owners in Cornwall receiving £170m in Coronavirus grants, as announced this week by the county council.

So combined, these factors soften up the industry and public opinion for more taxes.

I wish I could say another reason would be the need to reform the anachronisms of stamp duty and council tax, and the vagaries of Capital Gains and Inheritance Tax. But I sense that isn’t how the government is thinking right now - it’s more crisis management than considered reform, more raw politics than pragmatic analysis.

On October 27 we’ll get our answers. And of course, I hope Chancellor Sunak proves me wrong.

*Editor of Estate Agent Today, Letting Agent Today and Landlord Today, Graham can be found tweeting about all things property at @PropertyJourn