Report calls for property speculation tax to prevent housing bubble
Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Finance
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The government should introduce a property speculation tax to stabilise the market and prevent another housing bubble, according to a new report.
Published by think tank the Smith Institute, ‘The Case for a Property Speculation Tax’, which highlights the speculative activity driven in high demand areas by overseas investment, argues that the government urgently needs to consider preventative action to curb excessive volatility in the property market.
The report warns that a housing bubble would not only worsen the housing crisis but also threaten the economic recovery.
It claims that overseas buyers are pushing up demand and house prices in London, investing over £7 billion in property in the capital. Around 85% of new-build properties in central London and 38% of re-sales are estimated to have been purchased by overseas buyers.
The think tank says that a property speculation tax (PST) would be a timely means of helping change the behaviour of investors, which, depending on the rate, could raise up to £1bn.
PSTs are used in other countries, such as Germany, and impose a high rate of tax if properties are sold quickly. The tax is tapered, with lower rates the longer the property is kept.
The report says that a PST would exclude ordinary home-owners and longer term investors, with its focus on curbing speculation, but could also include second homes and empty properties.
Paul Hackett, director of the Smith Institute and co-author of the report, said: “Preventing another housing bubble is common sense. The idea of a property speculation tax would be one way of stabilising the market particularly in London where overseas investors seem to be pushing up house prices. A PST could also raise up to a £1bn for much needed new affordable homes.”
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