What Burnham’s tax system could mean for the housing market - Mark Manning
Every so often, a proposal comes along that has the potential to completely reshape the housing market. Andy Burnham's suggestion of replacing council tax and stamp duty with a new annual property tax is certainly one of them.
Council tax is based on property values from 1991, despite the housing market changing dramatically over the past 35 years. House prices have risen at vastly different rates across the country, meaning many homeowners now feel they are paying a level of council tax that bears little resemblance to the value of their property.
For that reason alone, reform is something many people would welcome. The challenge is making sure any replacement is fair, proportionate and doesn't create more problems than it solves.
One of the most attractive aspects of the proposal is the suggestion of abolishing stamp duty.
Stamp duty has long been one of the biggest barriers to moving. We regularly speak to homeowners who would like to move but simply can't justify the tax bill that comes with buying their next property. It affects first-time buyers stretching their budgets, families looking for more space and older homeowners who would downsize if it didn’t cost them to do so.
Removing that upfront cost could significantly improve mobility across the market and would result in more people moving up and down the property ladder. This is something the housing market has needed for some time and anything that removes barriers will lead to a healthier market overall.
However, replacing stamp duty with an annual property tax raises important questions. While buyers may save thousands of pounds upfront, the new tax would become part of the ongoing cost of home ownership. I'm not convinced homeowners will naturally think that they’ve saved thousands in stamp duty and put it aside to help cover the ongoing tax cost, which could cause some affordability problems down the line.
There is also the question of fairness across the country. Property values vary enormously between the north and the south. A relatively modest property in London or the southeast can be worth the same as a large family home in Yorkshire, so if the tax is based purely on property value, policymakers need to think carefully about how that works in practice.
Does there need to be some form of regional weighting to ensure the system feels fair wherever you live? These are important questions that need answering.
For me, though, the biggest concern isn't necessarily the proposal itself, it's the uncertainty that could surround it. The property market dislikes speculation and thrives on confidence. If homeowners believe major tax changes are coming but have no clear timetable or details, many will postpone moving until they know where they stand.
If reform is going to happen, it needs to be handled decisively. The changes need to be introduced immediately, or phased in over a clearly defined period so buyers and sellers know exactly what to expect.
The objective behind Burnham’s proposal is a sensible one. However, achieving a strong outcome will depend on careful planning, clear communication and avoiding the uncertainty that often accompanies major policy changes.
Mark Manning is managing director of Manning Stainton