Punishing homeowners with high taxes won’t end well for market

The Greens state that they want the 12 per cent rate – which currently begins at £750,000 – to begin at £650,000 and for a new 15 per cent rate to be levied on homes worth more than £1m. This would mean that Scots would be paying 7 per cent more than their English counterparts on properties worth more than £650,000 and a further 3 per cent more on those worth £1m plus.

While nobody likes property taxes, people hate unfair and excessive taxation. As with all such policies the politicians forget that people have a choice. They don’t have to live in Scotland and pay substantially more for buying a home. They don’t have to live in Scotland and pay substantially more in income tax.

Just as there is evidence from recruiters that Scotland’s high tax regime may be putting off individuals and business owners from moving to Scotland so it is inevitable that prospective homebuyers may also find their choices change to reflect the much greater taxes being charged on homeowning north of the Border.

But the further concern is that this will impact on the wider housing market. Just as first-time buyers and those making their second property move are unduly penalised for purchasing in Scotland so higher taxes at the top end of the scale cause blockages.

Older  owners are reluctant to downsize because of the excessive costs involved. The result is that many larger properties – which would be ideal for younger people with growing families – remain in the ownership of older retirees who don’t want to pay tens of thousands in taxes to move to a smaller house.

Thus, you have taxes impacting on the starting and end points of the housing market. People moving from their first home to their next property may struggle to afford the much greater stamp duty imposed from £325,000, resulting in potential delays in them moving from their first house to their next at the same time that buyers further up the market are unable to find sufficient larger properties to expand into because these are blocked by older owners unwilling to move.

The result is you make the whole market stodgy, you make those larger properties that do come on the market much more expensive, and you risk causing the housing market to falter and potentially fall backwards.

We need support for  homeowners, we need help to encourage buyers at the start of their home buying and older owners at the end, and we need to ensure that there is a level playing field with the market in the rest of the UK. To continue down this route of ever higher taxation will have an impact at some point.

How severe that impact will be is not yet known but for all actions there are reactions, and this continual financial punishment of the homeowner is not going to end well.