Rightmove issues stark warning to Rachel Reeves over 'new property taxes'

Property experts have warned that "everyone" could be impacted if new tax rules come into effect, with Rightmove urging the Government to tread carefully to avoid "unintended consequences."

The property platform's intervention comes amid reports that Chancellor Rachel Reeves is weighing up replacing stamp duty with new forms of property taxation - including an annual levy on higher-value homes and a possible new 'mansion tax' targeting sales above £1.5million. Rightmove's latest analysis shows that just under a third (30%) of homes for sale in England are priced above £500,000 and would be caught by the rumoured property tax.

In London, 59% of properties currently on the market are listed above the £500,000 threshold, compared with just 8% in the North East.

The average asking price across Great Britain now stands at £368,740, while buyers in London face a far higher figure of £666,983.

At the very top end, just over 1% of all homes sold so far this year have been priced above £1.5 million - the level being floated for a potential new capital gains "mansion tax."

In London, 11% of homes on the market fall into this category, with 5% of transactions this year agreed above the threshold. The South West sees only 0.7% of sales in this bracket, and the North East just 0.1%, illustrating the significant regional imbalances.

Rightmove CEO Johan Svanstrom stressed that affordability and mobility must come first in any reforms. He said: "It's already hard for first-time buyers to save up their deposit to get onto the ladder, and many must fund a large stamp duty payment too. Around a third of all sales currently going through the system are for typical first-time buyer properties, so this is a big part of the market.

"Affordability is very stretched, and so putting the tax burden onto the seller could be beneficial for first-time buyers; however, the savings could be wiped out if sellers simply build some of the charge into a higher asking price."

Mr Svanstrom also warned that transitional arrangements would be vital if new rules were introduced.

He said: "The Government will need to really think through how this transition will be phased in to avoid slowing down the mass market. Those who have recently paid stamp duty as a buyer and would face paying property tax as a seller in the future would clearly be at a disadvantage. As we've seen around moments such as stamp duty changes, we could see some distortion in the market for properties at or close to the £500,000 mark if this does end up being the threshold, with movers at this price range understandably keen to avoid the new tax if they can."

The potential impact on downsizers could also be significant. With no clear incentive to move, older owners of larger homes may simply stay put, further restricting supply.

Mr Svanstrom said: "There is no real incentive for someone in a large home to downsize to a smaller one unless they truly need to and can still afford the stamp duty bill. The current rumours to stamp duty changes would only seem to exacerbate this, as it may deter some at the top of the market from moving if they would then face a new annual tax.

"he Government needs to be cautious over the cumulative effect of taxation on higher priced areas of the country, as it simply risks stalling this part of the market. A slower market can affect all types of movers, from first-time buyers to key workers and families, even if a tax is aimed at higher value properties."

While renters would not be directly taxed under the proposals, Rightmove warned of indirect consequences.

Mr Svanstrom said: "If under the rumoured proposals, buyers no longer pay added property taxes, it could make the transition from renter to first-time buyer a little easier. But rents have risen 44% since the pandemic and average supply is 26% less, so affordability is very stretched.

"The rumoured stamp duty changes don't appear to apply to buy-to-let properties, so we wouldn't expect any immediate impact on landlord supply, although they face many other tax pressures adding to the concerns of adequate supply going forward in the market."

Mr Svanstrom argued that, while reforming stamp duty could bring important benefits, the overall design of new rules would be pivotal.

He said: "There are many ways the current system can be improved or made fairer. Under this week's rumoured proposals, there would appear to be some benefits to first-time buyers, but more consideration is needed for the mass-market caught between two systems, and downsizers.

"The key question is whether these changes would actually generate more income for the Government. It depends on the designs of reforms for taxes and fees, as well as the rates, but if they reduce mobility through these changes, they risk having the opposite effect and losing out in the long run."