Mansion taxed: at £2.5m selling price this year, this property on Bishops Walk, off Gravel Hill, with its own pool, will be one of those affected by the new charge
What parts of Croydon are likely to be hit by the ‘mansion tax’? Our housing correspondent, BARRATT HOLMES, peers through the estate agents’ window…
Pearls were being well and truly clutched at the Bog Standard this week, as the full horror of those wealthy enough to own £2million homes having to pay a bit more in taxation began to hit home.
Guess what? After almost half a century of rocket-fuelled house price inflation in the capital, triggered by Thatcherite right-to-buy policies, and endless dull dinner party conversations about how the increase in equity on someone’s home had somehow helped to put Jolyon and Jocasta through private school, someone at what used to be an evening newspaper has realised there might be a downside to ever-increasing housing costs.
What was once a London evening newspaper has gone weekly, but even in its virtual form The Standard has kept its lucrative Wednesday Homes and Property section going, as they pocket all those fat fees from estate agent ads, all the while doing their bit to stoke the flames of housing inflation (Plot spoiler: if you reduce demand by providing thousands more homes at social rent, private landlords won’t any longer be able to charge massive rents, much of which is paid for through housing benefit).
The Standard is owned by the son of a Russian KGB spy who was ennobled by Boris Johnson, and the paper was (badly) edited for a while by austerity Chancellor Gideon Osborne. So blow us down with a feather when it emerged that they don’t much care for Labour’s “mansion tax”, announced in Rachel Reeves’ Budget last week. Qu’elle surpris!
Undervalued: Mayor Jason Perry’s house near Lloyd Park will probably dip below the £2m tax threshold
“From 2028 and beyond, if your home is around the £2million mark, a total stranger (or algorithm) who has not even seen inside your property will be deciding its value — with expensive consequences,” the Sub Standard bleats today. Someone in Inside Croydon Towers said that they may have heard the sound of very small violins being played…
Two-thirds of house sales in Britain above £2million take place in the capital. The arrival of the mansion tax may force more families to be pushed out of central London, into suburbia and the commuter belt. That might just include Croydon.
The paper explains how the mansion tax will use the Council Tax structure, placing an annual charge on homes in bands F, G and H if valued by the Valuation Office Agency (to become part of HMRC) as potentially worth £2million.
Inside Croydon has been unable to confirm the very strong suggestion that Chancellor Reeves was subjected to intensive lobbying in the weeks before the Budget, asking her to raise the mansion tax threshold from a previously proposed, more “modest” level, thought to be £1.5million, as this may have snared several of her Cabinet colleagues and Labour bigwigs in the tax net.
Even Reeves’ own home, in Dulwich, where the average price of a semi is currently £1.4million, may have been in that category…
In Croydon, around 1-in-10 of all properties seem likely to be subject to Reeves’ mansion tax. Going by 2023 figures (the most recent readily available), there were approximately 11,800 properties in Band F, 7,500 in Band G and 650 in Band H.
Given that the going-rate for a small, one-bed flat in Croydon lately is close to £400,000, it ought not come as a surprise to discover that in some of the leafier enclaves of this borough, from desirable parts of Upper Norwood to Green Belt Coulsdon, there are many properties likely to be subject to a mansion tax.
In the “very desirable” (to use estate agent speak) Upper Woodcote Village outside Purley, the average property price is north of £1million. The houses here don’t often come on to the market, but properties sold there in 2021 and 2022 for £1.9million and £2million respectively.
On swanky Bishops Walk, which meanders through the Addington Hills towards the Addington Palace golf course, one detached house (four bedrooms, three bathrooms) sold for £2.25million last year. In February this year, another home on the millionaires’ way went for £2.45million (four bedrooms, but only two bathrooms this time).
So Reeves’ mansion tax might well affect homes in all parts of the borough, from large family houses on roads such as Castlemaine Avenue, overlooking Lloyd Park, where Mayor Jason Perry lives, to Gothic piles on the top of Bramley Hill in Waddon, unless the owners can show their homes are less than the £2million threshold.
Purley premium: big houses like this in Upper Woodcote Village have sold for more than £2.4m recently
That levy, added to the Council Tax bill, will amount to between £2,500 a year for a household at the bottom end of the range, up to £7,500 for homes priced at more than £5million.
The revaluation exercise starts in 2026 and the new charges will begin from 2028. Revaluations will take place every five years.
It is all a bit of a sticking-plaster adjustment to the nation’s property taxes, with Council Tax valuations on all properties long overdue for an overhaul.
The Standard predicts that there might soon be a glut of large family homes coming on to the market in London and the south-east, as the properties’ older owners rush to down-size. “Retirees on a fixed, dwindling income and facing higher energy costs, whose property price has increased 30-fold since they bought it, may feel forced to sell their forever home prematurely,” the paper notes.
“The mansion tax is already triggering a wave of repricing,” The Standard says.
They quote estate agent Roarie Scarisbrick: “There is already talk of sellers bunching up just below the thresholds and I expect very little will sell within around £100,000 of the £2million mark.
“Potentially, it is a great negotiation point for buyers and a problem for sellers who have to trim their price.”
Even a bit of canny price fixing won’t be a permanent solution in London’s overheated housing market. With the valuations set for updating every five years, mansion tax will increase over time: estate agency Savills forecasts 15.3% growth in London values over the next five years. That would see a £1.9million property in 2026 being valued at £2.3million by 2031.
“With house price growth across Greater London over the past two decades, homes with a multi-million price tag are now found outside the uber-luxury stomping ground of central London,” The Standard says. “There are 26 neighbourhoods where the average house price… sits around the £2million mark.”
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The mansion tax wasn’t brought in to get loads of money from the filthy rich, it is a PR stunt to appease those living on benefits.
If people can afford to run multi million houses, they will stay in them. These houses haven’t been flying up in value nearly as fast as have 2-bed flats in recent years, so the older, less financially gifted owners of 4-bed detached houses with very large gardens may downsize, and people who have lived in smaller 4 bed detached houses with garages for a couple of decades may buy their properties, selling their own homes to property developers. The government will pocket the stamp duty.
However, multi-millionnaires will probably stay in their Knightsbridge mansions as these are owned by trusts or enterprises to whom the mansion tax will be another overhead to reduce profits. The really rich always have get-outs to legally avoid taxes, nothing changes.
Spot on, although suspect the appeasement is for Starmer’s backbenchers, who have been getting twitchy at the sheer unpopularity of the PM’s Blue Labour agenda
“Gothic piles”. I see what you did there…
Your reference to social rents alludes to a question almost never, if ever, heard about housebuilding in the UK. Do we want new houses for people to live in, or new houses for people to own?
For however long now, the assumed answer is the latter and that’s what has got us where we are. Emphasis on the former, with a focus on social housing, would take so much heat out of the sector we all might be able to live normally again without posing as our own personal property speculators.
Crazy thought: and people under 30 might aspire to owning their own flat or house again, like my generation did.
As for the £2m limit, it’ll result in a lot of ‘bunching’, where there’ll be a glut of sales around the £1,999,999 mark; in the same way we have a similar phenomena at the £925K and £1.5m stamp duty thresholds.
Build, baby! Build!
It’s another nail in the coffin of the original occupants of these beautiful older properties. At one time we could expect occupants to include professional people, business people, or landed families, all of whom took pride in maintaining high standards of maintenance of their homes and gardens. Even passersby took pleasure at the very sight of these mansions. Nowadays however multiple families choose to tuck themselves into these properties as evidenced by the number of cars and vans littered around frontages. Ultimately what once may have been described as public art will be knocked down by developers in favour of apartments. This latest mansion tax will undoubtedly accelerate this process, sadly.
It’s fascinating that quite a few of these ‘mansions’ are ex-council houses, as a result of Thatcher’s right-to-buy. They are up and down the country, with most in central London. Is it possible that some are in our benighted borough?
“Fascinating”?
Where are these £2m ex-council homes?
You don’t know, do you? Is that because there aren’t any?
It’s a load of bolleaux served up by the Torygraph, who claim that “exact figures on the value of social houses is not available, but across England there were more than 110 social homes, current or former, sold for more than £2m since 2021, which could therefore attract the mansion tax, a Telegraph analysis of property sales data and EPC ratings found. “
The house I own with my brother is in band F. It is worth about 700k. I doubt very few houses in Croydon in this band will be valued at over £2m and most in band G probably won’t hit that level either.
There has always been the issue of building new homes but it has never gone anywhere. Who does it? Public Sector? Brick by Brick is a great example of not letting local councils run with this stuff. The Government? Useless at infrastructure projects. Private sector? The rules, regulations, costs etc have already ground building to a halt in London. Also, does everyone want to live in a flat now because that is all we seem to build. It is a mess.
Back to the £2m limit. It has started there, but how long before it isn’t raising enough so a new lower tier comes in. Will it ever increase with inflation? Ultimately council tax needs reform but it is very hard to do when there will be a lot of vocal lovers however you do it. Most likely though it will be people who feel they have been the brunt of tax increases for little in return over the past decade.
Given the high demand for housing you would think that “Adam Smith’s invisible hand” would solve this problem easily by simply building more homes. The fact this doesn’t seem to happen leads me to vacillate between the two following concussions. Either capitalism doesn’t work or we don’t actually live in a capitalist society?
The former
Didn’t St Margaret rule that there is no such thing as “society”?
Re public housing for rent. I was a resident board member of our Housing Association [HA], a small one of under 1000 dwellings, which has struggled for nearly a decade to accumulate the funds, and get through planning hurdles to build a new block of flats on land it already owns. There used to be large subsidies for HA home building, they now have to be financed mainly from private finance and sales, and rents that, supposedly ”affordable”, at 80% of the market rent in no way meet that description. The proportion of genuinely affordable ”social rents” now available is a very much smaller percentage compared to the historical post war peak of council owned rented homes, when it was around a third of all homes. Now, only 17% are publicly owned and rented – HA’s to which many councils handed off their housing departments, plus the remaining council owned homes. Over 40% of homes sold under right-to-buy are now being rented privately. The obvious answer is to properly fund social housing development through the HA’s by returning to the historic levels of grant aid for the initial costs of those buildings. For which increased taxation -for example of the obscenely profitable privatised essential services – water, power, transport, etc and of the off-shore profits of such as Amazon, and indeed of the wealthiest in society, who are proportionately vastly more so now than a lifetime ago, is equally obviously necessary. We live in an age when people seem to want previous levels of public service and provision, but do not want to pay the taxes to provide them.
Can Inside Croydon stage our New Year’s Eve party round your gaff, then, Simon?
I assumed you’d already be spoilt for choice with invites from our esteemed local councillors, council leaders and the big man himself Mayor Perry!