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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