The so-called "Mansion Tax" proposal in the United Kingdom could hurt the property market if put into effect, experts say.
The "Mansion Tax" proposal has been making global headlines of late. The Labour Party has proposed to tax homes that are valued above $3.26 million. As per the proposal, homeowners will be liable to pay any amount that crosses the set threshold.
For example: a homeowner whose property is valued at $4 million, will have to shell out $740,000 in extra annual property taxes.
The Labour Party says it will use the money to boost healthcare plans in the country. However, real estate experts say this tax could hurt the country's property market and the economy on the whole too.
Experts say that according to today's current rates, many home owners have a home valued above the set threshold. But, many of these homeowners do not have the means of income to pay such a huge tax.
Liam Bailey, global head of research at Knight Frank, explained to CNBC that one in every 10 homes would be two or one-bedroom properties, as per the Labour Party's prescription. He also asserted that only one percent of the properties qualifying for the mansion tax would, in its true sense, be a mansion with more than 10 bedrooms.
Industry players also expect home values to retreat by more than 10 percent if the tax is levied. In any way, the tax will only hurt the property market sentiment.
"A mansion tax is a vindictive gesture that will eventually find its way down the property ladder to hit much less expensive homes," Jonathan Isaby, of the TaxPayers' Alliance, told The Daily Mail.
"Imposing a mansion tax on London does not make sense. It will reduce house-building and limit growth. It is a tax on aspiration," Rob Perrins, managing director of the Berkeley Group, told the publication.
Others are calling the tax a political motive and have dubbed it "pure class envy".
"The idea that having succeeded in life, or simply living in London, makes one a "sinner" is incredibly revealing of the prejudices that seethe within the party. This policy does not make fiscal, economic or moral sense. It is simply class envy dressed up as public policy - and as such, should be firmly resisted," The Telegraph View writes.
The overwhelming influx of foreign investors in the London property market triggered the concept of the "Mansion Tax." But in an effort to milk the rich, the lower and middle-class people will be sacrificed too.
A comment on the CNBC feature reads:
"Please justify why properties worth $3,3000,000 owned by millionaire in central London pays exactly the same flat property tax ( about $1000) as a property worth $300,000 in the London suburbs owned by a struggling middle class family. Problem with tax is that only the middle classes pay it."
