The infamous "Mansion Tax" in the United Kingdom is already starting to affect prices in the country even before it could come into effect.
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 the 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. You can see which properties qualify for the Mansion Tax in an infographic here.
Quoting data from the London-based property firm Marsh & Parsons Ltd., Bloomberg notes that prices of London's most expensive home rose at the slowest pace in the past three years in the third quarter of 2014. Also several property owners are cutting asking prices in order to lower the value of their homes owning to the upcoming Mansion Tax, which could come into effect of the Labour Party comes into power next year.
The mansion Tax isn't just hurting the prices, but could also hurt the economy. The tax wouldn't spare overseas investors either. Since foreign investors drop in huge chunks of money on property in London, the tax could hurt the amount of overseas cash flowing into the real estate market of the city hurting the economy further.
Experts now believe that the luxury home market in London could take a backseat until the elections as investors would grow cautious now.
"Every investor has a choice and they don't need to choose London," Nick Candy, the developer who helped conceive the One Hyde Park apartment project, was quoted by Bloomberg.
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 previously.
"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.
