Peter Young, MD of JDWood believes that it will be “business as usual” and “initial soundings from our buyers, sellers and staff indicate that, despite everything, the rules of the game have not changed.” And yet by his own admission there are contradictions. “Several things are certain: if you have property contained in a company vehicle for whatever reason (and not all such arrangements are SDLT-related), this is the time to consider selling. There is a window of opportunity which, if you don’t take it now, may not come again, and by announcing a consultation on an annual levy and Capital Gains Tax to be implemented next year the government is indicating that the magnitude of taxation may increase yet further.”

Advice to anyone trying to sell needs to be carefully calibrated. Geography and expectations are critical. The market outside London still suffers from a lack of quality stock but despite this, prime properties over the £2m level were already failing to find buyers before the budget. Estate agents have been slow to advise their clients on the action they need to take. There is still a yawning gap between what most buyers are prepared to pay and what owners think they can achieve. Over-valuing by agents in both 2011 and 2012 has exacerbated the problem and could result in future price reductions being “too little too late.” Price cuts at the top end will of course have a knock on effect on the rest of the market.

Within London, many buyers have reluctantly been prepared to stomach increased taxes and costs while prices went upwards. But the climate is changing. Any market works in cycles and prime central London has depended heavily on foreign buyers. The currency differential and London as a safe haven were both incentives to buy but options elsewhere may start to look more attractive. London by any standard is expensive and it won’t take much to spark a price correction. Perhaps the budget has lit the fuse?

Estate agents may have only a limited window (April and May) in which to convince their clients to take a modest price cut and catch a buyer this year. Those that get ahead of the game will be the winners. According to a recent survey from holiday rentals company HomeAway published in March 2012, 65% of second homeowners are considering or would like to sell their property. We have for years lived with demand outstripping supply but, even without an interest rate increase, that could all be about to change.

Please see our previous article “Land Tax and the European subsidy” for a more in depth analysis.

Mr Stevenson’s ideas are interesting but are open to question. This is robbing Peter to pay Paul, merely switching one negative from one side of the equation to the other. Demographically it is just as likely there will be as many people trading down as well as up over the next 5-10 years and so if the seller should be discouraged from selling then supply will further dry up and prices will increase. This hardly helps the first time buyer and what also of those who have recently already bought and paid thousands in stamp duty only to face a second round of tax when they come to sell. There is also human psychology. Buying property is aspirational, people enjoy buying and owning a property of their own. The reverse can be said of selling. Most sales still tend to be as a result of death, divorce, or financial difficulties. A further disincentive to sell property will simply result in sustaining artificially high prices.

What is needed is a fluid market in which buyers want and are able to buy, matching or slightly exceeding those who want and are able to sell. This may appear simplistic but unless one begins from a common starting point all subsequent policies are bound to fail.

Forcing banks to lend has been on the agenda for some time while governments will be reluctant to loose vital tax revenue with a reduction in stamp duty. Equal emphasis, therefore, must be focused also on the seller, with billions locked up, but in a different way to that purported by Mr Stevenson.

First are those 5.5m homeowners who are “at risk of flooding” who might wish to move but are unable to do so. In June 2013 the present deal forcing insurers to provide cover comes to an end. There is an opportunity to look at this topic which needs a radical overhaul.

Second is the issue of empty homes. According to the Halifax this number is close to 700,000 in the UK but other sources which include flats above shops for example, say the figure is much closer to 1m. Whilst measures to force landlords to either rent out or sell the property would be welcome, geographical differences will have to be taken into account. Rows of derelict homes in Yorkshire (which has the worst record) may be harder to bring back into the market than an isolated flat in South Kensington. Nevertheless this is also an area that must be tackled with a firm brush, while not forgetting that the Coalition is keen to reduce legislation, not increase it.

Third is development on brown field sites. In England, 66,000 hectares of brownfield land (equivalent to an area the size of the West Midlands conurbation) are either vacant, derelict or available for redevelopment according to a survey conducted by the Environment Agency in 2001. While planning regulations for development on green field sites should either remain unaltered or even bolstered, we should ease those areas of red tape concerning brown field sites which are where new and more affordable homes can and ought to be built. This may also help to avoid development on flood plains.

The macroeconomic effects of helping people to move will manifest itself over time so while we can agree with Mr Stevenson’s switch of focus to the seller we should be careful lest in paying Paul, we drive Peter into refusing to sell.

Early signs for 2012 show that this year will also be a game of two halves. Estate agents know that their effective marketing window, if they are to clear the backlog as well as give themselves time to sell the new instructions, will be from February through till May. April and May will be especially busy as gardens come into their own and these eight weeks should be enough time to sell even the most camera shy homes. So, assuming we do not have some late snow (never ideal for property particulars as it dates so easily) or the euro lurches further into crisis, or Iran decides to block the export of oil coming out of the Gulf, then we can expect a busy Spring. Thereafter, most vendors may as well find something else to focus their minds as the levels of activity will become swamped by the Jubilee, European football and the Olympics.

Midgham in Berkshire is due to see at least three £2m plus houses come to the market in the next few weeks so if that trend is reflected elsewhere, then vendors will need to be price aware if they are to sell this side of June.

Details are lacking but what has come out is giving estate owners nightmares, and ought to give anyone looking at rural house prices plenty to think about. The party has announced its support for a 0.5% tax on the capital value of land ‘over a certain acreage’. At any likely minimum acreage, the effect on land and house sales, and values, could be dramatic.

Whilst it may seem radical, the idea of taxing land value is not new. It featured in Lloyd George’s ‘Peoples Budget’ of 1911, when it was blocked by the House of Lords. The notion that the economic rent of land should be shared by society was  widely held in the 19^th century, when the economist Henry George argued in his bestseller ‘Progress and Property’ that a land tax would eliminate the need for any taxes on productive activity.

The fact that the Lib Dems support this proposal might suggest that small owner occupier farmers in the West Country and the Celtic Fringe, (traditionally Liberal voters), would be exempt. That might set the minimum threshold at above a few hundred acres. Howls of protest from struggling owner occupiers in the rest of the country might force it higher.

If the Lib Dems are at all serious about this proposal they must have ‘landed estates’ in their sights, and presumably calculate that these owners can either pay, or will sell up, to neighbouring farmers or house owners, many of whom will then let the land, or have it farmed on contract.

According to Labour party research, in the 1970s a mere 200 families owned 32% of Britain (18 million acres). Whilst some of those holdings may have diminished, average farm sizes have grown. Whatever the cut off point might be for the putative land value tax, a taxable ‘level of acreage’ would surely apply across much of the country.

Judging by farm incomes the tax would turn farmland into an unmitigated liability for many owners.

For example, the Hoddington Estate, in north Hampshire, has been on the market since May. The 800 acres comprise approx 400 acres of arable and 400 acres of woodland. The estate relies heavily on the European Single Farm Payment to make ends meet. Net income from the land is £50,000 of which 95% is the Single Farm Payment. This estate has survived by diversifying and converting the stables into 12 let cottages attracting an annual rent of £127,000 per annum. However, in so doing the estate provided work for the local builder, affordable housing for local people and taxable income for the government. The NFU has stated that these subsidy payments to farmers are “in grave doubt” from 2015 onwards. Pressure from Europe may also see a cap on payments over a certain acreage, so large estates will suffer disproportionately. Couple this with a land tax and the effects could be catastrophic. One way or another land owning families will bear the brunt of what will be a severe and unsustainable tax on land, the income from which already attracts income taxation. A firesale of landed estates faster even than in the late 1940s might be popular with first time buyers of cottages, if not with their current owners.

Would a general public enamoured of Downton Abbey and other celebrations of the class system baulk at the idea of a tax that might be the death knell of ‘landed families’? The public probably has little idea how slender are the margins on landed estates, or how much they depend on subsidy. Letters to the editor labouring the point might not win landowners much sympathy but their often considerable contribution to local communities ought to work in their favour.

Perhaps part of the reason for the landed gentry’s lingering popularity is that we can easily imagine them being replaced by Russian or Middle Eastern oligarchs. Mrs Polouvicka and her son Richard de Vere in ‘To The Manor Born’ is a popular, but counter intuitive example of wealthy foreigners who endear themselves to the locals. However, the thought of a wholesale foreign takeover would probably still raise concern.

In the 1970s the Labour government started to monitor the nationality of UK farmland buyers – in response to such concerns. If the public can be spooked with a vision of a countryside of gold plated, gated communities, an extension of Knightsbridge and Belgravia, rather than a reversal of the Enclosure movement, (as the Lib Dems may try to convince us), the land tax may be averted.

It’s a situation that Francis Long, director of the high-end buying agency Hanslips, believes could be disastrous if combined with reductions in EU grants for farmers. Long quotes the National Farmers’ Union as saying that the European Single Farm Payment system is “in grave doubt from 2015.”

“A land tax, mansion tax and the withdrawal of subsidy could mean a notable increase in big estates being chopped up,” Long says. The result, he says, would be the opposite of what advocates of wealth distribution hope to achieve. “A lot of estates support the local community” he says, citing two examples in Berkshire, Englefield, owned by Richard Benyon, the MP for Newbury, and Yattendon, owned by Lord Iliffe, which subsidise housing and facilities such as pubs and post offices.

The likely result is, according to Long, a “wholesale foreign takeover” of our finest country houses. “If our landed estates go under the hammer, who will step in? Russians. Do you really think they are going to be pumping lots of money into the local community? Not a chance.”

But wouldn’t oligarchs be put off by a punitive tax regime in the same way as the English landed gentry? “It’s all relative,” Long says. “Would they rather have their money in a rather desperate bank in Damascus that might disappear overnight or in an English country estate? I was with a Lebanese buyer yesterday in Mayfair. He was a bit concerned about prices but he’d rather be here than in Beirut.”

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The equilibrium is beginning to alter however. Winkworth’s latest quarterly review shows that the number of foreign buyers in central London has fallen by more than half (56%) over the last four months as the economic conditions which made London property such an attractive investment option subsided.

So what can we expect to see over the next six months in prime parts of London? Transactions will remain at desperately low levels with both buyers and sellers in short supply. But do not expect prices to continue their upward spiral. Prices outside London continue to drop/stagnate and this will encourage more sellers in London to move out, taking advantage of the differential. Buyers should remain patient and take advantage of better buying conditions this autumn.

            Changes to the French wealth tax system could make waves this side of the Channel. From January 2012 non-resident property owners will be paying considerably more tax. The French Government is closing a holding company loophole, used by wealthy property owners to avoid tax, and is also introducing  a 20% tax on  theoretical rental values. This will apply to non-residents who own second homes that are not let out. It might be a vote winner with some locals who will welcome any exodus of foreign owners.

Now the Spanish are also getting tough on second homeowners. Plunging property values have produced a situation where some foreign vendors of second homes are being penalised. The Spanish tax rules mean that capital gains are taxed at an “official” valuation which may not be same as the actual sale price. It seems that Spanish nationals routinely under-report these valuations, whereas foreign vendors, less attuned to the ways of the Spanish tax system, have been caught out.   Officially prices have fallen 20% since 2007 but in reality many properties have fallen by up to 50% and as a result Britons who were forced to sell below their “official” valuation are being chased for additional tax, months or even years later.

            In these difficult times, our own government may also be tempted to pick on easy targets like second homeowners and foreigners. Don’t forget that David Cameron, only a year ago, was reportedly willing to see CGT for second home owners go up from 18% to 40% or even 50%. It hasn’t happened yet, but with the economy stabilising, the government may wish to take another look at that option. Pressure is likely to mount for second homes, estimated at 245,000, as well as empty properties, estimated at 870,000, to contribute more to the economy. Should this result in increased supply, prices will be under further pressure.