Labour’s VAT raid on private schools and uncertainty around the future of the non-domiciled tax status are hitting demand for high-end house purchases, a major estate agent has warned.
Winkworth, which has offices primarily in London and the south of England, said the general election has had less impact than normal on the property market, “except for on the demand for high-end properties.”
The company said in an update to investors: “A combination of the Conservative Party’s removal of non-domiciled status, the Labour Party’s stated intention of adding VAT to private school fees, and the higher cost of finance have weighed on this sector.”
Applying VAT and business rates to private schools was a key Labour manifesto pledge which the party has said will raise £1.5bn. But experts have warned the move will push parents to pull their children out of private education and into the state school system.
Former chancellor Jeremy Hunt announced in his spring budget that he would scrap the UK’s non-domiciled tax system, a policy that Labour pledged to take even further as one of its key revenue-raising measures.
In its manifesto, Labour said that it would raise £5.2bn from a combination of tightening non-dom rules and a crackdown on tax avoidance. It pledged to spend the money on cutting NHS waiting times.
Labour also promised to add a one percentage point surcharge to stamp duty for overseas buyers, who are active in Britain’s priciest markets.
Transactions of London’s priciest homes slumped by nearly 15pc year-on-year in May, while prices fell by nearly 3pc, according to separate data from analysts LonRes.
In the market for properties worth £5m and over, transactions fell even more steeply, dropping by 20.5pc year-on-year.
This was in stark contrast to clear evidence of a recovery across the wider market.