Introduce CGT on homes, says thinktank

Is capital gains tax the answer to the UK housing crisis? Senior economists think so...

construction imageThe Government is being urged to consider introducing capital gains tax (CGT) to help prevent house prices from spiralling out of control.

The National Institute of Economic and Social Research (Niesr) believes that the levy would help deter people from investing in property, helping to restrict overall demand from buyers and keep property prices at bay.

Angus Armstrong, a Senior Economist at Niesr, told the press, “A first priority must be to improve the taxation of housing. An efficient tax system would be consistent across assets and leave the decision about how much to consume today versus save and consume tomorrow unaffected.

“If a capital gains tax were introduced, this would reduce the gains in an upturn and losses in a downturn, so dampening house price cycles. These ideas are unfortunately in the opposite direction to recent policies.”

The thinktank also urged the Government to stop relying so heavily on the private housebuilding sector to help solve the widening supply-demand imbalance in the market, as it could never meet the demands for housing.”
Mike Quinton image
The latest figures show that the number of new homes registered across the UK hit an eight year high of 156,140 in 2015, up 7 per cent year-on-year.

“We have seen encouraging levels of housebuilding across most regions of the country,” said Mike Quinton (left), Chief Executive, NHBC.

James Wyatt imageHowever, the volume of new homes registered remains significantly below the Government target of 200,000 new homes a year, and is less than two-thirds of the estimated 250,000 new homes a year needed just to meet existing demand for housing in England.

“One of the most pressing issues is the population explosion. We are living longer, and the UK is receiving many more immigrants,” said James Wyatt (right), Partner, Barton Wyatt. “The planning system is too complex and the current greenbelt too restrictive. The Government need to start with a clean sheet of paper and redraw what the UK should look like not in 10 or 20 years, but in 50 years when our population may be nearer 80 million.”

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