House Prices On The Rise, But Will It Last?
Published: 13 May 2010 By MoneyHighStreet Staff 1 Comment
House prices are on the rise with prices in March 2010 almost 10% higher than those of March 2009. But will the rise last?
According to the latest UK house price index statistics produced by Communities and Local Government, UK house prices were 9.7 per cent higher than in March 2009 and 0.7 per cent higher than in February 2010 (seasonally adjusted).
That said, the house price rise in the quarter to end March 2010 was slightly lower than that for the quarter ending December 2009, up 2.8% compared with a 2.9% in the previous quarter.
But will Capital Gains Tax rises knock the shine off house prices? As reported in the Financial Times, “property experts have warned there will be a major sell-off of investment properties and second homes as well as a further dampening in house prices if capital gains tax (CGT) is raised under the new coalition government”. This could lead to house prices falling as supply outstrips demand.
The Con-Lib coalition have stated that CGT will be raised from the current 18% to rates that are similar to an income tax level. It’s not know whether taper relief (which cuts the tax to be paid on assets held for the long-term) will be brought back in. The coalition statement on CGT does indicate some exemptions including “generous exemptions for entrepreneurial business activities”.
Of course if house prices do fall, first time buyers are likely to benefit. This will be good news as according to the latest house price data, the annual growth in UK house prices for first time buyers was 12.6 per cent in March compared to 9.3 per cent in February. There was also a 1.3 per cent increase in prices in March 2010 compared to a fall of 1.7 per cent in the same period last year.