Reeves’ punitive property tax will hurt London the most
Labour’s mulled property tax could stall the housing market – and it’s Londoners who will suffer most, writes Steven Mulholland
Few would argue against reforming stamp duty. It has long acted as a brake on moving house, distorting the market and penalising families for moving. But replacing it with a blunt new national property tax, as the Chancellor is reportedly now considering, risks trading one distortion for another – and could end up choking demand altogether.
Such a levy, charged on homes worth more than £500,000, would hit hardest in London and the South East – precisely where housing pressures are already most acute. Yet the impact would not remain confined to those postcodes.
Even with a threshold, property taxes effect the whole chain
When buyers hesitate at the £500,000 threshold, whole chains grind to a halt. Families delay trading up, downsizers stay put and first-time buyers struggle to find properties coming onto the market. The knock-on effects ripple outwards: agents report stalled sales, developers rein in investment and mortgage lenders become more cautious. It is a domino effect that can turn a single policy change into a market-wide slowdown.
We have already seen how damaging tax uncertainty can be. When stamp duty thresholds were adjusted earlier this year, housing transactions collapsed by 64 per cent in a single month.
That drop did not simply show up in estate agents’ order books – it reverberated straight through the construction supply chain.
If housing sales slow, developers postpone new sites, contractors delay hiring and suppliers shelve investment in machinery. Before long, the pipeline of projects runs dry. For a sector already recording its sharpest fall in activity since the pandemic, a national property tax risks being the final blow.
Housebuilding industry can’t take another blow
This comes at a time when construction firms face mounting pressures on every front.
Labour’s recent employer National Insurance hike has increased the cost of every job, every apprentice and every piece of equipment. Looming changes to Business Property Relief threaten to saddle family-run firms with inheritance tax bills they cannot pay, forcing many to sell or close. The potential fallout is stark: more than 200,000 jobs at risk, alongside billions of pounds of lost economic output.
These are asset-rich but cash-poor businesses. For the 95 per cent of construction plant-hire firms that are SMEs, this combination of rising costs and collapsing demand is simply unsustainable. Unlike large, private equity-backed rivals or foreign-owned firms, family-run companies cannot rely on deep cash reserves to weather prolonged downturns. They live or die by the strength of local markets.
This is not about loopholes or avoiding a fair contribution. It is about safeguarding the backbone of Britain’s economy. Family firms employ locally, train the next generation and supply the machinery that makes every building project possible. Undermine them, and you undermine jobs, skills and the delivery of new homes.
Labour has set an ambitious target of 1.5m homes. But piling yet another tax onto homeowners while simultaneously squeezing the SMEs that build for them is a recipe for failure.
Construction firms need certainty, not another round of short-term fixes. Without it, developers won’t commit, projects will stall and the pipeline will dry up.
If the government is serious about delivery, it must prove it: back demand, reward investment and give British companies the confidence to build. Anything less will leave Britain’s housing ambitions stuck in neutral – with jobs, growth and skills sacrificed along the way.
Steven Mulholland is CEO of the Construction Plant-hire Association