The threat of a potential mansion tax after May’s general election was hitting demand for £2m-plus homes, estate agent Winkworth said yesterday.
Shares in the agency fell 2.6 per cent after it warned of a “subdued” first half of 2015, despite anticipating a pick-up in activity in the final six months of the year.
It expects the prime central London market to be worst affected, with political uncertainty and fears of a potential mansion tax leading to a prices falling by five per cent in the first half.
Labour has pledged to introduce a mansion tax on owners of homes worth more than £2m with the intention of raising £1.2bn to spend on the NHS, should it win the election.
The proposed legislation has come under fire from MPs, including many within the Labour party, for unfairly hitting homeowners in the capital where even a three-bedroom house could cost more than £2m.
Winkworth said London was also at risk of becoming less attractive to international buyers.
“Changes to the taxation of overseas investors and less attractive exchange rates lead us to believe that, although the market may pick up slightly after the general election, prices will be flat in central London for the year as a whole,” the company said.
The wider south east market is expected to benefit from people relocating from the capital, with Winkworth saying it forecasts prices in this market to increase by three per cent next year.
It expects the middle market to see the strongest activity in 2015, as delayed interest rate rises prolong the availability of cheap mortgages.