Is The Prime and Super-Prime Residential Market Heading For A Recession?

 

Is The Prime and Super-Prime Residential Market Heading For A Recession?

One reads in the press and media a great deal about how the Help-To-Buy Scheme is aiding and abetting a housing bubble.  Mark Carney is being blamed for stoking a bull market in the housing sector and everyone is worried about runaway house price inflation and the risk that this presents for the impoverished first time buyer.

Well, look through the telescope from the other end and you could see that activity in the prime and super-prime markets across London is probably down up to 50%.  Cash buyers (whether local or international) are down by more than 50% and in price ranges over £10,000,000 there has never been more selection available.

Agents are complaining bitterly that there are not enough buyers to satisfy supply and this is evidenced by the Treasury’s own statistics that Tax Receipts from the ill fated budget of 2012  (where Stamp Duty was increased by 40% to 7% and a 300% increase for offshore companies to 15%) are down by £300,000,000.  In other words the Lib Dem influence on the Chancellor to increase Stamp Duty rates (as a sop to them for not imposing a Mansion Tax) has reduced the Treasury’s coffers by this huge sum of money giving the government less money to spend on welfare.  How many hospitals and schools have to close as a result?

With activity down across this sector of the market a substantial knock-on effect is likely on other related industries.   The negative effects of which will flow through during the course of 2014.

Do we need any further proof that higher taxation raises less money and is a dangerous course to plot when the economy is trying to claw its way back from this massive deficit position?

The Lib Dems are still bleating on about the spectre of a Mansion Tax.  This will be the final death knell of the property market at the higher end before the trickle down effect starts to negatively affect the markets of the middle and lower ends.

Kensington is bristling with newly displaced French entrepreneurs who have fled François Hollande’s draconian and socialistic environment and are hoping and praying that the UK does not fall into the same trap.

Have these people not learned any economic lessons from the past that socialistic inspired higher taxation raises less money for good causes (see Arthur Laffer’s theory on taxation).

This is the thin end of the wedge, and not widely reported, but I fear that the top end of the residential market in London is cruising for a bruising.