By Nick Taylor, of Hadley Taylor in Norwich
There is much speculation that the Government will increase capital gains tax at the budget as part of its attempts to reduce the budget deficit. Much of this speculation is I believe media driven and although I think we are going to see an increase, I don’t think it will be nearly as scary as some are predicting. I believe this for two reasons. Firstly, I don’t think our new chancellor is in the habit of political suicide and second, the wealth creators have to go on doing just that, creating wealth, and too much of an uplift on CGT would be counter productive in the long run. So what effect will an increase have on the property market? Will landlords rush to sell? The answer to this will depend on the level of increase. If we have a modest increase I don’t predict a rush to dispose of investment properties. Professional landlords with large portfolios who are in it for the long haul tend to buy and not sell so I don’t think an increase in CGT will impact much on this group. Many amateur landlords who jumped on the band wagon during the past decade in search of an easy buck have already come unstuck and are no longer in the game. Accidental landlords, of whom many have been created during the past three years, will feel under most pressure to exit the market. So I am expecting a welcome increase in instructions of small flats and houses in the city during the next few months but not the sort of surge in disposals that would lead to instability in the market and a drop in property values.
Nick is on 01603 250248.