This is what's hurting the London property market

Talks of London homes being hit by a mansion tax are causing a “subduing effect on buyers”, according to Savills.

The estate agent warned that mansion tax threats are set to affect house prices until the general election in May.

The news comes as figures show that London is no longer the city that has seen the fastest growth in house prices.

According to property analyst Hometrack, Cambridge’s property prices have grown faster than London since the financial crisis.

In a statement, Savills said: “Our UK residential agency business has continued to trade well since June, with a resilient performance from the prime London markets, which have moderated in recent weeks in line with our expectations.

“The general election and the potential implementation of a “mansion tax” thereafter has had the expected subduing effect on buyers, albeit that we have seen registered buyers per listed property rise since the low point around the Scottish independence vote in the summer.

“The country market has seen the rise in activity that we had anticipated and demand is focused clearly in the sub £2m market. Residential Development sales have continued to perform strongly.”

What is a mansion tax?

Mansion tax is an annual tax to be paid by the owners of homes worth more than £2m.

According to Savills, there are about 97,000 properties in Britain that cost over £2m. Over 80% of these properties are based in London and the south east.

The idea was floated by the Lib Dems in 2010 who said a mansion tax based on 1% of a property’s value above £2m should be introduced.

In 2013, David Cameron rejected plans to propose a mansion tax saying a “wealth tax is not sensible for a country that wants to attract wealth creation, wants to reward saving and people who work hard and do the right thing”.

In October this year, Shadow Chancellor Ed Balls said that homes worth between £2m and £3m will pay £250 a month in mansion tax, if Labour wins the elections.

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