There has been considerable opposition to the EC's moves in Britain not least on the grounds that the buying and selling of property does not constitute a bona fide financial service. Those arguments have been ignored and from Tuesday buying a house will be treated in a similar vein to pensions and stocks and shares.
The official line from Brussels is that many estate agents now sell all kinds of services such as insurance and mortgages alongside properties and are therefore legitimately covered by the financial services directive. The unofficial explanation is more cynical and suggests the legislation is framed to protect inefficient domestic Conntinental property markets from the threat of British competition. Unfortunately while the property addendum to the Financial Services Directive willmake European markets unattractive to British estate agents it will also stifle the British market.
Cynics, however, point to the fact that the addendum has been accelerated through the EC corridors of power and rushed out right in the middle of a British General Election.
They are horrendous. Tuesday's addendum is based on lowest common denominator legislation where it takes the weakest elements of domestic law and enshrines them in a new set of Pan European property rules.
Those rules envisage:
1) The capping of capital gains on all property sales. Any gain in excess of five per cent of the initial purchase price (before commissions) will be treated as a windfall and must be transferred to a new Local Council Property Redemption Fund.
2) Unrealised gains on properties owned for more than 10 years will be subjected to a new local property tax. The tax will be levied on the number of unoccupied bedrooms.
3) The introduction of fixed estate agent commissions of five per cent on both the buyer and the seller of a property.
4) Abolition of stamp duty.
5) Abolition of mortgage subsidies.
6) A new garden under utilisation levy. This will empower the Local Council Property Redemption Fund to compulsory repurchase the whole or part of any garden which is deemed to be under-utilised.
Under-utlisation will be deemed to have occured where a garden remains unkempt or unkept, where a garden is replaced by any artifical or inorganic material (e.g. crazy paving) or where a garden is used for outside cooking more than once in any three consecutive months. The compulsory purchase price will be based on the average price for low grade agricultural land ruling at the time of of of purchase
The garden owner will then be obliged to lease the garden back from Local Council Property Redemption Fund at a rate which guarantees the fund a return no less than which could have been secured had the money used for the repuchase been invested in an appropriate commercial property investment fund.
7) A new Home Improvement Surcharge levied on the estimated capital enhancement of any work carried out on a property. The surcharge will be based on estimates provided by a panel of experts such as double glazing salesmen, fitted kitchen manufacturers and conservatory suppliers.
The EC property addendum will be puiblished on Tuesday which if you had not already guessed is April Fool's Day.
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