Something as radical as capital gains tax on your home will,one day, have to be introduced to end the social and economic distortions that our obsession with bricks and mortar has created.
A healthy housing market, and especially one as buoyant as the present one, is a mixed blessing. For existing home owners the latest news from Halifax bank, that house prices rose by about 16 per cent in the past year, is excellent. For prospective first-time buyers it is a depressing confirmation of what they have been finding, especially in London and the South East: that they are being priced out of the market. This has hit particularly those in the public services – nurses, teachers and police officers – who find their London allowances quite inadequate. And, of course, we should remember that the rise in house prices is irrelevant to the poor and the homeless, whose plight has been made worse by the shameful neglect of social housing by local and central government.
More immediately, though, the confirmation of the boom in property puts the Monetary Policy Committee of the Bank of England in an even trickier position as they meet to decide on interest rates. For all the indications are that the present "bathtub" shaped recession may drag on for a little longer. Tensions in the Middle East have pushed the price of oil higher, something that may well choke off the recovery of confidence we have seen since about Christmas. Meanwhile, retail price inflation stands in stark contrast to the housing market, running at historically low levels as well as being modest by the standards of our competitors.
So the decision of the MPC is a difficult one. The safest bet would be to leave rates on hold or edge them very slightly upwards, by a quarter point. In the context of the housing market any move the committee makes is unlikely of itself to cool the housing market down very much.
What might make a difference, however, would be a signal from the Chancellor in this month's Budget that some of the anomalies in the tax system favouring domestic property might be ended. At the very least he might act to restrict some of the generous tax breaks offered to buy-to-let properties, the popularity of which has undoubtedly pushed house prices higher.
Mr Brown might also signal that he wants to move to a generally more neutral fiscal regime over the different types of assets held by individuals – property, equities, bonds, pensions and so on. It is wrong that, for example, pension funds have had to take the brunt of Mr Brown's stealth taxes. A little capital gains tax on your home? Political poison now (as abolishing mortgage tax relief once was), but something as radical as that will, one day, have to be done to end the social and economic distortions that our obsession with bricks and mortar has created.Reuse content