Take a Running Jump: Why we don’t need Brussels’ property market advice

by on for PrimeResi

The European Commission is attempting to interfere and meddle from across the North Sea, in a highly sophisticated and particularly specialised local market, the dynamics of which it simply does not understand. Thank goodness we have Boris on our side, says Valerie Brecher.

‘Take a running jump’ responded Boris Johnson recently to Brussels Eurocrats calling for property taxes specifically aimed at London. The UK property industry were quick to follow suit, rising to their feet in unison and a topical football analogy springs to mind of flag waiving fans, cheering their team’s stalwart defence in a crucial World Cup opening game.

The London Mayor’s comments were made following the receipt of some gratuitous ‘advice’ from Brussels politicians given to the Government, aimed at boosting Britain’s economic growth. Brussels bureaucrats would not really be our first port of call when seeking advice on ways in which to improve the British economy.

The list of European Commission economic policy suggestions recently sent to the Chancellor, George Osborne includes proposals for raising taxes, particularly placing special levies on expensive homes — a ‘mansion tax’. With true characteristic passion, and referring to a popular tourist attraction in the Belgian capital, Mr Johnson took aim and scored by retorting: “The Eurocrats in Brussels should take a running jump into the ornamental pond of the Square Marie-Louise. A tax on higher-value properties in London would have a detrimental effect on the market. They should butt out.

It is utterly incredulous that we in the UK should be considering ‘economic’ proposals drafted by bureaucrats based in a dark corner of an EU building in another Country for what surely, is a purely domestic matter. London after all, has been one of the resounding success stories of the recession, and this success is in no small part due to the capital’s luxury residential property market. The European Commission acknowledges that the UK economy has raced back to life over the past year, but is concerned about imbalances between London and the rest of the UK. In their view, such imbalances should be addressed with targeted action from the Treasury. So, in an attempt to resolve the perceived problem, they are attempting to interfere and meddle from across the North Sea, in a highly sophisticated and particularly specialised local market, the dynamics of which they simply do not understand.

The High Net Worth (HNW) community resident in London is extremely important to the UK economy. Much of this community is made up from international residents living in prime Central London. We must remember that the foreign HNW’s always have a choice. They have chosen to live in London, perceived as a safe haven with a transparent legal system and a relatively foreigner friendly tax system. These people have brought prosperity to London through their patronage of shops and restaurants and through resulting employment both direct and indirect. They pay VAT and they also pay Council Tax all year round even though they may only use the public services intermittently. The government could be in danger of scoring an own goal if signals are sent out indicating that new or increased taxes targeting Londoners and expensive London residences may be considered. London is only one of many popular Capital Cities but we need to ensure that we keep our competitive edge by not creating uncertainty and by keeping taxes under control.

The Country benefits from London’s success and as such needs to encourage HNW’s to live there with the ensuing benefits that result. So it’s good to see Boris defending the turf. Contrary to the Eurocrats’ plans to ‘help’ London’s economy, the last thing our Capital needs is a hostile tax environment to frighten off wealthy property investors. It would create an uneven playing field; on the Continent (and in many places outside the UK) there has long been a preference to rent homes rather than to buy, so the taxes proposed for the UK would work differently, a mansion tax (or equivalent) would in all likelihood, hit our tax payers harder, pro rata.

They say that beggars can’t be choosers but clearly, the world’s super rich are not beggars, and they have plenty of alternative choices if London starts to lose its appeal. Continuing with the football analogy, if the Eurocrats proposals were implemented, they would in all likelihood result in undermining London as the preferred destination for the world’s super-wealthy, particularly, if an unattractive tax regime were put in place. We could forget about any chance of reaching the Final, or to put it another way, our goalposts would well and truly have been moved! Let’s hear it for Boris: on this issue, it’s good to have him on our side.