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The Liberal Democrats have proposed a ‘property tax’ on properties over £1m. Leaving aside the arguments about the political merits of redistribution of wealth, the real question is ‘will this work in practice?’ asks Smiths Gore’s head of Residential Agency, Andrew Turner.

The first question concerns the uneven effect that this will have around the country. The number and proportion of £1m+ properties in the north of England and in Scotland is far lower than in London and the South East for example. Over half of the houses sold for over £1m each year are in London. Is it right that some areas should be affected more than others? This will be interesting politically but presumably the Lib Dems have considered this when thinking about their target seats. At the moment, we don’t know whether it would apply in Scotland.

The proposal is to charge home owners 0.5% of the value of their house above £1m each year – so for a house worth £1.5m, this would be a £2,500 a year charge. But don’t we already have a ‘property tax’ in the form of Council Tax? Quite how a separate system will fit in with Council Tax is not clear but it looks suspiciously as though the politicians are going for any easy win. The big problem, comments Andrew Turner, is that the annual charge proposed will be completely unrelated to the ability to pay. In the case of elderly grandmothers living alone in a family home but with a depleted income or the owner of a grade 1 listed building spending their income on preserving the fabric of the building, possibly even opening it to the public, it is hard to explain why they should be paying an extra tax. Owners of valuable houses are not necessarily bankers on big bonuses much as politicians would like us to believe that they are. If a pensioner had to pay the new tax, they would need about an additional £100,000 in their pension pot to produce the income.

Then there is the question of the valuations themselves. As Jason Beedell, Smiths Gore’s Head of Research, says, ’We have seen how the values of properties have been affected by the stamp duty bands. Because of the extra stamp duty payable once you pass the stamp duty thresholds of £250,000 and £500,000, sales tend to take place just below the thresholds. Depending on how the Lib Dems propose to value properties, I can see the same thing happening in this case and sales taking place just below the £1m threshold. It will also be interesting to see how the houses are going to be valued. The valuations that Council Tax is based on are for 1991 and house prices have risen by about 130% since then. Liberal Democrat officials have admitted that they don’t know whether the new tax would be based on Land Registry figures, house sales, or whether local authorities would have to carry out new valuations.’

Finally there is the question of where the property starts and ends, says Smiths Gore’s head of farm Agency, Giles Wordsworth. ‘When you have a large house in a small garden then it is comparatively straightforward. When the garden extends to 500 acres then the situation is very different. I can’t believe that the farming industry, facing reduced product prices particularly in the arable and dairy sector, are going to thank politicians who add to the farm’s annual costs by placing an additional charge on the farmhouse’, he concluded.