Been thinking about this today. People already pay CGT on 2nd homes but given that housing is being used as an investment vehicle by virtually everyone in the UK, does it make sense to apply it to single homeowners too?
Would have to ignore the current govt's pledge to not raise taxes but with national debt at over 100% of GDP and us spending over 100 billion pounds a year in interest alone... not sure that is sustainable.
Thinking it through, house prices would fall since they would immediately be a less desirable commodity. Although they wouldn't plummet because houses still have intrinsic value and the supply of houses being sold would begin to dry up as people are dissuaded from selling.
The rental housing supply would increase in terms of properties since it would be more profitable to let them out than sell them. An increase in supply would reduce the cost of rent. It would need to come in with an increase in renter protection laws. Focusing on long term rented properties as family homes works well for other countries like Germany.
At the moment we've got a situation where people buy the most expensive house they can possibly afford because it has the best return of any investment by being exempt from CTG. In theory, people might buy more modest homes if they are buying and potentially could put more money into stocks/indexes which would stimulate the wider economy.
Anyway, this was more of a showerthought than anything else. What do you think?
I suppose it depends if you think homes continue to be classed as a special asset class. I had originally been thinking people would spread their wealth into other assets instead of concentrating it in their home; even like increased private pension contributions. That seems to be how it works in Germany.
Companies that specialise in providing rental properties did own a plurality of the market in 2024 (49%) so I think your concern about them buying up all the properties is valid. I was imagining that average rent would decrease if the % of housing being rentals increased, but that probably depends on a constant supply of new houses to prevent those aforementioned companies monopolising on the situation.
At the core of the situation is that we see housing as a special asset and I was wondering about that in the OP. But then, given their unique utility maybe they are a special asset.
Additionally, you have to suspend your disbelief that the electorate would accept CGT on single homes because the "nation of homeowners" mindset is so ingrained in our society. Even if the economics of it were overwhelmingly compelling people in the UK would still treat them as special assets because the "feel" special.