Booming London house prices are likely to be subject to a new levy soon after the general election, should the Liberal Democrats or Labour get into power, says the Chief Secretary to the Treasury, Danny Alexander in a speech to the city yesterday, writes The Times.

Vince Cable, the architect of this new policy said that it could raise as much as £1.7 billion for the Exchequer but this is due to be revised to £1.2 billion.  He proposes a 1% levy on top of all properties worth over £2 million pounds on top of council tax for high value properties.  Mr Alexander said that “by building on the council tax system, there would be no need for a detailed valuation of the small proportion of properties affected”.

There are now 82,269 homes that are valued at £2 million and more, according to the property website Zoopla and two thirds of those are in just three wealthy London boroughs – Kensington and Chelsea, Westminster and Camden – suggesting that the levy will effectively become a tax on rich neighbourhoods in the city and other areas outlying to the West of London like Henley on Thames and Windsor.

The housing market recovery seems to be outstripping previous Treasury predictions due to the continued demand for prime London properties but it is likely to put a cap on many prices at £2million. I think this extra tax band will co-incide with the current pressure on houses in this price region to be under this £2 million because of the 7% stamp duty paid on purchase.

Richard Butler-Creagh