Sources close to DeltaContinental, believe that planned increases in the rate of
capital gains tax rates in the United Kingdom will almost certainly exacerbate price falls that are inevitable in the aftermath of austerity measure implementation.
The firm said that the surprising recovery in house prices in the UKs market was the result of a shortage of inventory after many would-be vendors shelved plans to sell after prices plunged in the wake of the credit crunch. They believe that the imminent austerity measures will prompt further price falls and the uncertainty over CGT will act as a double whammy for the market.
A DeltaContinental analyst said that homeowners had largely been shielded from the effects of the credit crunch and subsequent recession thanks to record low interest rates but, with the pressing need for the UK to reduce its budget deficit and national debts, it was likely that additional inventory would be added to markets by way of foreclosures and the arrival of more stock from investors keen to beat CGY rises would depress prices further.
DeltaContinental warned that UK homeowners should be under no illusion that property prices would rise or remain stagnant. The firm estimates that prices will fall a further 15-30% before leveling out.
DeltaContinental said that the potential problem could be partially circumvented by imposing the increase in CGT with immediate effect rather than giving investors an opportunity to dump property on the market but the remaining headwinds of austerity and higher interest rates still posed a formidable threat to medium term property values.