In addition, it said that the logistics of managing the tax would prove costly and could encourage price bunching just under the threshold.
Marsh & Parsons’ analysis of Land Registry data showed that in Kensington & Chelsea, the average property valued at £2m would have cost just £392,082 in 1995, while the average £2m London property would have been worth £524,326.
In contrast, when taking in property prices across the whole England and Wales, the average home now valued at £2m was worth £771,903 in 1995.
Marsh & Parsons said that the rapid rise of house prices in central London could mean that the average property in Kensington & Chelsea would be liable for a £2m mansion tax by 2021, with properties in Westminster pulled in by 2025, if the threshold remains stationary.
Peter Rollings, CEO of Marsh & Parsons, said: “It’s clear that it’s not solely super-rich buyers who would bear the brunt of a new mansion tax, but long-term homeowners that may not be cash rich but happen to have lived in an area that has seen house prices climb rapidly.
“In effect, such a tax would simply penalise long-term ownership in areas that are now highly sought after.”
Rollings said London would be disproportionately affected by a mansion tax, given that more than 80% of sales for properties worth over £2m take place in the capital.
He added: “At a time when the housing market is fragile, targeting the only vibrant part of the market is sheer folly, and risks undermining London’s global appeal to wealth-creating business.”
