The Labour party's Mansion Tax on houses over £2million will send middle income households into debt and cause a crash on the south-east property market. It is quite simply a disaster for London, and a disaster for already squeezed middle income families.
Shadow Chancellor Ed Balls states that this new tax will generate £1.2billion a year to pay for the NHS, and will target super-rich foreign property buyers to make more of a contribution to the people who need it most.
However, it is disingenuous in the extreme to say Russian oligarchs will be footing Labour's health bills.
A Tax on London
There are 108,477 properties in the UK worth over £2million - (according to Zoopla, Sept 2014) - 88.2% of these are in London, 7.7% in South East England - 95.9% in total. It doesn't take an NHS brain surgeon to work out that this is a tax on London and the south east. It's also a misnomer to call this a Mansion Tax, a large number of these houses are just three to four bedroom terraced houses. The four-bed property pictured below in north-west London is on the market for £2.1million - and is hardly what most people would envisage as a mansion. And what about in two or three years time - at current rates another 15,000 London homes are likely to fall into the £2million price bracket, and will the threshold be raised to consider inflation. Unlikely.
Squeezed Middle Hit Hardest
After some hastily made changes to this scheme, Shadow Chancellor Ed Balls stated that if your household earns less than £42,000-a-year then your Mansion Tax can be deferred.
The problem here is that in London £42K is not exactly a city fat cat wage, and it's an expensive place to live. The average earnings of 1.37million male workers who live and work in central London is £50,875 (Source - The Guardian) - not all own a £2m house admittedly, but there's still a lot of people who are going to really feel the pinch here.
Also what Shadow Chancellor Ed Balls doesn't make clear is whether this is joint household income or individual incomes.
For example, a household of two secondary school teachers will earn jointly £55,000, so should one assume that this makes them eligible?
Many other workers who are not cash rich will be eligible for the tax - train drivers (£42,000), and ironically hospital managers (£43,000).
Also let's not forget - being underneath the £42,000 does not exempt you from the tax, it merely defers payment till you move or die. Which means families will inherit a nasty bill from the tax-man at some point.
Let's do the sums here - a middle income home-owner on £50K-a-year will pay £9,403 income tax, £4,271.41 National Insurance (by the way, I thought this is what was meant to pay for the NHS, am I wrong?) and £1,296 in Council Tax (this is the average London Council tax), so total tax so far £14,970.41 - now add to that £3,000-a-year for Mansion Tax - a 20% increase on their annual tax bill which will see many slide into debt.
As for the super-rich, they won't feel the pinch from this tax. As a percentage of their disposable wealth this won't make any noticeable difference - but more importantly there aren't that many of them - a few thousand oligarchs at best - so their contribution to the NHS will be negligible. The vast majority of the £1.2billion annual tax is going to come from the middle classes.
London House Prices Crash
Quite simply, middle-income households will have to leave London or downsize considerably.
Lots of £2million properties will come on the market and as a result family house prices in central London will crash. The market in home renovation will dry up and many small building firms in London could go bust. More accommodation in London will be split into smaller units and the number of rentals will increase significantly - and the middle classes will have to live outside central London, or leave the capital completely.
This could be the start of the biggest exodus of the middle classes from the capital since the Great Fire of London.
And we will be forced to make a 21st Century amendment to Samuel Johnson's famous quote: "When a man is tired of London, he is tired of Mansion Tax."
Sayed Bukhari is CEO of property firm HPM Developments based in London.
You can follow Sayed Bukhari on twitter here: @SayedZBukhari