Tax rises and no housing boom

Published:  14 October, 2009

The rise is house prices is likely to be short-lived with consumers squeezed by tax rises. 

Roger Bootle, managing director of Capital Economics writing yesterday in the Daily Telegraph said: "The UK housing market is currently in something of a sweet spot. The optimists believe that the bad times are over and the housing market will now return to normal. Meanwhile, the market – and the broader economy – are benefiting from rock bottom official interest rates.

"But these two supports cannot co-exist for much longer. Before long, either the wider economic recovery will falter, or interest rates will rise... Either way, the housing market would suffer."

He said: "Taxes are certain to rise as part of the looming fiscal squeeze, thereby reducing consumers' disposable income. We already know that high earners will be hit by a new 50pc rate of income tax. But the standard rate of income tax may be raised too, while there is a good chance that VAT will be increased to 20%."

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