What does the emergency budget mean for the housing market?

"CGT was the main story, as the proposed increase was heavily trailed in advance. In reality the rise to 28% for high-rate tax payers is a non-issue for the housing market.

"The rise is coming into play overnight - so there will be no sudden sell-off of second homes or investment properties. The new rate takes us back to a similar rate to where we were under the pre-2008 rules, when taper relief was able to reduce a 40% headline rate of CGT to 24%.

"With higher-rate CGT at 28% the argument for property investment still looks strong, and capital gains still compare very favourably with income tax at 40%.

"The other issue of note is that with strong GDP growth forecasts for 2011 and 2012 - the inference is that the Bank of England will be encouraged to maintain a very loose monetary policy for longer than recently expected, suggesting interest rates at current levels could be maintained for longer.

"This would underpin house prices and also contribute to ongoing low supply in the market."

*Liam Bailey is head of Knight Frank residential research

Article by: Liam Bailey - www.realestateweb.co.za