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Highlights
- Inflation-beating house price growth in the past 20 years has delivered an ‘unearned, unequal and untaxed’ capital gains worth about £3 trillion on UK homeowner’s main residences.
- Applying a capital gains tax on this could help raise about £11 billion per year.
An above-inflation house price growth of 86 per cent in the past 20 years has delivered an ‘unearned, unequal and untaxed’ capital gains worth around £3 trillion on homeowner’s main residences in the UK, according to a report by thinktank Resolution Foundation in partnership with Financial Fairness Trust.
This untaxed windfall is because main residences are exempt from a capital gains levy. However, other assets where capital gains are taxed have a tax rate ranging between 10 per cent to 28 per cent.
The aforementioned capital gains of £3 trillion accounts for 20 per cent of all wealth at present. Applying a capital gains tax of 28 per cent on this could help raise about £11 billion per year.
The report found that homeowners with an age of above 60 received the biggest windfalls with an average of £80,000, whereas those aged below 40 years have an average windfall of less than £20,000.
The report suggested that taxing this windfall could help avoid poorer households from paying more taxes.
Given this context, let us take a look at 2 FTSE 250 index listed home construction stocks and their investment prospects:
- Countryside Properties PLC (LON: CSP)
Countryside Properties is a British housebuilding and urban regeneration business.
The company’s adjusted revenue, for the year ended on 30 September, rose by 54 per cent to £1,526.2 million, up from £988.8 million in the year before.
And its adjusted operating profit during the period jumped by 209 per cent to £167.3 million, up from £54.2 million in the previous year.
The company forecasts its adjusted operating profit for the year to 30 September 2022 will be between £200 million to £210 million. This is inclusive of the contribution from legacy housebuilding operations worth about £40 million.
Image source: Refinitiv
Countryside Properties’ shares were trading lower by 0.69 per cent at GBX 459.80 on 9 December at 09:39 AM BST, while the FTSE 250 index was at 23,245.77, up by 0.07 per cent.
The company has a market cap of £2,382.83 million, and its one-year return stands at 6.39 per cent as of Thursday.
- Crest Nicholson Holdings PLC (LON: CRST)
Crest Nicholson Holdings is a UK based residential housebuilder.
The company expects its FY 2021 adjusted profit before tax (PBT) to be marginally ahead of its £101.2 million consensus estimate, according to its latest trading statement.
The higher expected adjusted PBT is due to its contribution from Longcross Film Studio being more than previously expected.
Image source: Refinitiv
Crest Nicholson’s shares were trading lower by 1.00 per cent at GBX 356.40 on 9 December at 09:12 AM BST.
The company has a market cap of £ 924.91 million, and its one-year return stands at 17.28 per cent as of Thursday.
