Rathbones is giving the warning in response to recent reports that the Treasury is examining various options for property taxes ahead of the Budget

A prominent wealth management firm says Labour’s plan to impose new property taxes is ‘the final nail in the coffin’ for property investment.

Rathbones is giving the warning in response to recent reports that the Treasury is examining various options for property taxes ahead of the Budget – including a levy on homes sold for more than £500,000, the application of national insurance to rental income and a possible overhaul of council tax.

Rathbones says it’s seen a marked increase in clients with property portfolios worried about the plan.

Charlie Newsome, divisional director at Rathbones, says: Far from being ‘safe as houses’, the investment case for residential property has shifted dramatically. Slower price growth, higher borrowing costs and increasing regulation have combined to erode the appeal of property as an asset class.

A new property tax could be the last nail in the coffin for property’s status as a viable investment and cause potentially tens of thousands of people planning for retirement to rethink their strategy, Newsome said.

A tax that scales with property values risks deepening the housing crisis. It could even create the perverse outcome where less well-off homeowners in deprived urban areas where house prices are high, are penalised more than wealthy homeowners in rural areas, where values are lower, Newsome said. While second and holiday homes may still hold lifestyle value, their investment appeal has weakened significantly.

By contrast, those seeking dependable long-term returns may be better served by a more balanced approach that includes equity markets, which have consistently outperformed property in recent years, Newsome added.

A recent report by Rathbones found that residential property has not kept up with the current rate of inflation (3.8%) at 3.7% per annum between 2016 and 2024, leading experts to conclude that any so-called golden age of property investment is over.