Labour’s proposed VAT on private school fees is set to stir changes in the housing market. Many expect it to drive up house prices in catchment areas of top state schools.
Parents may start moving their children to state schools as private education becomes pricier, increasing competition for homes in these areas.
Impact on Property Values
The plan to introduce VAT on private school fees is anticipated to boost property values in desirable areas. Parents may seek to relocate to state school catchment zones if private education becomes too expensive.
According to Aneisha Beveridge, Head of Research at Hamptons, property prices in these zones are expected to outperform the wider market if Labour wins.
Hamptons’ research shows that property values in areas with highly rated schools have been rising faster.
Labour’s Pledge
Sir Keir Starmer has pledged to implement the tax plan immediately if Labour wins the general election.
The policy includes incrementally introducing VAT on almost all private school fees over five years.
Business rates relief for independent schools will also be removed.
Financial Implications for Families
High interest rates could limit house price growth in these expensive areas.
Families might need to balance the additional costs of private school fees against the potential expense of moving and downsizing.
High mortgage rates make it costly for households to upsize, putting a cap on price growth.
Wealth Advisers’ Perspective
Wealth advisers report that some families are already relocating to reduce outgoings.
There is increased competition for homes near ‘outstanding’ rated state schools since Labour announced the VAT proposal in 2021.
Currently, around 7% of pupils in the UK attend private schools.
Bank of England’s Role
The Bank of England is expected to lower interest rates from the current 16-year high of 5.25% in the coming months.
Lower interest rates could revive the property market, possibly affecting the dynamic of state school catchment areas.
House price stability remains uncertain amid fluctuating mortgage rates.
Conclusion
Labour’s proposed VAT on private school fees is expected to lead to increased house prices in top state school zones.
Families seeking quality education will feel the impact of these changes.
Labour’s tax policy on private schools will have a broader impact on the housing market.
Parents are likely to seek alternatives as private school fees rise, fuelling demand for homes near top state schools.
