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Last Updated: Thursday, 25 August 2005, 08:27 GMT 09:27 UK
Tax plan sparks rural homes fear
Rural homes
The tax break on second homes is due to come into force in April 2006
Plans to give tax breaks on second homes could exacerbate the shortage of affordable housing in the countryside, a government watchdog has warned.

Investment in residential properties will count as part of a pension and qualify for tax rebates from April.

Financial advisers say investors are queuing up to buy second homes and the Affordable Rural Housing Commission fears this could raise prices further.

But the Treasury says this measure will appeal only to a few people.

People will be allowed to include buy-to-let investment property in their pension pot, under the self-invested personal pension scheme.

It means that higher income earners could get 40% back from the government on the cost of a holiday home.

Housing shortage

In an interview for BBC Radio 4's Costing the Earth programme, ARHC chairman Elinor Goodman said that the chancellor's plans "on the face of it" seemed contrary to trying to keep prices down in the countryside.

BBC rural affairs correspondent Tom Heap said the spiralling cost of housing in the countryside was fast becoming the biggest source of concern in rural areas, with many rural already dwellers priced out of the market.

I think it could lead to a mini property 'spike' next year with prices, almost artificially, inflated
Malcolm Cuthbert

A housing shortage along with the number of properties bought as holiday homes by wealthy city dwellers were thought to be factors, he said.

In the Lake District - where average house prices are already 10 times annual salaries - the policy has been described as "insane".

Stan Collins, a South Lakeland district councillor, said local people would find it hard to make sense of the proposals.

"Gordon Brown is more keen on providing a tax shelter for the rich than helping people to get homes who need them," he said.

Malcolm Cuthbert, of the stockbrokers and advisers Killick and Co, said the changes "could lead to a mini property 'spike' next year with prices, almost artificially, inflated."

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