Cotality chief property economist Kelvin Davidson said the market was steady.

“The timing of Labour’s proposal is interesting,” Davidson said. “The market is getting busier, but remains a touch below normal, affordability has improved and investor participation is on the rise.

“Against that backdrop, the CGT debate naturally raises questions about behaviour, whether investors would hold properties longer to try and avoid the tax for a while, and how much revenue a tax might realistically generate.”

He said timing and the assumptions in the policy were important considerations.

“For such a system to collect meaningful revenue, property values would need to rise, yet recent years have seen only modest growth. Our data shows national median values up 10% since five years ago in October 2020.”

He said a capital gains tax would not stop prices rising. Other countries with a CGT still recorded house price rises.

“People were looking at the general vibe of the CGT policy and saying surely what Labour wants from this is for house prices never to grow again. It’s not quite true.

“Perversely, they’d actually need house price rises to keep rising for any tax to be collected.”

He said investors could dodge it for a while by not selling – but not forever.

“I do think it would reduce the expected return from property investment and you would think that might result in relatively fewer investors than otherwise, which could have implications.

“People say it might push up rents and it may a little bit, but at the same time, it might create some opportunities for people who otherwise would have been renting to actually buy. The houses don’t disappear.”

Sales volumes were up 6% in October, the 28th rise in the past 30 months. New listing numbers also increased.

Davidson said first-home buyers were still active in the market at 29% of purchases in October.

“First-time buyers are still getting in in record numbers in terms of market share, but we are also seeing investors out there, so I guess there is a bit for everybody.

“There is a bit of balance there. It is not cheap, but if you’ve got the finance, you’ve got the income, you’ll be able to get a decent property at a price that is still down 15-20% from where it was potentially.

“You might say the market is in some kind of equilibrium right now.”

He said investors had lifted to 25% of transactions.

“The predictability of current conditions is reassuring for buyers, who are continuing to adjust to the recent experience of stable prices and slightly lower mortgage rates.”

“With affordability gradually improving and employment conditions set to strengthen next year, there’s a growing sense of cautious optimism.”

He expected prices to rise next year.

“The economy is not exactly racing away, but I guess we’re getting a wider range of indicators starting to improve course,” Davidson said. “Mortgage rates are down, so eventually that lagged impact of mortgage rates will come through and tend to push up house prices.

“Affordability is at its best level in several years, listings are set to ease lower and a large share of fixed loans are shifting on to cheaper rates. Provided employment holds up, those factors point to a gradual lift in both sales activity and values next year.”

“We’ll be watching the final months of the year closely, as they will show whether the steady rise in sales is strong enough to keep absorbing the normal seasonal lift in new listings.”

He said normally, the impact of mortgage rate falls would have been felt earlier than it was this time.