If a Labour-led government assumes power and introduces a ‘mansion tax’ on higher value homes, the knock-on effects could prove disastrous for thousands of ordinary home-owners who still have mortgages on their properties or who have invested for their retirement in property.

Let’s be clear – this is a wealth tax in every way but name. Details are scant on how it will work in practice, or how much revenue it might raise, but the threshold of what qualifies as a ‘mansion’ would likely fall around the £2 million mark. We know the vast majority of these homes are in Londto on and, while Mr Miliband himself jokes that his current London home would fall into this bracket, it will be no laughing matter for thousands of ordinary Londoners.

Unless you are very rich, you are likely to have a mortgage on your home. Let’s say your home is worth £2.5m but you have a £1.5m mortgage. That means your asset value is only £1m, but you will be taxed as though you own the property outright. This would potentially make  this wealth tax the UK’s first ever tax on debt.

Even if the property is owned outright, perhaps having been bought with a mortgage which has now been paid down in full, then the mansion tax could prove problematic for many households.

Older householders may be particularly hard hit, especially if they are retired and on a reduced income. They are also less likely to be able to remortgage to release capital. They could be forced to sell up and downsize to avoid a tax they simply can’t afford – in many cases they may have to move away completely if more affordable homes are not available in their local area.

The implementation of a new tax with a threshold beginning at £2m would also likely have an immediate impact on values. Properties worth around £2.25m for instance could drop to under the £2m threshold overnight, which could send many home-owners into negative equity. Thus in turn the tax may not bring in as much as calculated.

We will see the threshold creep downwards. It is very easy for a government to change tax thresholds and I expect that we will quickly see the £2m fall. Maybe to £1m as they realise that the tax brings in far less than they ever expected and as the requirement for more tax take increases. Be warned!

We also need to consider the impact of this wealth tax on the banks. Those banks with a large exposure to houses particularly in that vulnerable price range of £2m-£2.5m will need to be looking at their loan books very carefully if values start to fall.

A rush to sell by those in homes worth more that £2m could see a flood of properties on to the market and values suppressed as supply outstrips demand. We would be faced with a situation where the super-rich who are the presumed intended targets of this policy would be largely unaffected, while those who have planned for retirement by investing in property over many years will see their prudence undone at a stroke and, in the worst cases, forced out of their home.

Faced with the prospect of draconian new taxes such as this coming in, we are certainly experiencing a bit of a hiatus in the market while home-owners and would-be buyers are waiting to see what the outcome of the election will be. Whatever its political make-up, we would urge the next government to consider very carefully and consult widely across the industry before bringing in new policies that may have such a significant impact on thousands of people across the capital and the wider UK.

To see Chestertons research into London’s changing house pricing, visit http://www.chestertons.com/research-and-insight/insights/london-boroughs-historical-house-pricing/

Robert Bartlett is CEO of Chestertons Group