How does the fact that only 6% pay UK inheritance tax fit with the average property prices?

Answer 1

There are several immediate effects of of low inheritance taxes.

One is that with high taxes, the people receiving the property as an inheritance often have to sell it to pay the taxes; with low taxes they can afford to keep the property.

More generally, low inheritance taxes means that people who are inheriting ave more money to spend. Money in the hands of the people tends to create more economic demand than the same amount of money in the hands of the government, but it also has a higher multiplier effect (i.e. not only higher demand but also causes more production).

Exactly how this plays out in the real estate market is less clear but high taxes force people to sell, which tends to create lower prices, while richer people can pay more for housing which tends to cause prices prices to rise.

So, unless there are countervailing factors that I'm not aware of, I'd expect that all other factors being equal (which they never are) low inheritance taxes to lead to higher real estate prices.