How far will house prices fall [volume 4]
Discussion
EddieSteadyGo said:
There is a story this morning in the online Telegraph related to stamp duty.
It quotes an unnamed cabinet minister that the chancellor is under pressure to reduce stamp duty in the Autumn budget or to at least reverse some of the sharp increases introduced by Osborne due to the effect it has had in reducing transactions.
If this story gains any traction it could further dampen the market until November as people would hold off exchanging in case the rate of stamp duty reduces.
Wishful thinking from people with a platform- ie young London-based journo's cheesed their £200k flat is now a mill and they want a 4-bed house and don't want to pay the extra stamp. It quotes an unnamed cabinet minister that the chancellor is under pressure to reduce stamp duty in the Autumn budget or to at least reverse some of the sharp increases introduced by Osborne due to the effect it has had in reducing transactions.
If this story gains any traction it could further dampen the market until November as people would hold off exchanging in case the rate of stamp duty reduces.
There is nothing stopping people moving, they CAN pay the tax, they just don't WANT to pay it (I paraphrase and could find it if I tried, but read Tonker's posts about the "unfairness" of having to forgo a few weeks in Verbier to cover the additional cost given his recent market activity in recently-increased stamp land), despite, in general, sitting on an enormous pile of unearned equity acquired through no skill or talent of their own.
I say this because Hammond is not just epically useless (I speak from personal experience) but favours a "steady as you go" approach, and people always moan about the thresholds- it used to be the massive rise at £250k that caused a problem. As those writing the article aren't buying zone 1 parking spaces, that's not their problem any more.
He was "under pressure" to do something about this in his first budget- there was plenty of press on it. He did nothing. He's under more pressure to raise NHS pay. He has done nothing. And he can't do anything on that significantly greater vote winner as not everyone with a million+ house is wanting to move all of the time, if he gives those miwyonairres [paper as it may be] a tax break.
Croutons said:
There is nothing stopping people moving, they CAN pay the tax, they just don't WANT to pay it (I paraphrase and could find it if I tried, but read Tonker's posts about the "unfairness" of having to forgo a few weeks in Verbier to cover the additional cost given his recent market activity in recently-increased stamp land), despite, in general, sitting on an enormous pile of unearned equity acquired through no skill or talent of their own.
I think you might be in danger of over generalising. The reason he may want to adjust stamp duty rates is to increase transaction volumes in order to keep the broader economy moving. It might even be beneficial to adjust or lower some of the stamp duty rates in order to actually increase overall tax receipts.
In terms of affordability, if you take a property selling for £1.8m the stamp duty costs are £130k. If you take into account that stamp duty has to be paid from taxed income it actually costs £260,000 of your gross salary just to cover the transaction tax. That is far from being small beer in terms of cost.
Cuts in sdlt will only benefit the sellers as they can then charge more for their house.
Just another attempt to shore up the bubble IMO. People are obviously worried... Govt should wind up help to buy nonsense as well.
Having said all that, SDLT is a bad tax, & a replacement with Land Value Tax would be highly beneficial. (Probably not to banks though)
Just another attempt to shore up the bubble IMO. People are obviously worried... Govt should wind up help to buy nonsense as well.
Having said all that, SDLT is a bad tax, & a replacement with Land Value Tax would be highly beneficial. (Probably not to banks though)
EddieSteadyGo said:
I think you might be in danger of over generalising.
The reason he may want to adjust stamp duty rates is to increase transaction volumes in order to keep the broader economy moving. It might even be beneficial to adjust or lower some of the stamp duty rates in order to actually increase overall tax receipts.
In terms of affordability, if you take a property selling for £1.8m the stamp duty costs are £130k. If you take into account that stamp duty has to be paid from taxed income it actually costs £260,000 of your gross salary just to cover the transaction tax. That is far from being small beer in terms of cost.
Exactly. We would quite like to move. We could afford to move, including paying the stamp duty. We don't, however, want to move enough to pay between £250-300k in stamp duty. The Govt has put too much uncertainty into the private rental market for us to want to place any more capital there. This means that we will probably spend the money buying another property abroad. This isn't a win for the UK economy.The reason he may want to adjust stamp duty rates is to increase transaction volumes in order to keep the broader economy moving. It might even be beneficial to adjust or lower some of the stamp duty rates in order to actually increase overall tax receipts.
In terms of affordability, if you take a property selling for £1.8m the stamp duty costs are £130k. If you take into account that stamp duty has to be paid from taxed income it actually costs £260,000 of your gross salary just to cover the transaction tax. That is far from being small beer in terms of cost.
edh said:
Cuts in sdlt will only benefit the sellers as they can then charge more for their house.
Just another attempt to shore up the bubble IMO. People are obviously worried... Govt should wind up help to buy nonsense as well.
Having said all that, SDLT is a bad tax, & a replacement with Land Value Tax would be highly beneficial. (Probably not to banks though)
That is not necessarily so, and surely it also might benefit buyers that can afford a property but not the property plus the current rate of tax?Just another attempt to shore up the bubble IMO. People are obviously worried... Govt should wind up help to buy nonsense as well.
Having said all that, SDLT is a bad tax, & a replacement with Land Value Tax would be highly beneficial. (Probably not to banks though)
Stamp duty is useful for one thing; cooling overheated markets.
It is very, very blunt. Side effects are demographic stratification of property markets and a reduction in the mobility and flexibility of labour, both of which are exactly the sort of thing an economy already struggling with a 1980's road network and falling productivity could do without.
edh said:
Cuts in sdlt will only benefit the sellers as they can then charge more for their house.
Just another attempt to shore up the bubble IMO. People are obviously worried... Govt should wind up help to buy nonsense as well.
Having said all that, SDLT is a bad tax, & a replacement with Land Value Tax would be highly beneficial. (Probably not to banks though)
Why do you think land value tax is a good idea?Just another attempt to shore up the bubble IMO. People are obviously worried... Govt should wind up help to buy nonsense as well.
Having said all that, SDLT is a bad tax, & a replacement with Land Value Tax would be highly beneficial. (Probably not to banks though)
Many years ago I was working on some terraced houses in Islington, one of which required a new upper floor. When we took up the old floor we discovered that news papers had be used to infill the spaces between the floor joists, when the house had been constructed. We read some of theme dating back to the early 20th century, and in one there was an advert for new houses for sale in Hampstead Heath. 3 and 4 bed detached chalets were being sold for around 280 to 370 pounds each. Heaven only knows what those same houses will sell for now.
The prices of houses have inevitably fallen and risen over time, but the unmistakable, and certainly irreversible trend for houses, is that over time, overall their prices will be going up.
The supply and demand aspect also has its effect, and with the rate of population growth in the UK being what it currently is, it is likely that demand will outstrip supply for some time to come.
The prices of houses have inevitably fallen and risen over time, but the unmistakable, and certainly irreversible trend for houses, is that over time, overall their prices will be going up.
The supply and demand aspect also has its effect, and with the rate of population growth in the UK being what it currently is, it is likely that demand will outstrip supply for some time to come.
p1stonhead said:
Why do you think land value tax is a good idea?
A bit O/T for this thread, but it could be hugely beneficial. Incentivises optimum use of land. Doesn't penalise improvements to buildings like business rates does. Captures planning gain (who benefits from £bn's of public spending on crossrail at the moment? - the land / house owners near the stations) Forget the "garden tax" scare stories & other similar stuff, it's a complete misrepresentation. There's plenty of material out there if you want to read up on it
btw - Described by that well known lefty Milton Friedman as the "least bad tax" Adam Smith was also a fan I believe.
Not good for land speculators, & banks (same thing?) or landlords though (I am none of those 3, just a middle aged mortgage free house owner who thinks the UK housing market is barmy & needs correcting)
edh said:
A bit O/T for this thread, but it could be hugely beneficial. Incentivises optimum use of land. Doesn't penalise improvements to buildings like business rates does. Captures planning gain (who benefits from £bn's of public spending on crossrail at the moment? - the land / house owners near the stations)
So some poor sods who've worked hard and bought a house could be at risk of being priced out of it, but some random new bit of infrastructure? Genius idea, really.Digga said:
edh said:
A bit O/T for this thread, but it could be hugely beneficial. Incentivises optimum use of land. Doesn't penalise improvements to buildings like business rates does. Captures planning gain (who benefits from £bn's of public spending on crossrail at the moment? - the land / house owners near the stations)
So some poor sods who've worked hard and bought a house could be at risk of being priced out of it, but some random new bit of infrastructure? Genius idea, really.edh said:
I don't understand your point... Is it that you think windfall gains on land should always be tax free to the land owner?
Any gains on your primary residence should be tax free as it is now. Secondary properties including land aren't anyway as it is because of capital gains. Lots of people don't choose for their houses or land to rise in value nor do they have 'money' which you might expect from the value of their house in which to pay said tax.
Doing it when people move through stamp duty is the least bad way.
Penalising people for living in popular areas in which land values spike is not the way.
Edited by p1stonhead on Wednesday 9th August 10:57
p1stonhead said:
Penalising people for living in popular areas in which land values spike is not the way.
Dunno. As if you look at the examples set by some parts of Europe, income taxes for example vary depend on where you live as local councils set their own and compete with each other. So if you live in the attractive city centre you pay a bit more than those living in less attractive areas.Appears a sensible idea to me.
Edited by hyphen on Wednesday 9th August 11:05
hyphen said:
p1stonhead said:
Penalising people for living in popular areas in which land values spike is not the way.
Dunno, in some parts of Europe, taxes vary depend on where you live. So if you live in the attractive city centre you pay a bit more than those living in less attractive areas.Appears a sensible idea to me.
Supply and demand should dictate prices but let people choose to pay it if they want not tax them after the fact because they happen to live in a popular area.
What would this do to already popular areas? Make them simply play towns for the rich who can afford to pay the tax.
It's a ludicrous notion and Corbyn quite rightly got crucified for suggesting it.
p1stonhead said:
How is that sensible? Don't they already pay a premium to buy houses in the areas?
Supply and demand should dictate prices but let people choose to pay it if they want not tax them after the fact because they happen to live in a popular area.
What would this do to already popular areas? Make them simply play towns for the rich who can afford to pay the tax.
It's a ludicrous notion and Corbyn quite rightly got crucified for suggesting it.
Supply and demand should dictate prices but let people choose to pay it if they want not tax them after the fact because they happen to live in a popular area.
What would this do to already popular areas? Make them simply play towns for the rich who can afford to pay the tax.
It's a ludicrous notion and Corbyn quite rightly got crucified for suggesting it.
Nice parts of the UK are already play towns for the rich. Can that poor family afford to buy in Harrogate,Alderey Edge, Brighton seafront, Richmond?Nope, they are in already in Bradford, Salford, Whitehawk and Mitcham!! Giving them more disposable income would actually make it a nicer place, as currently the standard Pizza Express type offerings would not be opening there.
p1stonhead said:
hyphen said:
p1stonhead said:
Penalising people for living in popular areas in which land values spike is not the way.
Dunno, in some parts of Europe, taxes vary depend on where you live. So if you live in the attractive city centre you pay a bit more than those living in less attractive areas.Appears a sensible idea to me.
Supply and demand should dictate prices but let people choose to pay it if they want not tax them after the fact because they happen to live in a popular area.
What would this do to already popular areas? Make them simply play towns for the rich who can afford to pay the tax.
It's a ludicrous notion and Corbyn quite rightly got crucified for suggesting it.
Shifting taxation to land & away from income / consumption would also be beneficial to most people.
Don't characterise it as a left wing idea- it's not. As I wrote above, supported by Friedman, Smith, also Churchill. Lib Dems are probably the main proponents these days. Corbyn was attacked by the people who don't understand the concept of LVT, and from the vested interests in property speculation.
If land was free/cheap and abundant/not hoarded, think of the growth of house building by small builders & self-builders, as opposed to the current drip feed by the major builders as they ration housing to squeeze out the profits from each plot.
UK land speculators have had a great ride in the last 40 years, but like any investment, it's not always a guaranteed win & I see no reason why they should be continued to be favoured.
Even the Tories are floating wealth taxes now & the only effective one is on land. You can't hide it.
edh said:
Houses would become more affordable, not less as land prices fell. Supply & demand? so many factors influence this so why shouldn't we change the mix?
Shifting taxation to land & away from income / consumption would also be beneficial to most people.
Don't characterise it as a left wing idea- it's not. As I wrote above, supported by Friedman, Smith, also Churchill. Lib Dems are probably the main proponents these days. Corbyn was attacked by the people who don't understand the concept of LVT, and from the vested interests in property speculation.
If land was free/cheap and abundant/not hoarded, think of the growth of house building by small builders & self-builders, as opposed to the current drip feed by the major builders as they ration housing to squeeze out the profits from each plot.
UK land speculators have had a great ride in the last 40 years, but like any investment, it's not always a guaranteed win & I see no reason why they should be continued to be favoured.
Even the Tories are floating wealth taxes now & the only effective one is on land. You can't hide it.
But the housebuilders are not doing what you're accusing them of.Shifting taxation to land & away from income / consumption would also be beneficial to most people.
Don't characterise it as a left wing idea- it's not. As I wrote above, supported by Friedman, Smith, also Churchill. Lib Dems are probably the main proponents these days. Corbyn was attacked by the people who don't understand the concept of LVT, and from the vested interests in property speculation.
If land was free/cheap and abundant/not hoarded, think of the growth of house building by small builders & self-builders, as opposed to the current drip feed by the major builders as they ration housing to squeeze out the profits from each plot.
UK land speculators have had a great ride in the last 40 years, but like any investment, it's not always a guaranteed win & I see no reason why they should be continued to be favoured.
Even the Tories are floating wealth taxes now & the only effective one is on land. You can't hide it.
They work on margins of 15-20%, that's pretty tight!
Land is a sunk cost, if construction cost inflation and labour shortages continue less homes will be built, these are the main limits on development currently - it is not in the interests of housebuilders to sit on land!
Also think about it, how can they deliver 1000's of houses in 1 location at once, who would buy them? - who would end up paying this new land taxation within the house prices as these development sites are worked though planning processes (often a decade)?
If you're trying to encourage development and construction a land value tax is counter-productive. If you really want more development activity, slash frictional moving costs (SDLT), relax the planning process and lift restrictions on the PRS sector and overseas investment, reverse Brexit and train/import more tradesmen....then construction activity would really take off
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