How far will house prices fall [volume 4]

[edh]

kiethton said:

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.

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

Land Speculators sit on land as the cost is minimal - IIRC over 50% of land banking is not done by builders.

Who would buy the houses? I suspect there is a sizeable demand in the UK particularly if prices fell.

Land value tax would charged on permitted use i.e farmland almost zero, land with PP much more. So until you get PP the tax would be low. Importantly it would incentivise the use of all the derelict sites and empty houses held vacant across the UK. Often small plots that are uneconomic to big builders. We don't just have to build on farmland. Skills shortages are a big issue but can be addressed. Factory built houses could make a big difference (it's finally arriving in the UK)

[Shamrock_]

loafer123 said:

p1stonhead said:

Believe me I am not shocked with anything anyone is saying in this thread apart from your mythical 30% drops which appear to be anything but. I work for a property developer

amongst many other things, I am an Exec Director of a small regional house builder and advise a mezz fund on a defaulted scheme in central London.

As the saying goes, denial is not just a river in Africa.

[Croutons]

EddieSteadyGo said:

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.

No-one holds a gun to your head and says you HAVE to buy a property at £1.8M. It's a choice.

Under the old system the tax was what, 5% from April 2010- the current rates in 2014 on houses from 1- 2M. People who wanted to buy at that price, paid that. It was still £90k on a 1.8M property. The rate was still 4% on anything over 500k from the year 2000- high stamp on expensive property is not a new phenomenon.

Yes, house prices have risen, predominantly in London, but all that does is skew perspective, as suddenly people are buying houses with absolutely no relation to their earnings, then moaning when there are costs attached to move. The same people don't moan at the massive equity gift they've had in the past few years with, in many cases, no effort at all beyond having been in the right place at the right time.

[edh]

p1stonhead said:

Any gains on your primary residence should be tax free as it is now.

Edited by p1stonhead on Wednesday 9th August 10:57

Is this "just because I say so" or is there any rationale to this?

[EddieSteadyGo]

Croutons said:

No-one holds a gun to your head and says you HAVE to buy a property at £1.8M. It's a choice.

Under the old system the tax was what, 5% from April 2010- the current rates in 2014 on houses from 1- 2M. People who wanted to buy at that price, paid that. It was still £90k on a 1.8M property. The rate was still 4% on anything over 500k from the year 2000- high stamp on expensive property is not a new phenomenon.

Yes, house prices have risen, predominantly in London, but all that does is skew perspective, as suddenly people are buying houses with absolutely no relation to their earnings, then moaning when there are costs attached to move. The same people don't moan at the massive equity gift they've had in the past few years with, in many cases, no effort at all beyond having been in the right place at the right time.

I don't recall where I said anyone had to buy a property at a certain level. I was just highlighting some of the reasons why a punitive level of tax on the transaction could be bad for the economy overall and how in some instances could even raise less tax directly.

[V6Alfisti]

gibbon said:

I feel this has been somewhat hijacked, and i dont want to make it personal V6Alfisti, but i would say this in a final effort-

With respect, i dont need you to do any work for me. You've seen a place advertised for sale, no data recorded of a sale, but then its popped up to rent. Maybe its sold, maybe its not, who knows, but what we do know is that we dont know.

The other details above i dont have the time to go through, so please forgive me, but, i doubt they prove much, i could be wrong.

Im not focussed on anything, I just feel you are not backing up your statements with actual fact, no worries either way, but you are struggling to back up statements with fact.

Alternative analysis is out there, particularly over an autobot calculation we dont know the parameters of, this is one of the great benefits of pistonheads, there are real people out there (here), with real experience. Analyse the market all you want, but please take reliable parameters and actual metrics and also may I say, listen to others, many people here have no axe to grind and are not trying to win any debate, simply calling bulls1t when they see it.

If you do not own a property, you are inherently short the market, people seem to find that hard to grasp. I think i've said this to you before, but take on what you wish to believe and draw whatever conclusion you need to, to believe you choices are right, but please do listen to others.

Im just telling you what i've experienced, from real time experience of the very market you are speaking of, draw from that what you want.

Good luck with your bargain hunting, but dont hate people for calling you wrong and lifting property before you convince yourself its the bottom of the market. Im sure glad i didnt listen to people saying what you are in 2010.

My advice, if you care to know it, as you dont own a place, is if you want to own a home, buy one, use the softer market to bid it low, be cheeky, and hopefully buy a home you love. Then move on, stop worrying about it, and enjoy living there. However, if you keep sitting it out, waiting for the bottom, and convincing yourself its not the right time, you will be a long time waiting, and potentially end up paying way more.

Good luck.

Edited by gibbon on Tuesday 8th August 22:21

We can agree to disagree, ultimately from the point I have been looking have dropped substantially enough to warrant a 'stop and think'. The savings I have made, and progress of seperate investments (using capital for property) ultimately leaves me in a stronger position. The market would have to have a significant uptick in double digits YoY to leave me "paying way more".

Although do appreciate those without the capital base/insight not to leave money in 1% savers could get to that position far quicker!

Let's see

[Ari]

edh said:

p1stonhead said:

Any gains on your primary residence should be tax free as it is now.

Is this "just because I say so" or is there any rationale to this?

My house is worth (say) £250K, I need to move to Milton Keynes for work so I sell here and buy another house for £250K. Cost is moving fees plus stamp duty. Fine.

My mate next door is doing exactly the same.

Ah, but I've owned my house for 20 years and paid £100K for it - suddenly the move is costing 20% of £150,000 (or whatever tax you're going to put on house value increase). I'm no better off, I'm swapping from one house to another of equal value, but suddenly I've got to find an additional £30,000?

Meanwhile my mate (who doesn't even have a mortgage, his mum bought him the house) bought three years ago. He's making the identical move but doesn't have to find the £30K tax.

How is that remotely fair, or even feasible for many people? You've just created a 'you've owned a house a long time' tax.

[edh]

Ari said:

edh said:

p1stonhead said:

Any gains on your primary residence should be tax free as it is now.

Is this "just because I say so" or is there any rationale to this?

My house is worth (say) £250K, I need to move to Milton Keynes for work so I sell here and buy another house for £250K. Cost is moving fees plus stamp duty. Fine.

My mate next door is doing exactly the same.

Ah, but I've owned my house for 20 years and paid £100K for it - suddenly the move is costing 20% of £150,000 (or whatever tax you're going to put on house value increase). I'm no better off, I'm swapping from one house to another of equal value, but suddenly I've got to find an additional £30,000?

Meanwhile my mate (who doesn't even have a mortgage, his mum bought him the house) bought three years ago. He's making the identical move but doesn't have to find the £30K tax.

How is that remotely fair, or even feasible for many people? You've just created a 'you've owned a house a long time' tax.

You could do it like that... I wouldn't. As you say, may not be feasible. It be a bit like IHT then, only falling on a few people, but in large amounts. (I'd probably abolish IHT as well)

LVT would be charged every year, so applies while you own the land rather than when you sell. That's why it's fair. It would capture gains along the way, although £100-250k in 20 years isn't exactly thrilling vs inflation so doubt there's much to get excited about re: extra tax

But anyway well done on your £150k windfall

I think this has been posted before

http://www.thedailymash.co.uk/news/society/man-who...

[p1stonhead]

Ari said:

edh said:

p1stonhead said:

Any gains on your primary residence should be tax free as it is now.

Is this "just because I say so" or is there any rationale to this?

My house is worth (say) £250K, I need to move to Milton Keynes for work so I sell here and buy another house for £250K. Cost is moving fees plus stamp duty. Fine.

My mate next door is doing exactly the same.

Ah, but I've owned my house for 20 years and paid £100K for it - suddenly the move is costing 20% of £150,000 (or whatever tax you're going to put on house value increase). I'm no better off, I'm swapping from one house to another of equal value, but suddenly I've got to find an additional £30,000?

Meanwhile my mate (who doesn't even have a mortgage, his mum bought him the house) bought three years ago. He's making the identical move but doesn't have to find the £30K tax.

How is that remotely fair, or even feasible for many people? You've just created a 'you've owned a house a long time' tax.

Also would people get paid £30k by the government to move if their house had dropped £150k?

[kingston12]

Ari said:

You've just created a 'you've owned a house a long time' tax.

I think that is exactly what the Government have tried to do. The rationale seems to be 'we have given homeowners a lot of free money, now we want some of it back.'

The problem is that stamp duty isn't really the best way to collect it because it causes the problems that you mention.

A one-off windfall tax would have been completely unpalatable, so I suppose they thought that was the best option to raise some tax revenue whilst also falsely appearing to be tough on the 'housing crisis'.

[edh]

p1stonhead said:

Also would people get paid £30k by the government to move if their house had dropped £150k?

No. See above

Another good reason why a one off capital gains tax is much worse than LVT

[p1stonhead]

edh said:

p1stonhead said:

Also would people get paid £30k by the government to move if their house had dropped £150k?

No. See above

Another good reason why a one off capital gains tax is much worse than LVT

And yet here we are with zero chance of your idea coming to fruition.

[gibbon]

V6Alfisti said:

We can agree to disagree, ultimately from the point I have been looking have dropped substantially enough to warrant a 'stop and think'. The savings I have made, and progress of seperate investments (using capital for property) ultimately leaves me in a stronger position. The market would have to have a significant uptick in double digits YoY to leave me "paying way more".

Although do appreciate those without the capital base/insight not to leave money in 1% savers could get to that position far quicker!

Let's see

The problem with houses, is the inherent leveraged situation of most people, making it very hard for savings to keep a pace with house price inflation, in a positive market, so you need to then leverage up your investments to match, which is rather risky.

Anyway, just trying to add perspective.

Edited by gibbon on Wednesday 9th August 14:52

[edh]

p1stonhead said:

And yet here we are with zero chance of your idea coming to fruition.

Not my "idea" btw

"zero chance"? Don't count on it... If Brexit means we adopt the "Singapore" model - guess what tax is used over there..

And yet here we are, with the "least worst" tax, and zero arguments against it - here's another "lefty" screed about LVT from Merryn Somerset Webb, that well known revolutionary...

https://www.ft.com/content/392c33a6-211f-11e3-8aff...

Quite balanced actually - and points out the failings if rates are too low (and other taxes are not reduced or removed to offset it)

Read it, you might learn something

[loafer123]

http://www.rics.org/uk/news/news-insight/press-rel...

The ripples are working their way out.

[Derek Chevalier]

edh said:

Houses would become more affordable, not less as land prices fell.

Land prices are driven by the value of the finished new build which in turn is determined by prices of existing stock.

[ClaphamGT3]

Trying to determine the land and real estate tax model based on a rational analysis of which is best for the economy is so much dancing in the head of a pin; land and real estate taxes will never be developed on that logic; they will be developed on what is most politically expedient.

For some time, political expediency has been to support land and real estate values. If it becomes expedient to support social equity and some notion of 'fairness' - whatever the badgery fk that means in the context of land and real estate values - then tax policy will be changed to drive this.

[98elise]

edh said:

Ari said:

edh said:

p1stonhead said:

Any gains on your primary residence should be tax free as it is now.

Is this "just because I say so" or is there any rationale to this?

My house is worth (say) £250K, I need to move to Milton Keynes for work so I sell here and buy another house for £250K. Cost is moving fees plus stamp duty. Fine.

My mate next door is doing exactly the same.

Ah, but I've owned my house for 20 years and paid £100K for it - suddenly the move is costing 20% of £150,000 (or whatever tax you're going to put on house value increase). I'm no better off, I'm swapping from one house to another of equal value, but suddenly I've got to find an additional £30,000?

Meanwhile my mate (who doesn't even have a mortgage, his mum bought him the house) bought three years ago. He's making the identical move but doesn't have to find the £30K tax.

How is that remotely fair, or even feasible for many people? You've just created a 'you've owned a house a long time' tax.

You could do it like that... I wouldn't. As you say, may not be feasible. It be a bit like IHT then, only falling on a few people, but in large amounts. (I'd probably abolish IHT as well)

LVT would be charged every year, so applies while you own the land rather than when you sell. That's why it's fair. It would capture gains along the way, although £100-250k in 20 years isn't exactly thrilling vs inflation so doubt there's much to get excited about re: extra tax

But anyway well done on your £150k windfall

I think this has been posted before

http://www.thedailymash.co.uk/news/society/man-who...

How is LVT fair?

I buy a house to live in. Its value can go up or down and it makes no difference to me, it's still just my home. What it's notionally worth is pointless as I can't access anymore it unless I sell, and only then is there any "profit"

If I then move to a similar house then I'm still just living in a house only I have less money now.

It seems odd that some people would argue that we need more taxes to make thing "fair". LVT just seems to be a way of sucking more money out of people's pockets for no actual service or benefit.

Edited by 98elise on Thursday 10th August 16:35

[edh]

98elise said:

How is LVT fair?

I buy a house to live in. Its value can go up or down and it makes no difference to me, it's still just my home. What it's notionally worth is pointless as I can't access anymore it unless I sell, and only then is there any "profit"

If I then move to a similar house then I'm still just living in a house only I have less money now.

It seems odd that some people would argue that we need more taxes to make thing "fair". LVT just seems to be a way of sucking more money out of people's pockets for no actual service or benefit.

Edited by 98elise on Thursday 10th August 16:35

LVT is intended to shift taxation away from income and consumption onto land - it's not an extra tax it's a replacement. Unless you accept that, it's pointless to discuss.

Benefit? What gives value to the property holdings of the Grosvenors in Mayfair? It's the entire activity and infrastructure of London - they didn't build that... (an extreme example, but a good one)

Read what Churchill said
http://www.landvaluetax.org/current-affairs-commen...

[edh]

ClaphamGT3 said:

Trying to determine the land and real estate tax model based on a rational analysis of which is best for the economy is so much dancing in the head of a pin; land and real estate taxes will never be developed on that logic; they will be developed on what is most politically expedient.

For some time, political expediency has been to support land and real estate values. If it becomes expedient to support social equity and some notion of 'fairness' - whatever the badgery fk that means in the context of land and real estate values - then tax policy will be changed to drive this.

I agree with most of that second para at least...