How far will house prices fall [volume 5]
Discussion
gibbon said:
I cant really argue with any of that, i was simply intrigued at your rationale.
I wonder, if we have say a 25% growth in house price in the next 5 years (not HUGELY above inflation), if you would be happy paying some kind of 'income' tax on your sale price should you decide you want to move house for whatever reason, being that the corresponding house you move to will have likely increased by the same amount.
Don't we already pay stamp duty on buying a house? oh, you mean the seller should pay this, or are you suggesting both? Won't that just price some people out of moving, so they stay put rather than move up or down?I wonder, if we have say a 25% growth in house price in the next 5 years (not HUGELY above inflation), if you would be happy paying some kind of 'income' tax on your sale price should you decide you want to move house for whatever reason, being that the corresponding house you move to will have likely increased by the same amount.
156651 said:
100k combined puts you in the top 5% of UK households (not sure what the figure is for London).
When Labour announced that they planned to increase income tax for those on £80k+ salaries, I’m sure I recall seeing a statistic saying that only the top 5% of full time workers in London earned more than that figure.Edited by 156651 on Friday 6th March 14:19
That seemed low to me, but I suppose it makes sense. There are millions of low paid workers all over London. There are a lot of high paying jobs too, but many less.
Allot of the high end houses in places like K&C will be owned by people who don’t need to earn anything anyway.
NomduJour said:
Indeed - as is food, but not many eat at The Ledbury every night. The market sets the price (just as it does with your generous salary).
So your solution is price everyone out of London other than the millionaires? Who will clean your office and serve you coffee and drive your taxis etc. etc. etc.?
Or do those sorts not deserve anything more than paying extortionate rents to landlords for their entire life?
156651 said:
NomduJour said:
Indeed - as is food, but not many eat at The Ledbury every night. The market sets the price (just as it does with your generous salary).
So your solution is price everyone out of London other than the millionaires? Who will clean your office and serve you coffee and drive your taxis etc. etc. etc.?
Or do those sorts not deserve anything more than paying extortionate rents to landlords for their entire life?
okgo said:
156651 said:
I would be interested to explore a property tax system actually based on house values, unlike the mess that is council tax where you can be paying less on your Kensington mansion than someone in a much cheaper and smaller property elsewhere. Our council tax is going to be £1,489.55. The 34m quid house linked below? £1507.70
https://www.zoopla.co.uk/for-sale/details/53896022...
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
I feel its because you're looking at it from the POV of a FTB. https://www.zoopla.co.uk/for-sale/details/53896022...
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
Edited by 156651 on Friday 6th March 10:12
In two properties time, it's entirely likely that you'll have getting on for half a million cash as a deposit, maybe more?
The first time buyer mentality point is well made - people will afford the £2m + houses because they will almost never be first time buyers - they'll be 3rd/4th time buyers with £1m + of equity.
To your point about taxing capital gains on principal residences as "unearned wealth", let's just look at that a bit. The house that has appreciated to create further equity would have attracted stamp duty on purchase, so that's one lot of tax. Assuming it was mortgaged, then the mortgage repayments would be paid from taxed income. Council tax would also be paid and out of already taxed income. That house has already consumed a lot of tax-take. That's before of course you realise that the asset was never bought with the primary purpose of generating a capital gain in the first place but, notwithstanding that, the beneficiary of the upside gain has also taken the downside risk on potential or actual property value reduction during their ownership of the house.
I can be convinced that selective LVCT could be acceptable if it were levied specifically to retro fund investment in activity that has DEMONSTRABLY enhanced the value of the asset to be taxed AND that the tax is only due when capital profit is crystallised. Tax on capital gains on principal dwellings just to swell the general tax take can never be acceptable.
156651 said:
I would be interested to explore a property tax system actually based on house values, unlike the mess that is council tax where you can be paying less on your Kensington mansion than someone in a much cheaper and smaller property elsewhere. Our council tax is going to be £1,489.55. The 34m quid house linked below? £1507.70
I snipped your post because this is the part I'm commenting on - Edited by 156651 on Friday 6th March 10:12
It's not as simple as that. LA areas need a certain income to maintain the services they offer. Those incomes come from several sources: Council tax, central government grant, charges for various services (e.g. parking), penalties, and presumably returns on investments. The dominant streams are central grant and council tax.
I live in Richmond where the council tax level is £1539 p.a. for a band D property (excluding mayor's precept). In neighbouring Wandsworth, with who we have a shared services agreement for admin functions, it's £770.
How can they deliver broadly the same services to broadly the same number of people in the same location for half the council tax cost?
I haven't looked at their annual reports but I bet it's not down to wiser investments or efficiency. I bet it's down to the level of grant they get, meaning less top up is needed from council tax.
Personally I'd abolish council tax altogether and stick the difference on each band of PAYE to gain parity. I don't mind subsidising S Wales or such where the population is low and serives costs are high, but I bloody well do mind subsidising the borough next door to that extent.
Edited by 2gins on Friday 6th March 22:40
ClaphamGT3 said:
You pay the council tax you do because you bought in high spending, high cost-to-serve, labour controlled Greenwich rather than fiscally responsible, lower cost-to-serve RBKC. Similarly, we live in Lambeth where we pay £2400 a year and, from our top floor, we can see identical houses a few hundred yards away in Wandsworth paying about £500 - it's not like we didn't know when we bought the houses.
The first time buyer mentality point is well made - people will afford the £2m + houses because they will almost never be first time buyers - they'll be 3rd/4th time buyers with £1m + of equity.
To your point about taxing capital gains on principal residences as "unearned wealth", let's just look at that a bit. The house that has appreciated to create further equity would have attracted stamp duty on purchase, so that's one lot of tax. Assuming it was mortgaged, then the mortgage repayments would be paid from taxed income. Council tax would also be paid and out of already taxed income. That house has already consumed a lot of tax-take. That's before of course you realise that the asset was never bought with the primary purpose of generating a capital gain in the first place but, notwithstanding that, the beneficiary of the upside gain has also taken the downside risk on potential or actual property value reduction during their ownership of the house.
I can be convinced that selective LVCT could be acceptable if it were levied specifically to retro fund investment in activity that has DEMONSTRABLY enhanced the value of the asset to be taxed AND that the tax is only due when capital profit is crystallised. Tax on capital gains on principal dwellings just to swell the general tax take can never be acceptable.
You mean because Greenwich has more poor people than Kensington and Chelsea and therefore needs more money to provide essential services. Nothing to do with being "fiscally responsible". Not sure those that are buying in places like Kidbrooke have the option to relocate to Kensington to pay less council tax.The first time buyer mentality point is well made - people will afford the £2m + houses because they will almost never be first time buyers - they'll be 3rd/4th time buyers with £1m + of equity.
To your point about taxing capital gains on principal residences as "unearned wealth", let's just look at that a bit. The house that has appreciated to create further equity would have attracted stamp duty on purchase, so that's one lot of tax. Assuming it was mortgaged, then the mortgage repayments would be paid from taxed income. Council tax would also be paid and out of already taxed income. That house has already consumed a lot of tax-take. That's before of course you realise that the asset was never bought with the primary purpose of generating a capital gain in the first place but, notwithstanding that, the beneficiary of the upside gain has also taken the downside risk on potential or actual property value reduction during their ownership of the house.
I can be convinced that selective LVCT could be acceptable if it were levied specifically to retro fund investment in activity that has DEMONSTRABLY enhanced the value of the asset to be taxed AND that the tax is only due when capital profit is crystallised. Tax on capital gains on principal dwellings just to swell the general tax take can never be acceptable.
The tax comment ignores the fact that the wealth generated by house price inflation is untaxed. It's irrelevant that tax is paid elsewhere. We all pay tax.
Edited by 156651 on Friday 6th March 22:28
okgo said:
5 years ago the average salary in the city was 50k.
Average salary of the entire borough of Kensington and Chelsea is £150k. Not much less in Westminster... they cover enormous areas with a huge number of properties.
Is that mean or median? Unless median then it’s not a very good representation..Average salary of the entire borough of Kensington and Chelsea is £150k. Not much less in Westminster... they cover enormous areas with a huge number of properties.
156651 said:
You mean because Greenwich has more poor people than Kensington and Chelsea and therefore needs more money to provide essential services. Nothing to do with being "fiscally responsible".
The tax comment ignores the fact that the wealth generated by house price inflation is untaxed. It's irrelevant that tax is paid elsewhere. We all pay tax.
As the previous poster said, it's not as simple as that. How do Wandsworth and Lambeth, which have broadly similar dynamics have such widely divergent rates of council tax? It's a combination of different approaches to discretionary spend, differing amounts of RSG and CG precept, differing models for revenue generation and differing levels of corporate efficiency.The tax comment ignores the fact that the wealth generated by house price inflation is untaxed. It's irrelevant that tax is paid elsewhere. We all pay tax.
It is not irrelevant that capital gains on principal residences are facilitated by the spending of taxed income. Additionally, if you support the taxation of capital gains on principal residences then, presumably, you support the Treasury indemnifying owners against capital losses?
2gins said:
I live in Richmond where the council tax level is £1539 p.a. for a band D property (excluding mayor's precept). In neighbouring Wandsworth, with who we have a shared services agreement for admin functions, it's £770.
Must admit I didn't know such low figures existed. Ours is £1520, for Band D in West Cheshire. Compared to typical salaries here, it's a noticeable cost.Sheepshanks said:
2gins said:
I live in Richmond where the council tax level is £1539 p.a. for a band D property (excluding mayor's precept). In neighbouring Wandsworth, with who we have a shared services agreement for admin functions, it's £770.
Must admit I didn't know such low figures existed. Ours is £1520, for Band D in West Cheshire. Compared to typical salaries here, it's a noticeable cost.okgo said:
156651 said:
That was me, name changes every now and again.
I am sure Mr Clapham wouldn't dream of living in SE London. It is certainly not the case that an average family is living in an average 1.5m to 2m house in London though.
How does one even afford something like that unless you are a) spectacularly well paid or independently wealthy or b) benefitted from enormous (unearned and untaxed) house price inflation.
With respect, your view might change in a few years when you're putting down multiple hundreds of £k on your next property which otherwise would have been totally out of reach (unless you make partner etc)...I am sure Mr Clapham wouldn't dream of living in SE London. It is certainly not the case that an average family is living in an average 1.5m to 2m house in London though.
How does one even afford something like that unless you are a) spectacularly well paid or independently wealthy or b) benefitted from enormous (unearned and untaxed) house price inflation.
Edited by 156651 on Friday 6th March 08:30
My parents' place in Greenwich was bought for £130k in the mid 1990s. It has had £30k spent on it, and is now worth north of £1m. That's a compounded rate of nearly 8% per year. Inflation has averaged just 2.8% pa in that period.
skwdenyer said:
If proper taxation of private houses were introduced, the prices would come down pretty quickly I suspect. The unearned and untaxed wealth is truly terrible in its effect on inequality.
My parents' place in Greenwich was bought for £130k in the mid 1990s. It has had £30k spent on it, and is now worth north of £1m. That's a compounded rate of nearly 8% per year. Inflation has averaged just 2.8% pa in that period.
Someone I know through work bought a 4-bed place in Bayswater in 2006, stretched him to the max at the time as it cost £950K. Nearly lost it all when the markets went down in 2008.My parents' place in Greenwich was bought for £130k in the mid 1990s. It has had £30k spent on it, and is now worth north of £1m. That's a compounded rate of nearly 8% per year. Inflation has averaged just 2.8% pa in that period.
They sold it last month for £4.9million - absolutely crazy.
As he said - the house has earned far more than me or my wife - average increase in value of £300K a year for the last 14 years!!
OzzyR1 said:
Someone I know through work bought a 4-bed place in Bayswater in 2006, stretched him to the max at the time as it cost £950K. Nearly lost it all when the markets went down in 2008.
They sold it last month for £4.9million - absolutely crazy.
As he said - the house has earned far more than me or my wife - average increase in value of £300K a year for the last 14 years!!
The house we are buying for 460k the vendors paid 1.2k for in 1982...They sold it last month for £4.9million - absolutely crazy.
As he said - the house has earned far more than me or my wife - average increase in value of £300K a year for the last 14 years!!
156651 said:
OzzyR1 said:
Someone I know through work bought a 4-bed place in Bayswater in 2006, stretched him to the max at the time as it cost £950K. Nearly lost it all when the markets went down in 2008.
They sold it last month for £4.9million - absolutely crazy.
As he said - the house has earned far more than me or my wife - average increase in value of £300K a year for the last 14 years!!
The house we are buying for 460k the vendors paid 1.2k for in 1982...They sold it last month for £4.9million - absolutely crazy.
As he said - the house has earned far more than me or my wife - average increase in value of £300K a year for the last 14 years!!
How would you tax the more significant gains made by former local authority tenants who've made such significant gains, especially in London and especially where they have both benefitted from significant subsidy and are arguably capitalising on taking a property out of public housing circulation?
ClaphamGT3 said:
The first time buyer mentality point is well made - people will afford the £2m + houses because they will almost never be first time buyers - they'll be 3rd/4th time buyers with £1m + of equity.
That's if prices keep going up in the same way. Given some of the reasons for it is linked to both partners working (not possible to repeat), interest rates being super low so monthly payments are possible even on much higher prices (unlikely to go lower, although who knows), foreign investors (can continue depending on taxation) and probably some effects from QE over time (likely will continue). It's hard to see the same kinds of increases continuing longer term.soxboy said:
You've mentioned before that it was an ex-LA property and so that will be the right to buy price, heavily discounted and therefore not open market value.
How would you tax the more significant gains made by former local authority tenants who've made such significant gains, especially in London and especially where they have both benefitted from significant subsidy and are arguably capitalising on taking a property out of public housing circulation?
I think RTB is/was a massive policy mistake. How would you tax the more significant gains made by former local authority tenants who've made such significant gains, especially in London and especially where they have both benefitted from significant subsidy and are arguably capitalising on taking a property out of public housing circulation?
And for the avoidance of doubt I have never said I think taxing gains on principal residences is necessarily the right thing to do. It would have very chilling effects on the housing market. This discussion came out of a comment that 2m gets an average family a fairly average house. That's simply not the case - and most will have limited sympathy for someone paying chunky stamp on a 2m purchase.
NRS said:
That's if prices keep going up in the same way. Given some of the reasons for it is linked to both partners working (not possible to repeat), interest rates being super low so monthly payments are possible even on much higher prices (unlikely to go lower, although who knows), foreign investors (can continue depending on taxation) and probably some effects from QE over time (likely will continue). It's hard to see the same kinds of increases continuing longer term.
This, coupled with the uncertainty that has suddenly erupted around Covid and the knock-on effects of a debt loaded economy are making me very worried about making an upwards move right now.Even though I have equity, the price of the next place in the chain requires a big mortgage relative to income. Whilst prices might not fall, why should I take that debt risk on right now when it looks like we could be at the end of the bull run.
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