House Prices?

Evilmags

thomasross20 said:

@olafgarten I will be a home-loaner soon and wouldn't want them to rise

Regarding Australia - I actually did look into this with Sheena about 8 years ago not long after we met! To be honest, we can buy a cracker of a house just outside Edinburgh for a decent amount and other than the weather, it's great here!

It was, in about 1989. It has become so staid and dull since then. It used to have loads of live music venues, clubs, 6am curfeew and was driveable and parable in. It's really boring nowadays. If I ever moved back to the UK it would be London....

Axe_meister

Evilmags said:

We are at near as dammit full employment, GDP is growing and expected to continue doing so. Where is this "massive economic damage".  

Question is. If house prices where say 20% lower, people would have more disposable income thus contributing to our economy a little more.
Yes I know that the current 20% is being used by the banks for economic activity, but that does not necessarily mean it is contributing to local communities and therefore jobs.  

olafgarten

@ICBM What happens if the house price decreases, will I get money?

ICBM

olafgarten said:

@ICBM What happens if the house price decreases, will I get money?

Do you get money if other capital assets decrease in value?

No.

I'm actually not sure why you're so keen on the idea of rising house prices - if you're not buying now, but will probably be in the future, why would you want to pay even more of your hard-earned cash to service the mortgage debt? Price stability would be better in the long run for everyone, including you.

The only people really doing well out of high prices are the bankers…

(And downsizers to some extent, although they still have to buy another house.)

thomasross20

Edinburgh music scene isn't what it was, true!

olafgarten

ICBM said:

olafgarten said:

@ICBM What happens if the house price decreases, will I get money?

Do you get money if other capital assets decrease in value?

No.

I'm actually not sure why you're so keen on the idea of rising house prices - if you're not buying now, but will probably be in the future, why would you want to pay even more of your hard-earned cash to service the mortgage debt? Price stability would be better in the long run for everyone, including you.

The only people really doing well out of high prices are the bankers…

(And downsizers to some extent, although they still have to buy another house.)

I'm not exactly keen on rising house prices, I just don't want to pay more tax, I'm not even employed and am still giving too much tax to the government. 

ICBM

olafgarten said:

I'm not exactly keen on rising house prices, I just don't want to pay more tax, I'm not even employed and am still giving too much tax to the government. 

How can you be giving too much tax to them if you're not employed? Do you have an unearned income which you resent being taxed? Or do you meant VAT?

You've also missed the point of why excess house price rises should be taxed - not to generate tax, but to control and preferably stop the price rises.

Tax is both essential to the operation of a civilised society and a useful means of influencing behaviour. The big problem is that governments seem incapable of using it correctly - they usually overcomplicate things, resulting in loopholes and hence tax avoidance which distorts the economy. Housing is a good example - by making the value your home exempt from Capital Gains tax (despite being by far the largest capital gain most of us make), the result is that putting too much money into that rather than other forms of investment is seen as desirable.

jellyroll

ICBM said:

ToneControl said:

and stamp duty would have to be cancelled, I assume? 

Surely paying tax when you buy a house and when you sell it would be immoral?

Not immoral, but probably unnecessary. Stamp Duty isn't a very good tax anyway, since it causes market distortions. Better to simplify the whole thing and do it with Capital Gains in my opinion.

I wouldn't be so sure. SDLT raises more than the entire CGT regime (£11bn vs £7bn in 2016) so whilst the primary argument in favour of a levying CGT on first houses is an economic one rather than a fiscal one, the hypothetical chancellor might be reluctant to sacrifice such a large slab of income......

Also, worth noting is the interaction between IHT and CGT. Folk complaining about IHT on their inheritance forget that they've just skipped a CGT charge (assets get a free uplift to market value for CGT purposes on death)....

ToneControl

I can't believe that these ugly houses are worth £650k to £950k each

https://www.google.co.uk/maps/@51.5610888,-0.1121193,3a,75y,60.81h,93.2t/data=!3m6!1e1!3m4!1sux1TjlN2GrdP_ONcQhtOwQ!2e0!7i13312!8i6656

CabbageCat

ICBM said:

Bridgehouse said:

@ICBM - Hang on, so you're saying that everyone should pay CGT on house price rises even if due to inflation?

So you'd pay tax on a 'profit' even if it was actually the same value in real terms?

Are you sure?

No, exactly the opposite - only on profit above inflation, and less the cost of any improvement. It's the inflation of house prices *above* general inflation which is the problem.

Would you also expect to use a cumulative capital gain allowance as well? If your house increases in value over ten years would you expect to get ~£100,000 (10 x ~£10k; adjusted by inflation) of the profit tax free? For other assets subject to CGT you can usually sell them off piecemeal to use your allowance yearly but for a house it's hard to sell a chunk at a time.

jellyroll

ToneControl said:

I can't believe that these ugly houses are worth £650k to £950k each

https://www.google.co.uk/maps/@51.5610888,-0.1121193,3a,75y,60.81h,93.2t/data=!3m6!1e1!3m4!1sux1TjlN2GrdP_ONcQhtOwQ!2e0!7i13312!8i6656

They're not. The value is in the land, not the building. 

ToneControl

jellyroll said:

ToneControl said:

I can't believe that these ugly houses are worth £650k to £950k each

https://www.google.co.uk/maps/@51.5610888,-0.1121193,3a,75y,60.81h,93.2t/data=!3m6!1e1!3m4!1sux1TjlN2GrdP_ONcQhtOwQ!2e0!7i13312!8i6656

They're not. The value is in the land, not the building. 

OK:

I can't believe this land is worth £550k to £850k per plot

jellyroll

ToneControl said:

jellyroll said:

ToneControl said:

I can't believe that these ugly houses are worth £650k to £950k each

https://www.google.co.uk/maps/@51.5610888,-0.1121193,3a,75y,60.81h,93.2t/data=!3m6!1e1!3m4!1sux1TjlN2GrdP_ONcQhtOwQ!2e0!7i13312!8i6656

They're not. The value is in the land, not the building. 

OK:

I can't believe this land is worth £550k to £850k per plot

Supply & Demand.

rlw

A problem with ICBM's idea is that, in more normal times when interest rates are around 5%+, the actual cost of buying a house over 25 years far exceeds the initial purchase price and may well exceed the actual value at the end of the deal.  

When interest rates were totally mad, I worked out that the price we would pay for our £56,000 house (bought in 1986) would  actually be in the region of £490,000.  We lived there for eleven years and our sale price was actually less than the purchase price plus the mortgage payments we had made.  How do you tax that exactly?

jellyroll

rlw said:

A problem with ICBM's idea is that, in more normal times when interest rates are around 5%+, the actual cost of buying a house over 25 years far exceeds the initial purchase price and may well exceed the actual value at the end of the deal.  

When interest rates were totally mad, I worked out that the price we would pay for our £56,000 house (bought in 1986) would  actually be in the region of £490,000.  We lived there for eleven years and our sale price was actually less than the purchase price plus the mortgage payments we had made.  How do you tax that exactly?

Sounds like you are mixing concepts. There is a) debt & repayment; b) interest expense on debt; and c) capital growth. They can be viewed entirely separately. 

LoFi

jellyroll said:

Sounds like you are mixing concepts. There is a) debt & repayment; b) interest expense on debt; and c) capital growth. They can be viewed entirely separately. 

Yes, they can be, but I don't think they should be - charging someone CGT on an asset that cost them more to buy than it's worth seems crazy.

ICBM

CabbageCat said:

Would you also expect to use a cumulative capital gain allowance as well? If your house increases in value over ten years would you expect to get ~£100,000 (10 x ~£10k; adjusted by inflation) of the profit tax free? For other assets subject to CGT you can usually sell them off piecemeal to use your allowance yearly but for a house it's hard to sell a chunk at a time.

Not sure. However, the answer to the question is whether you would expect it to encourage prices to rise relative to inflation. If the answer to that is yes, then no. If no, then yes… if that makes sense. Again, the objective would be to stabilise prices.

rlw said:

A problem with ICBM's idea is that, in more normal times when interest rates are around 5%+, the actual cost of buying a house over 25 years far exceeds the initial purchase price and may well exceed the actual value at the end of the deal.  

When interest rates were totally mad, I worked out that the price we would pay for our £56,000 house (bought in 1986) would  actually be in the region of £490,000.  We lived there for eleven years and our sale price was actually less than the purchase price plus the mortgage payments we had made.  How do you tax that exactly?

You don't. And you've had the benefit of living in it rent free for all that time - the fact that you have an asset at all at the end is why it's better than actually renting.

I can't think of anything else which you buy on credit which you expect to be worth more at the end than you've put in - the whole point of finance is that you get the benefit straight away and pay for borrowing the money to enable that.

This is why it's necessary to break people from the idea that house prices will always rise.

jellyroll

LoFi said:

jellyroll said:

Sounds like you are mixing concepts. There is a) debt & repayment; b) interest expense on debt; and c) capital growth. They can be viewed entirely separately. 

Yes, they can be, but I don't think they should be - charging someone CGT on an asset that cost them more to buy than it's worth seems crazy.

Firstly, I'm not sure you would have a taxable gain in that situation. The suggestion is that only real terms gains are taxed, i.e. Gains above inflation. So, if inflation/interest rise more than house prices, there' d be no gain to tax. (I accept this is a somewhat high level simplification). 

Giving interest relief against the gain would I suppose have other market distortions (i.e. It favours borrowers versus those who borrow less). So, granting the relief would depend on what market distortion our hypothetical Chancellor (The Right Hon ICBM?) wishes to introduce. 

It it would also be a pita to administrate - homeowners would need to keep records of interest payments over years/decades. 

Garthy

ICBM said:

I can't think of anything else which you buy on credit which you expect to be worth more at the end than you've put in - the whole point of finance is that you get the benefit straight away and pay for borrowing the money to enable that.

This is why it's necessary to break people from the idea that house prices will always rise.

Anything that has more demand than supply. Be it houses, cars, art, jewelry even a place in a queue will sell for more if people are prepared to pay for it.

rlw

All property is theft.

I think some leftie, anarchist or Froggie, said that.

Yes and no would be my comment.