House Prices?

ToneControl

ICBM said:

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.

and you have to ban non-residents from buying, I assume, since if your plan works UK house prices would become far cheaper than in other countries, and people would want to buy houses here, as holiday homes. Whereas Uk citizens would start buying houses in other countries as investments?

ThePrettyDamned

Prices will keep rising.

So what happens when they don't? If the market goes a bit down the toilet, a lot of people who see their home as an investment will be rather upset. 

Surely there is a limit to how expensive they can get before... I don't know. They're so unaffordable the market crashes? 

ICBM

Garthy said:

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.

As has been pointed out already by others (including outside links, not just opinions here), it's *not* primarily a supply and demand problem - it's primarily a tax-free, perceived risk-free investment problem, with too much money available to put into the system. Take out the tax loophole and the belief in the guaranteed growth in prices and people won't be stupid enough to borrow too much to buy overpriced houses. Restricting the maximum mortgage relative to salary would help too - whereas what's happened in the past is that such restrictions have been eased when the market goes too high, which is precisely the wrong thing to do. If people can't afford a house it doesn't matter how much demand there is. Small numbers of cash buyers will still buy, yes - but the bulk of the housing market is dominated by the everyday people with mortgages.

ToneControl said:

and you have to ban non-residents from buying, I assume, since if your plan works UK house prices would become far cheaper than in other countries, and people would want to buy houses here, as holiday homes. Whereas Uk citizens would start buying houses in other countries as investments?

Why would a non-resident buy a house when they will not see a rise in value above inflation, and they'll have to pay a big whack of tax if they sell it?

ThePrettyDamned said:

Prices will keep rising.

So what happens when they don't? If the market goes a bit down the toilet, a lot of people who see their home as an investment will be rather upset. 

Surely there is a limit to how expensive they can get before... I don't know. They're so unaffordable the market crashes? 

Exactly. For anyone who doesn't believe it should or can be stopped, how high do you think house prices can get? Double what they are now in real terms? Triple? If not, why not?

rlw

ICBM said:

Exactly. For anyone who doesn't believe it should or can be stopped, how high do you think house prices can get? Double what they are now in real terms? Triple? If not, why not?

Double would be nice to be honest.

Garthy

ICBM said:

Garthy said:

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.

As has been pointed out already by others (including outside links, not just opinions here), it's *not* primarily a supply and demand problem - it's primarily a tax-free, perceived risk-free investment problem, with too much money available to put into the system. Take out the tax loophole and the belief in the guaranteed growth in prices and people won't be stupid enough to borrow too much to buy overpriced houses. Restricting the maximum mortgage relative to salary would help too - whereas what's happened in the past is that such restrictions have been eased when the market goes too high, which is precisely the wrong thing to do. If people can't afford a house it doesn't matter how much demand there is. Small numbers of cash buyers will still buy, yes - but the bulk of the housing market is dominated by the everyday people with mortgages.

ToneControl said:

and you have to ban non-residents from buying, I assume, since if your plan works UK house prices would become far cheaper than in other countries, and people would want to buy houses here, as holiday homes. Whereas Uk citizens would start buying houses in other countries as investments?

Why would a non-resident buy a house when they will not see a rise in value above inflation, and they'll have to pay a big whack of tax if they sell it?

ThePrettyDamned said:

Prices will keep rising.

So what happens when they don't? If the market goes a bit down the toilet, a lot of people who see their home as an investment will be rather upset. 

Surely there is a limit to how expensive they can get before... I don't know. They're so unaffordable the market crashes? 

Exactly. For anyone who doesn't believe it should or can be stopped, how high do you think house prices can get? Double what they are now in real terms? Triple? If not, why not?

As we have done to death before, your cg tax won't deter sellers from selling to those with the deepest pockets. If person A offers me £400k and person B offers me £500k, I am still going to sell to person B because more is more. 

We have beat this subject to death a few times, every idea you have is shot down in flames as unworkable or not having the desired outcome/law of unintended consequences. I am sure the same crap will be posted by yourself in a couple of months time.  If there wasn't a supply and demand problem, why are people still getting into bidding wars and pushing prices up? Regarding your mortgage point, if a bank thought the security could go below the loan amount by a significant margin they simply wouldn't lend against it therefore reducing the housing market to just cash buyers and houses worth a fraction of the mortgage and as a consequence a banking crisis that would make the credit crunch look like a hiccough. 

holnrew

We can blame Thatcher for right to buy and easing regulations on the rent market. It made owning a home important, took away properties for the needy at a loss for councils, and ended up making housing an attractive investment for people of dubious morals. 

The reason more people rent in Germany is because tenants have rights beyond paying somebody else's mortgage for them.

ICBM

Garthy said:

As we have done to death before, your cg tax won't deter sellers from selling to those with the deepest pockets. If person A offers me £400k and person B offers me £500k, I am still going to sell to person B because more is more. 

We have beat this subject to death a few times, every idea you have is shot down in flames as unworkable or not having the desired outcome/law of unintended consequences. I am sure the same crap will be posted by yourself in a couple of months time.  If there wasn't a supply and demand problem, why are people still getting into bidding wars and pushing prices up? Regarding your mortgage point, if a bank thought the security could go below the loan amount by a significant margin they simply wouldn't lend against it therefore reducing the housing market to just cash buyers and houses worth a fraction of the mortgage and as a consequence a banking crisis that would make the credit crunch look like a hiccough. 

You would be right if there were an unlimited number of buyers willing to pay over the odds for houses - there aren't, thus you're wrong. A few buyers will still pay the highest prices, yes - but they're not going to buy every house, and the vast majority of houses will still be bought by normal buyers with normal mortgages.

Why do people get into bidding wars? Because they think they can pay over the odds and it won't matter in the long run because prices will go up. If they didn't think that, they wouldn't. Why would you pay far too much for something you'll lose money on? The banks are part of this too of course - and it's already been shown conclusively that they don't know when to stop putting money into overvalued assets.

I'm still waiting for you or anyone to provide actual reasons why house prices can go on rising for ever. If they can't, then sooner or later there will either be stagnation or a crash. I'm also still waiting for actual reasons why proposing to do anything about it is unworkable - other than just being told it is because that's the received market wisdom.

But as I've also said before, we'll never find out because no politician will now have the sense or courage to even think about dealing with the problem. No-one will accept being told that their 'safe as houses' investment can go down as well as up, and any time real market forces come into play to slow things down the politicians will find ways to 'help' the market 'recover', and so we all go round again with bigger mortgages and less to show for them.

ToneControl

ICBM said:

I'm still waiting for you or anyone to provide actual reasons why house prices can go on rising for ever. If they can't, then sooner or later there will either be stagnation or a crash. I'm also still waiting for actual reasons why proposing to do anything about it is unworkable - other than just being told it is because that's the received market wisdom.

they won't keep going up, there will be a crash/depreciation
it doesn't need bizarre taxes to trigger it

holnrew

It would be better to try and control it rather than have recession

thomasross20

@ICBM you're doing all the talking for me !  

AndyJP

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!

There seems to be a few Venues in Edinburgh closing recently.  Studio 24 the latest and recently Electric Circus.

I thought some guy had bought Malones to turn it into "Edinburgh's answer to Oran Mor". But when I went past yesterday it had become another shite Irish Bar. Anyone know anything about this?

ThePrettyDamned

ToneControl said:

ICBM said:

I'm still waiting for you or anyone to provide actual reasons why house prices can go on rising for ever. If they can't, then sooner or later there will either be stagnation or a crash. I'm also still waiting for actual reasons why proposing to do anything about it is unworkable - other than just being told it is because that's the received market wisdom.

they won't keep going up, there will be a crash/depreciation
it doesn't need bizarre taxes to trigger it

So what happens then? Genuine question. 

Sporky

ICBM said:

Why do people get into bidding wars? Because they think they can pay over the odds and it won't matter in the long run because prices will go up.

I don't think that's the only reason.

People want to own their own home - it's been sold as being part of being British for decades (if not longer).

School catchment areas matter to parents (and influence property values).

Renting is a lot of money for nothing at the end.

Garthy

Sporky said:

ICBM said:

Why do people get into bidding wars? Because they think they can pay over the odds and it won't matter in the long run because prices will go up.

I don't think that's the only reason.

People want to own their own home - it's been sold as being part of being British for decades (if not longer).

School catchment areas matter to parents (and influence property values).

Renting is a lot of money for nothing at the end.

We got into 7 bidding wars during this last house move, lost 6, won 1. Why? Because there were more buyers than houses available. Every single house we saw had dozens of viewers and quite often we would bump into the same couples at back to back viewings. Our own house had 120 interested parties and we only had viewings on one day.

ToneControl

ThePrettyDamned said:

ToneControl said:

ICBM said:

I'm still waiting for you or anyone to provide actual reasons why house prices can go on rising for ever. If they can't, then sooner or later there will either be stagnation or a crash. I'm also still waiting for actual reasons why proposing to do anything about it is unworkable - other than just being told it is because that's the received market wisdom.

they won't keep going up, there will be a crash/depreciation
it doesn't need bizarre taxes to trigger it

So what happens then? Genuine question. 

Theory says:

http://www.housepricecrash.co.uk/images/bubble-lifecycle.gif


some people put dates on it:
http://i187.photobucket.com/albums/x308/LPShadow/OzHousePriceCycle2012.jpg

ToneControl

http://oi44.tinypic.com/bgodmx.jpg

not my text or diagram, just someone's idea off the internet. Must be true

Sporky

Ha ha.

Blow-off phase.

ThePrettyDamned

ToneControl said:

ThePrettyDamned said:

ToneControl said:

ICBM said:

I'm still waiting for you or anyone to provide actual reasons why house prices can go on rising for ever. If they can't, then sooner or later there will either be stagnation or a crash. I'm also still waiting for actual reasons why proposing to do anything about it is unworkable - other than just being told it is because that's the received market wisdom.

they won't keep going up, there will be a crash/depreciation
it doesn't need bizarre taxes to trigger it

So what happens then? Genuine question. 

Theory says:

http://www.housepricecrash.co.uk/images/bubble-lifecycle.gif


some people put dates on it:
http://i187.photobucket.com/albums/x308/LPShadow/OzHousePriceCycle2012.jpg

Lol blow off phase. 

So house prices crash... But why? 

Not a silly question I hope. But I don't know what it will take to bring house prices down. 

I don't have a great understanding of economics sadly.  

Axe_meister

It's all about confidence. If you think the economy is about to crash you may not offer the money for a house you would have, likewise people desperate to sell (downsizing or moving to another cheaper area worried about keeping up repayments) will accept less cash. If there is a hike in interest rates people a lot of people may well be forced to sell no longer being able to keep up repayments on a mortgage 7 times their salary.

bodhi