House Prices?

VimFuego

https://en.wikipedia.org/wiki/Foxfire ?

make me own cider and beer, and apparently I can't vote for myself. And even if I could I'd be a crap PM.

Sambostar

I could vote for you and then you could vote for me and then we could legalize automatic weapons.

olafgarten

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

ToneControl

stickyfiddle said:

VimFuego said:

be interesting to see, but I suspect nothing but a blip, until you (generic you, not actually expecting you to fix it) fix the fundemntal issue of too much money floating around the housing market, I can't see prices coming down far or for long.

Fine, I'll sell ALL my houses..!

Bt seriously, I suspect the market is mental enough that a year-long crash would actually encourage more to pile back in again once it bottoms out. The cheap pound must be helping prop it up too.  Bleh.

it's not "the" market, there are many markets

around the country, areas lag behind London, and they vary in phase, some are miles behind
Ideally it's worth learning which phase each area is in, and investing at the right time

ToneControl

VimFuego said:

ICBM said:

I've said this before and I will say it again no doubt to general derision and shouting down…

Houses need to be fully subject to Inheritance and Capital Gains tax, just like everything else. That would firstly stop the idea that house price rises above inflation are inherently a good thing, and secondly raise much-needed cash for the government to help pay back the national debt.

We cannot go on encouraging an asset price bubble which is essentially tax-free, and tying up more and more of our earned income in it, particularly as mostly that's used to service the debt via mortgages.

If something isn't done there will come a point - if it hasn't been reached already - where the amount of debt taken on to service fictitious value in the housing market exceeds the capacity of the workforce to ever pay it back.

the term I've heard is peak debt.

I think they had that in Dublin when the "Celtic tiger" myth was widely believed

Axe_meister

olafgarten said:

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

How much is the house worth? The tax is only due on the amount over the threshold which I believe is nearly £1m

ToneControl

Fretwired said:

ICBM said:

I've said this before and I will say it again no doubt to general derision and shouting down…

Houses need to be fully subject to Inheritance and Capital Gains tax, just like everything else. That would firstly stop the idea that house price rises above inflation are inherently a good thing, and secondly raise much-needed cash for the government to help pay back the national debt.

We cannot go on encouraging an asset price bubble which is essentially tax-free, and tying up more and more of our earned income in it, particularly as mostly that's used to service the debt via mortgages.

If something isn't done there will come a point - if it hasn't been reached already - where the amount of debt taken on to service fictitious value in the housing market exceeds the capacity of the workforce to ever pay it back.

Out of interest how would you work it out? I've lived in my house for 29 years and in that time have probably spent just shy of £200K on it - the kitchen has been replaced twice, the two bathrooms three times, house rewired, new roof, trees removed, new garage doors, garage roof .. the list is endless. Add this all up and the amount I've made on my house isn't that great and yet I guess you're looking to simply take the purchase price and the house value and ignore interest and maintenance costs.

I think you'll find people will simply sell up and live off the money before they die or do equity release.

ICBM would class the increase in value as an unearned windfall, to be taxed at 40%, so I assume if you wanted to buy a bungalow in your old age, you'd find that you only had 2/3 of the sale price of your house available to buy the next one. Clearly no-one would ever do this, it's unworkable

Bridgehouse

olafgarten said:

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

You are Lord Grantham and I claim my Downton Abbey

boogieman

olafgarten said:

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

Jesus. Does he live in a mansion? You know you get the first £325k tax free? There's also some new ruling that's just come in that gives you extra £100k + of allowances ( I don't know the exact figure) before you get hit with the 40% tax. Your dad can gift some of it's value too to offset the tax: it's definitely worth talking to an expert if you haven't already. 

ToneControl

ICBM said:

Fretwired said:

Out of interest how would you work it out? I've lived in my house for 29 years and in that time have probably spent just shy of £200K on it - the kitchen has been replaced twice, the two bathrooms three times, house rewired, new roof, trees removed, new garage doors, garage roof .. the list is endless. Add this all up and the amount I've made on my house isn't that great and yet I guess you're looking to simply take the purchase price and the house value and ignore interest and maintenance costs.

No. I would account for inflation, and the cost of any upgrades. The idea would be to penalise only the unearned part of the rise due to house price inflation alone, and only make it applicable on sale as well - so if you inherit a house and want to keep living in it, you shouldn't be forced to sell it in order to pay tax. But if or when you do sell, you become liable.

It's the rise in "value" due to no genuine input which is the problem. It's seriously distorted the economy for no real benefit other than to the bankers who we now pay a much higher proportion of our incomes to in the form of mortgage interest, and people at the downsizing end who have taken advantage of huge unearned windfalls.

Snap said:

@ICBM - houses are subject to IHT, in the same way that other parts of an estate are. Are you saying that they should be separated from an estate and have their own distinct IHT, regardless of anything else?

I understand your motivations, but disagree with IHT full stop. I think IHT is just plain wrong: the tax has been paid whilst an estate is being built up, you should be allowed to gift it without liability IMO. I do understand the argument against this, but still hold to my point.

Some people have argued that houses should be exempt from IHT. My argument in favour of IHT is that it isn't a tax on the previous owner who gifts it - it's a tax on the unearned income of the recipient. If you inherit property and sell it, why should you get that tax free? You haven't earned it.

Snap said:

House prices - tbh, I don't see them reversing. I think they will continue to steadily go up long term. They always have.

It's this assumption as a justification which is exactly and precisely the cause of the problem.

House prices should *not* rise faster than general inflation. Why should they? No value is being added. It's fictitious wealth.

(Typo edit: hose prices certainly shouldn't be allowed to rise either. I need to water the garden… )

as we discussed at length before, I really can't see any justification in treating a gift from a parent to their child as "unearned income" that should be taxed, it;s already been taxed.

My observation is that house prices first rose a lot when women started working and getting proper salaries - that doubled values, then people started paying higher multiples of their salary because they could get the mortgages.
The last phase is when people in their 30s are prepared to house-share to live in a specific area. There are GPs lving in a room in a shared house - this would be something to tolerate from 18-24 in the past.

The foreign cash sloshing around London makes this worse of course

Bridgehouse

boogieman said:

olafgarten said:

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

Jesus. Does he live in a mansion? You know you get the first £325k tax free? There's also some new ruling that's just come in that gives you extra £100k + of allowances ( I don't know the exact figure) before you get hit with the 40% tax. Your dad can gift some of it's value too to offset the tax: it's definitely worth talking to an expert if you haven't already. 

And you can double up if you pass the allowance from one married partner to another before passing to children. My estimate (if this does apply) is £800k or so. If this is the case, that's a £2m house.

ThePrettyDamned

olafgarten said:

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

Whoa. Is he the Queen? 

WezV

Bridgehouse said:

boogieman said:

olafgarten said:

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

Jesus. Does he live in a mansion? You know you get the first £325k tax free? There's also some new ruling that's just come in that gives you extra £100k + of allowances ( I don't know the exact figure) before you get hit with the 40% tax. Your dad can gift some of it's value too to offset the tax: it's definitely worth talking to an expert if you haven't already. 

And you can double up if you pass the allowance from one married partner to another before passing to children. My estimate (if this does apply) is £800k or so. If this is the case, that's a £2m house.

Or a 1 bed flat in London

hotpot

Blimey It's all changed since I bought my house in 1982. You never even heard of all this BTL malarkey, well certainly not in my neck o the woods. 95% mortgages were the norm back then, Me & the missus pooled our redundancy payments (we worked at the same firm) totaling £1300. We beat the seller of the three bedroomed semi with double garage down from £16.400 to £15.880 and slapped that down as deposit. =)still living in it to this day.

ToneControl

robgilmo said:

I think second homes, buy to lets etc should have the shot taxed out of them until its just not worth it anymore, this way hard working people like myself might actually be able to afford to put a roof over my families heads and no longer be subject to a ruthless renting market run by greedy landlords and despicable estate agents, seems only fair, there is a housing crisis and you are either part of the problem or it's victim.

The BTLs I own would all be boarded up and empty if there were no rental market and no landlords willing to take the risk. No one would buy them on a mortgage to live in them. So far I have made a loss, I renovate them all to a higher standard than any house I've lived in, half have so far been trashed within a year, but I'm getting used to being called a "greedy landlord". I suppose I should take all the risk, yet run it as a charity - and just charge the tenants my basic costs, and then pay for the £2k repair bills from my own cash.

It's all about perspective: people have life savings earning zero interest, yet some think that it's evil if they instead invest in rental properties - most countries have predominantly rental properties, I really can't see any ethical issue with renting out properties. 
Would it be more ethical if I invested in Arms manufacturers and tobacco companies?

ICBM

ToneControl said:

ICBM would class the increase in value as an unearned windfall, to be taxed at 40%, so I assume if you wanted to buy a bungalow in your old age, you'd find that you only had 2/3 of the sale price of your house available to buy the next one. Clearly no-one would ever do this, it's unworkable

Why? Plenty of people sell up and buy a house worth much less when they get old. Why should they get to keep all the unearned windfall they made simply by sitting in a house for thirty or forty years, tax free?

What would actually happen is that very quickly it would dampen the housing market, so in fact prices didn't rise to anything like the same extent, and once you've deducted general inflation and any improvements, there would be little or no tax to pay.

The real point would not be to tax everyone, it would be to dissuade them from the extremely damaging economics of continually pushing house prices up in the first place. Tax is an extremely effective disincentive, more than any other type of cost because people resent paying it so much and will do almost anything to avoid it.

But it will never happen because it's politically unacceptable to deny people what they now think is their right to make a huge profit from simply owning a house for a while. So it will go on until no-one can afford any decent house, most of earning capacity goes to paying mortgage interest and the economy totally stagnates. And no-one dares pull the plug because that would cause negative equity…

It's an economic cancer, basically.

ToneControl

Sambostar said:

robgilmo said:

I think second homes, buy to lets etc should have the shot taxed out of them until its just not worth it anymore, this way hard working people like myself might actually be able to afford to put a roof over my families heads and no longer be subject to a ruthless renting market run by greedy landlords and despicable estate agents, seems only fair, there is a housing crisis and you are either part of the problem or it's victim.

Of course 'Their' argument would be that they are actual;ly putting a roof over people's heads, those who couldn't afford a (Cheaper) mortgage.  It's hardly a gamble when house prices have been steadily and exponentially rising for the last 30 years, it's not like they are investing in a business start up and creating real wealth either, it's just personal greed and security, but mostly greed.  Problem is the whole system is stacked on BTL's so the landlords can entrap themselves with even bigger debts for even bigger properties. The whole system stinks.  Townies want cheap labour as they are smooth handed, but are the first to complain if a portacabin or caravan goes up, as it brings their roperty value down.  Actually there is a lot to be said for the oldskool landed gentry, who still own most of the UK and provide cheap rents for tenant cottages and local workers, something that would make most townies blood curdle.  Personallly I'd like to see London, Cities and the rurals completely cleared of skilled and unskilled manual labour and see how they all get on whilst their 80% waste stacks up in front of their cottages, devaluing their properties and attracting the rats.  It's the system though really, you can't blame people for playing the system, they are just human animals and devoid of morals, they are not Jesus.  Most of them worship Satan or Mohammed.

Until the crash, The banks made stupid rules, and screwed up the market
BTLs were bought on 100% mortgages, which many signed up to without taking care. My mate went bankrupt.
Now 75% is normally the max, so people can no longer use it as infinite leverage, and their is much more investment needed from the landlords (and they are taxed on the mortgage costs too)

ToneControl

Sambostar said:

Agree it starts and ends with the banks and the moneymen.  Wankers. The risk isn't the sam as remortgaging to put into a business startup though and is entirely selfishly motivated.

yes it is, I am yet to make a profit. a shite agent who did not pass on rents, tenants who do not pay, long gaps between tenants can cost a fortune - and you have to pay full council tax for an empty house, and repairs to damage from tenants

ToneControl

olafgarten said:

Inheritance Tax is insane, my Dad worked out that with our latest House Valuation my siblings and I will have to pay almost 500,000 pounds between the 4 of us if he wants to leave it to us.

there are ways to legally avoid that, he needs to get advice

olafgarten

He has gotten advice now, and there is insurance to avoid it.

The house is now worth almost 1.5 million, plus a second which is being rented out that is worth almost 600,000.

The first house was one we built in 2010, and it cost us just under 800,000.