Blackcurrant

Loz Wrote: ------------------------------------------------------- > Blackcurrant Wrote: > -------------------------------------------------- > ----- > > Loz Wrote: > > > -------------------------------------------------- > > > > > But that 'value' is irrelevant until, as I > said, you actually sell it and realise that price. > Until > > > then it has no value. As Northern Rock > shareholders found - they could have been taxed > on > > > the 'value' of their shares only to discover > they actually were worthless. > > > > So if I have ?20 in my pocket, it's actually > worthless until I spend it and realise it's true > > value, because who's to say there won't be a > plunge in the value of sterling tomorrow. > > We're talking assets, not cash. This is not a > terribly difficult concept! 10% of ?20 is still > ?2, whatever the value of the pound. 10% of the > value of a house is not definable until it is > sold. It can be estimated based on an approximate > value IF you sold it right now, but not defined > until you actually do. Your initial point was that assets have no value and are worthless. I think you've realised that was nonsensical as you've repositioned and are now saying assets do have value but that value is hard to specify exactly until point of sale. Fine. But it can be estimated easily and accurately enough to make taxation practical. Even on eBay I can establish market value of any common item by selecting completed sales and looking at comparables. Houses are valued the same way. It's even easier to value shares or other financial assets including cash (which is also an asset). In any case your point that property, being a worthless asset, can't be taxed is pretty obviously untrue as various countries already do collect wealth taxes based on property, including the UK, which uses residential property values to calculate council tax. You can justifiably quibble about how efficient or fair the valuation process is, but that's very different from arguing that the value is nil, which I think you've got muddled about.

Loz Wrote: ------------------------------------------------------- > Blackcurrant Wrote: > -------------------------------------------------- > ----- > > Loz Wrote: > > > -------------------------------------------------- > > > ----- > > > No, no, no. The problem with this is that > assets (generally) have intrinsically no value. > How much > > > is a picture worth? How much is a car worth? > How much is 10000 shares in a company worth? How > much > > > is a house worth? The answer to all of those > is nothing... until the point they are sold. > Only > > > then can the value be understood. > > > > This clearly isn't true. I can look up share > prices from one second to the next and if I sell > > shares, I will get the current price. The value > of houses is easy to determine to within 5% of > the > > actual sale price. > > But that 'value' is irrelevant until, as I said, > you actually sell it and realise that price. Until > then it has no value. As Northern Rock > shareholders found - they could have been taxed on > the 'value' of their shares only to discover they > actually were worthless. So if I have ?20 in my pocket, it's actually worthless until I spend it and realise it's true value, because who's to say there won't be a plunge in the value of sterling tomorrow.

Penguin68 Wrote: ------------------------------------------------------- > The issue about a tax on landed property is that > many (often elderly) people are asset rich but > cash poor. There are people living now in property > in ED they bought 30 years ago whose income bears > no resemblance to that required to service a > current mortgage at current prices on their > property. So if a 'mansion tax' is brought in they > will be forced to sell because they won't have > income/ cash to pay the tax. No doubt that will > free-up property for the urgent-to-buy-in-ED > brigade whose incomes don't rely on e.g. pensions, > but that will force these elderly people away from > their friends so that a new batch of yummy mummies > can clutter the streets and desirable little cafes > with their double buggies. If you tax assets like > shares (or oil paintings) these can at least be > sold without giving up your home, but tax property > (I'm not talking here about local usage taxes but > about punitive envy taxes) and you will create a > class of dispossessed who will far outnumber those > oppressed by the 'bedroom tax'. Mainly in London, > of course, because that is where hyper-inflated > properties are mainly found. > > The ?2m 'mansions' in ED are of course not now > that plentiful (more in Dulwich itself) - but > start that rot and soon you will find that the > price ceiling is dropped to ?1.5m, then ?1m (where > the Lib Dems started their bidding war). > > You must not confuse those now living in houses > that would cost a lot to buy with 'the wealthy' - > unless they have brought them very recently - in > which case they are probably anything but awash > with disposable income as they work to pay down > their housing debts. > > Forcing pensioners (such as me, in fact) out of > their homes to satisfy the young employed's desire > to live in nice places will look increasingly less > a 'fix' to the problem as you (my readers) > approach old-age. What you have to bear in mind is that there has been a massive transfer of wealth to older generations via the house price boom and subsequent measures taken to arrest and reverse the correction that began in 2007/8. People who own property, especially in London, have received a vast unearned windfall, and the younger generation now has to pay for it by borrowing large amounts and working for life time to pay down debt. A wealth tax would help rebalance things. Bear in mind also that a growing proportion of voters are on the wrong side of this wealth transfer and awareness of the issue is growing. Obviously those with a vested interest in maintaining the status quo have made a lot of noise about widows being forced to liquidate the family home (see any newspaper for examples), but there are lots of ways of avoiding or mitigating that problem. A mansion tax would apply to the value of a property above a certain threshold, not the whole value. One effect it would have would be to bring prices back down below the threshold. Special exemptions could be made for pensioners, or arrangements could be made for the retired to draw down equity from the property. The beneficiaries would lose out on the unearned windfall but that's too bad. The current situation, with statospheric property prices being propped up by government measures intended to recapitalise banks and stimulate the economy, clearly isn't fair. Governments have to collect tax by some means and property is starting to look like a sitting duck, so I think some kind of wealth tax or property tax will eventually come into force, but it's going to take a long time. As another poster pointed out, imputed rent used to be taxed. Property investment has been made too tax-efficient and that needs to be changed.

Loz Wrote: ------------------------------------------------------- > No, no, no. The problem with this is that assets > (generally) have intrinsically no value. How much > is a picture worth? How much is a car worth? How > much is 10000 shares in a company worth? How much > is a house worth? The answer to all of those is > nothing... until the point they are sold. Only > then can the value be understood. This clearly isn't true. I can look up share prices from one second to the next and if I sell shares, I will get the current price. The value of houses is easy to determine to within 5% of the actual sale price. I don't think the current government will move in this direction but the libdems definitely want to and Labour are likely to. Liquidation would be a good thing if it frees up land for development or releases underoccupied houses onto the market. But if the system is introduced sensibly and gradually, it shouldn't cause a sudden shock - retired widows forced to sell up etc.

PokerTime Wrote: ---------------------------------------------------- > I agree blackcurrant. But I would also say that > cheap borrowing has been part of the problem too. Cheap borrowing, yes. Still propping up the market by deterring would-be forced sellers from releasing supply. Planning restrictions and insufficient building in the SE. Also inadequate taxation. More of the tax burden should fall on wealth rather than income. Income tax suppresses economic activity and is easily avoided by high net worth individuals with good lawyers. Taxing wealth, particularly property, is a much better idea and one that is gaining currency. You can't hide a London house off shore. A true land value tax would make more sense than a mansion tax, but there are vested interests to overcome either way. Almost everyone in power has a stake in the London property market.

PokerTime Wrote: ------------------------------------------------------- > I think your post is a useful example Sophie. > There is one thing you say that I think typifies a > major shift in affordability. 30 years ago, just > one salary in a family on an average wage could > support a mortgage. Many of us will have had > fathers or grandfathers that went out to work, > whilst mum stayed at home bringing up kids. Those > fathers may have worked in factories, or driven > buses, but they could do it (with maybe a little > overtime here and there). Today it is impossible > for a like for like salary to support a mortgage. > Increasingly both parents are having to work full > time and for what? A retirement funded by > downsizing and released equity? I think we've > become enslaved to the housing market. > > Editied to add; I completely agree Zebedee. That's the unfortunate flipside of sexual equality. House prices have been bid up by combined salaries of couples to such high levels that both partners now have no choice but to stay in work to service the huge mortgage. Inequality has been replaced by debt servitude.

ultraburner Wrote: ------------------------------------------------------- > But BIG price hikes are going on all of the SE so > I'm not sure its just London. > > House of cards mk2.6..... Yes the bubble has rippled outwards. In a crash, quality holds its value. In a boom, the rising tide lifts the scum faster than anything else. A year or two ago it was just big period houses doing well, but now it's everything anywhere near London, even ex council flats that were unmortgageable last year. Feels just like 89 - people panicking and fighting over poor properties before prices leave them behind. Every workplace watercooler conversation is suddenly about buying. You only have to look at stagnant rents to see this isn't driven by a structural shortage or rising population. Ultimately it's government policy, and isn't sustainable or even controllable.

Sazzle30 Wrote: ------------------------------------------------------- > We have been trying to buy a home, we are first > time time buyers looking around crystal palace ( > cant afford ed!).we put offers on two properties, > one at asking price and one 10k over and both got > rejected back in Jan. > > Now both are back on the market at a 'fantastic > price reduction' according to the estate agents > emails I received.... > > We did successfully put an offer on another- ?5k > over,which was accepted... Our mortgage company > went to do their valuation and deemed it over > valued by 30k and wouldn't give us mortgage unless > the price was reduced inline with their valuation. > Nightmare! > > This made me think that this must be a common > occurrence in London with estate agents hiking > prices and buyers having to place sealed bids? Yes very common, but surveyors are likely to turn more bullish as prices keep rising.

> Assets are inflation proof cash is not. Cash is crash proof, assets are not. In any case, there isn't much inflation around at the moment outside the London property market. The bigger picture is still deflation. Wage inflation is practically nonexistent, so debt erosion isn't happening. We're right back where we were in 2006, but heading for a London crash rather than a national one, which means the government won't bail anyone out this time round.

Penguin68 Wrote: ------------------------------------------------------- > An investor might as well bet all their money on > bitcoin or gold - equally crazy. > > Well, that puts paid to the stock market, to any > form of currency speculation, to investing in any > form of asset or raw material - so goodbye to all > City activity. Even the insurance business is one > based on risk - ask any Lloyds Name of the 1980s > or before. > > And, by the way, if there is a downturn in house > price assets then you may also expect any revenues > from rentals to fall as well - as people are able > to afford to move out of the rental to the > purchase market with falling house prices. > > ALL investments carry risk - and hoping to live > off rentals alone destroyed many 19th century > familes, who had previously lived well as > rentiers. The point I was making is that investors value assets by looking at the income they produce, e.g. with shares you might look at price to earnings ratio or dividends. Gold and bitcoin produce no income so are purely speculative. If people buy property without considering rental yield, they are making a purely speculative bet just like a bet on gold or bitcoin. Given how high house prices in London have now risen, and how far values have drifted from sensible measures based on rental yield, I reckon most sales must be to prospective owners rather than investors. Any market can drift away from fundamentals when herd mentality sets in, but eventually reality will reassert itself. That means that a correction is on the cards. Either rental yields are going to rise dramatically or prices are going to fall. The government clearly wants the former as it is doing everything in its power to push up wage inflation, but so far with little success. They certainly don't want a house price crash as it will cause solvency problems in banks (whose main assets are loans secured against property) and bring on another credit crisis. But they aren't really in control of things, so I think a price fall is very much on the cards, particularly in London.

StraferJack Wrote: ------------------------------------------------------- > i wouldn't mind jailing anyone who uses the phrase > "rental yields" > > I take your point (if not necessarily agree) about > buy-to-let being unnatractive at these levels - > but rental yields aside you are still getting > other people to pay your mortgage. Even at a loss > every month you end up with an asset much more > valuable than your no-paid-for mortgage Yes but the gain is based entirely on price speculation, so it's pure gambling. It would only take a tiny hike in the bank rate to turn sentiment when the market has drifted so far from rational means of valuation. An investor might as well bet all their money on bitcoin or gold - equally crazy.

StraferJack Wrote: ------------------------------------------------------- > It's only if you have to actually earn that much > the reality hits home It's also obvious if you look at rental yields, which are so low at these house price levels that buy-to-let looks suicidal. There's clearly more going on here than just a property shortage, which would push up rents at the same rate as prices - something that hasn't happened.

Jeremy Wrote: ------------------------------------------------------- > josh, the main point is that they are v small (700 > sq ft?) so prices for these houses are roughly in > line with good 2 bed flats. Yes they pretty much match 2 bed garden flats. One big difference is that you can easily extend them up and backwards, gaining about 40% floorspace, which has a big impact on value and rental yield.

Hickory Wrote: ------------------------------------------------------- > We don't know what to do. Our lovely 1 bed, second > floor flat has gone up by ?100k too, but we'd > still only be able to afford a purchase price of > ?440k. What kind of house is that going to get > us? > We don't yet have dependants bit might do in a few > years. > > A.Sell now and join the 3 bed race - compromising > on location? > B.Wait another year or 2 - we don't need the space > right now - but might be priced out altogether? > C. Or enjoy our gorgeous flat and neighbourhood > and hope that the frenzy and lack of supply calms > down a bit? > > A dilemma had by many I'm sure. Head vs heart Fixed mortgage rates have already started rising. The base rate is expected to rise by next spring. Prices have now got so high that rental yields are derisory, so a correction is on the cards, probably starting at the top of the market. Probably better to wait rather than follow the herd.

Lots of modern TVs (eg panasonic, samsung, sony) can record directly onto a ?50 portable hard disc drive. These are about the size of a pack of cards and don't need a power supply, so fewer boxes under the tv and fewer cables. Set recordings straight from the freeview guide. Works brilliantly. But.. if you want to watch one channel while recording a different one, Humax is the best choice.

Same where I work too. The more prices rise, the more desirable houses are and the stronger the urge to buy. According to classical economic theory demand is inversely proportional to price but the opposite can happen with status symbols (Veblen goods) and that's currently the case with London property. Rises of 50% a year can't be explained by a shortage or population growth and aren't sustainable.

rahrahrah Wrote: ------------------------------------------------------- > The banks are perfectly happy to lend to > individuals that can't afford it, because should > they default the banks still get their money back, > with interest. With a deposit put down, prices > rising and a taxpayer guarantee to boot, they > can't lose. If they can squeeze a good rate of > interest up to the point that the inevitable does > happen then all the better (from their point of > view). The banks and the government are complicit > in this crazy 'help to buy' scheme because it's a > vote winner with those already on the ladder (who > tend to be the demographic most likely to go to > vote), who like seeing the price of their house > going up on paper. It's completely cynical IMO. Yes "help to buy" is really about recapitalising the banks that have dodgy balance sheets rather than helping first-time buyers get "on the ladder". If it happens to bolster the apparent recovery and win votes, so much the better. The one thing it isn't doing is helping people who aren't already on the property ladder.

There are tawny owls in Dulwich Wood and Sydenham Hill and little owls in Greendale, Belair Park and probably other green spaces.

LadyDeliah Wrote: ------------------------------------------------------- > When I cycle, I'm lit up like a Christmas tree but > I still have drivers, who clearly see me, pulling > out in front of me because they don't appear to > think they should give priority to bikes as they > do to other vehicles. And there's nothing you can do about drivers who are texting or fiddling with iPhone/satnav/mp3 player etc etc.

DaveR Wrote: ------------------------------------------------------- > "Like the current frenzy, that was caused by the > government meddling clumsily with the market" > > I don't think this is accurate, either. Help to > Buy is a minimal factor in the current London > property market. It's much more straightforward > supply/demand. Yes, but the government can stimulate demand by cutting the bank rate. The main reason prices turned in 2009 was the cut to 0.5%. This not only makes mortgages dirt cheap for people with equity - it drives investors out of cash and into shares or property. QE also pushed down the value of sterling by about 20%, which stimulated foreign demand. I agree that help to buy will have a minimal impact long term, but in the short term it's had a huge impact in sentiment. It's Nudge-inspired behavioural economics and is working. Supply is obviously too tight in London, but when house prices become misaligned with rental yields there are other factors at work. If those factors change, prices can fall even with supply remaining tight.

simonethebeaver Wrote: ------------------------------------------------------- > Not true that this didn't happen a few years ago. > I bought in 2006 and people were making offers > without even viewing back then. After losing out > repeatedly, I finally got my flat by being the > first to view, being lucky to be shown round by > the owner and form a bit of rapport, and then > sitting on the phone next morning to make an offer > first thing. It took months to get anything. I was viewing around that time too and remember it being busy, but not so bad that every property went to sealed bids. Mind you, I was looking through 2007, by which time it might have started cooling. Anyway, it didn't end well that time either - prices fell about 20% in 2008. Maybe this time it's different?

aileking Wrote: ------------------------------------------------------- > My experience: you look at Zoopla every day. As > soon as something of interest comes up you phone > and get an appointment. They do a block viewing a > few days later on the Saturday where at least 30 > other people are looking at the property > (apparently at the latest one 60.....). Offers in > on Monday where there is often 10-14 offers on the > table (you are out of the game if you would want > to think about it or have a second viewing). I've > done this at least six times without success. I've > got no chain, 20% deposit and usually have ended > up bidding over the asking price, but still > haven't succeeded. And this isn't even East > Dulwich, it's the surrounding areas. Sometimes I > could have afforded to bid higher, but you start > feeling uneasy about paying such ridiculous > prices. On Zoopla it often says what the property > last sold for and in some cases the seller bought > that property for half the price about 5 years > ago. Most have gone up at least ?100,000 in the > last 3 years. But what do you do? Pay ?15,000 a > year in rent towards your landlords mortgage or > pay your own mortgage at an over inflated price? Amazing. It was never this bad during the boom that led up to the financial crisis. The last time people were panic buying london property was during the MIRAS fiasco back in 88. Like the current frenzy, that was caused by the government meddling clumsily with the market. After MIRAS was withdrawn and the panic to buy ended abruptly, prices in London fell 30% on average but a lot more for cheaper properties in less salubrious areas, such as ED and Peckham - neither were remotely trendy back then. There currently seems to be a conviction that London property is a one-way bet and that buyers have to get on ladder before it's too late. The faster prices rise, the greater the pressure to buy. I've heard tales of prices rising 50% a year in SE London. Clearly unsustainable, and likely to end messily.

citykid Wrote: ------------------------------------------------------- > Lots of predictions out there that price increases > set to continue.. > > Southwark prices predicted to go up 21.5% over > next 5 years > > http://www.telegraph.co.uk/property/investmentinpr > operty/9775932/Property-investment-top-20-places-t > o-make-money-in-London.html?frame=2441103#?frame=2 > 441053 > > Found the earlier points about sentiment being the > driver rather than fundamentals very interesting. > Whilst I completely understand the points made > here I do think there is a flaw.. simply because > people buying flats / houses are not (usually - > although, sure, sometimes) borrowing 80pc - they > are more likely borrowing much less - particularly > on bigger purchases as they would have accumulated > equity if not a first time buyer. Also, many > first time buyers are now in this category too > courtesy of help from the bank of mum and dad. Savills also predicted that SE England will outperform central London, so outer suburbs like Penge are expected to beat East Dulwich. It's worth remembering that the prediction is based on bank rate barely moving, but unexpected things can happen sometimes.

LondonMix Wrote: ------------------------------------------------------- > I wouldn't exactly call your example people who > would be "hurt" by an increase in interest rates. > Sounds like they would just make less money being > landlords.... Being forced to sell because rental income no longer covers the mortgage would be the painful bit. Selling in a hurry during a glut also means taking a hit on the price.