Trying to buy a house in this area is near impossible

[Zebedee Tring]

As I mentioned in an earlier post, the government should reintroduce Schedule A tax (which was abolished in 1963), thereby taxing the notional rent payable on a property and assessed on the property's value. This could be considerable in the case of, say, a multi-million property in Kensington Palace Gardens. Not only would it dampen down the value of properties, enabling people to get on to the property ladder, but it would provide a very healthy source of taxation, which could used to fund the NHS etc.

[miga]

.

[Jeremy]

SJ I think it's a bit cynical to suggest that people view their property as their pension. I think I made a comment the other day about people wanting to own their house because of pension uncertainties - but I just meant that it's important to get yourself into a position where you're not paying rent or mortgage repayments after retirement. I didn't mean that everyone is waiting to cash out.

I notice that sophiesofa on the previous page said that she wants to sell up, move further out and reduce their mortgage. But I don't believe that this is particularly common.

> I'm surprised you haven't said as much

If you mean that as it sounds, then I kind of resent it. I'm not intending to leave London any time soon so I'm not personally going to gain from the ridiculous property prices. In fact I'd much rather prices were stuck at 2002 levels.

[StraferJack]

I don't think I did mean it as you read it at all - my lack of clarity, sorry

What I meant was, given that several people on the tread have been exlicit about property as investment, I found it odd that you didn't reference any of those posts when you posted ""Who's treating their house as an investment, mike? Most people just want a place to live.."

Nothing personal about your situation was meant or even occured to me

[StraferJack]

that said, I can agree with you about the cynicism of property as investment but it seems as if you'd be surprised by how many do

on this thread alone in recent weeks:

"Loz on Monday said:

"But that's just an ideological problem you have at not wanting to see renting houses as a business. Every other business is entitled to deduct costs (such as interest on borrowing) from incoming revenue."

Cyclemonket earlier that day spoke about the half million garage in Camberwell which is "advertised as "ideal buy to let investment"

BTL Investment isn't aimed at just this garage - it has infected wider thinking

earlier again LondonMix (a consistently thoughtful poster who is no bleeding heart" spoke about:

"the concentration of a scarce resource in the hands of the most wealthy will always happen without regulation. Regarding housing we as a society have to decide how we want to address this: either reduce the attractiveness of owning homes as investments in London or increase the attractiveness of renting so that its not an issue. "

and then you have quids saying: "Also, BTL has become a reasonable choice for pensions since the late 1990s,"

[Jeremy]

To clarify SJ... of course BTL is an investment and should be taxed accordingly!

mikeb suggested that people treat their own homes as investments, so should therefore be subject to capital gains tax. I am disagreeing with this particular point.

[StraferJack]

can I agree with mike about (admittedly not everyone) treating their homes as investments but agree with you about they shouldn't be subject to CGT?

[david_carnell]

C'mon Jeremy - of course people view their house/home as an investment.

Hence all the talk at dull dinner parties of just how much increase in value there's been on a pokey 3 bed terrace.

My point a few pages back was that this mentality is so ingrained i.e. that prices MUST always rise that any government initiative to lower house prices across the board would be met with incredulity. Everyone wants prices to fall except when it comes to their own house.

[Jeremy]

Is that what happens at the dinner parties you go to, DC?!

[david_carnell]

Now and again.

Then I spend a long time explaining the concept of public ownership and land tax and I'm not invited again.

[miga]

.

[Jeremy]

david_carnell Wrote:

-------------------------------------------------------

> I'm not invited again.

No great loss, by the sounds of it.

I'd question whether the average person really does have that mentality... but if they do then it's a bit stupid as most of us don't win out. Either it remains unrealised, or it gets swallowed up when you move somewhere else.

[StraferJack]

If people didn't think it was an investment they wouldn't be in such a rush to buy

The rush stems from the belief that prices will only go up

They want some of that (sometimes expressed as "if we didn't now"..)

Plus everyone tells tenants constantly that they are wasting money

[Jeremy]

Trying to buy something while it is still within reach is not really the same as "investing", is it?

TBH this mini-debate has become a bit farcical. If you really believe that most people buy a house to make a profit (the definition of "invest"), then fine. I do not agree with you. Nothing to back up either side of the argument apart from personal experience/beliefs.

[mikeb]

Glad you've settled that for many people, property is an investment and for many others, it's a case of "buy before it goes up and becomes too expensive".

The windfall gain that someone like Penguin68 will have when they finally leave their ?0.5-1m property is untaxed. It will become real money that can be spent on a larger house somewhere else in the country or a smaller house with some left over for cruises / grandchildren / whatever.

Capital gains tax on property gains would be fairer than tackling the issue via inheritance tax (since it is levied on a realised cash gain).

To be clear, I would love property prices to be stable or even to decrease (and I say that as a homeowner).

[Zebedee Tring]

Below is an extract from today's "Grauniad" comment page:

"... there are 30m-40m actual or potential bedrooms nationwide not slept in every night ... The tiny fraction of these found in council housing are being aggressively pursued through the bedroom tax; public policy takes no responsibility - and shows no interest - in what happens with the rest".

I couldn't have put it better myself.

[Blackcurrant]

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.

[david_carnell]

Ok Jeremy - fair enough. It's anecdote on both sides.

My wider point would be, is it fair/right/moral that someone can make a vast untaxed profit on their primary residence having done nothing but exploited the market.

If you do no home improvements and just maintain upkeep, and your home improves in value say 100% over 10 years (which is what the situation has reached in SE15 at the moment), should you be entitled to that money. That's about ?400k untaxed profit. At ?40k per year that's more than the median/mean salary in London. For nowt.

You've done nothing to "earn" it. You've just got lucky in a rising market.

How about CGT applies to all homes and is ringfenced to build more low-cost homes?

[Otta]

I think a lot of people (well me anyway) buy because they don't want to be paying rent after they retire. So yeah I guess that's an investment in my future, but not an investment in the way that (I think) SJ is getting at.

[Otta]

And DC, you're seriously better off not being invited back to those dinner parties!

I think I'd share your ideology on this one, but we're too far down a bad road for us to ever get there I think.

[EDmummy]

41 properties over ?1M in SE22 on Right Move today - madness.

[Jeremy]

DC, I think there's a fundamental flaw in your point. Any "profit" you make on your sale will probably disappear when you move (assuming wherever you move to has also been subject to the same growth). There's no real profit to be made at all unless you intentionally downgrade and cash in. How often does that happen?

The real aims should be:

- making property investment less attractive

- ensuring there are enough properties to satisfy demand (specifically for owner-occupiers)

- figure out how to make the country less London-centric

Trying to arrest house prices by taxing people (even further) for daring to move house is just a fudge... crudely punishing regular people instead of addressing the real problems.

[DaveR]

Tapered CGT on profits above a certain threshold is much more sensible than a straight wealth tax on unrealised gains. Otherwise, the debate that has dominated (on and off) the last 20 odd pages about the 'morality' of BTL and multiple home ownership seems to me pointless. As has already been observed, if a private rental sector exists them somebody has to be in the business of owning and letting property - who it is and how and why they do it is irrelevant. If you want to argue in favour of rent caps (which I would oppose) or greater security of tenure (which I would support) then whether it's individual 'greedy' BTL landlords or institutional investors who are affected is irrelevant.

The issues in the housing market are still fundamentally market issues - limited supply and inflated demand - and the solutions are market solutions i.e. more building and/or redevelopment of existing stock, discouraging land banking and vacant property, stopping stupid mortgage lending etc. In the longer term the real key is to get economic development going outside London and the SE through infrastructure spending and incentives to business.

[Zebedee Tring]

Have you got a source for this information please, EDmummy?

[david_carnell]

Market solutions? Is that not what's got us into this mess?

What's the incentive for house-builders to build hundreds of thousands of houses that are needed? It would drive prices down as the come onto the market making them less profit.

I don't think the "market" is in the business of solving issues based on need. Merely on what makes money.

Access to shelter shouldn't be left to markets. It's too important. And is clearly failing currently.