Sunday, Jun 17, 2007
UK should take a look at it to curb the out of control specs
Stuff.co.nz: Reserve Bank suggests house-sales tax
The Reserve Bank has again floated the notion of a capital gains tax on rental investment property once it is sold, but at half the normal tax rate.A capital gains tax has been repeatedly proposed as a means to dent the demand for property, one of the factors that has fuelled rising property prices.
Posted by out of control speculators @ 11:39 PM (126 views) Add Comment
7 Comments
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1. cyril said...
I thought people already had to pay Capital Gains Tax on the profits from sale of investment (or rental) properties?
(Obviously few people actually pay CGT because it's allways offset against something else but in theory they are liable aren't they?).
2. Mark Wadsworth said...
Nonsense, I can see the moral case for CGT, but remember it does not reduce DEMAND, it restricts SUPPLY - somebody whose investment properties have soared in value is giving away a significant fraction thereof in tax if he sells (avoision and planning notwithstanding). Also CGT raises less than half a percent of all government revenues.
For better to scrap CGT and SDLT (which also impedes free markets and is totally unfair) and roll these into site-value rating for ALL properties (along with council tax and inheritance tax and the TV licence fee).
3. confused76 said...
I am with MW, trade constraints would not help market liquidity and lower the supply
But there would be other regulations that would help controlling house prices in a matter of seconds:
- introduce some sort of tenant protection
- make btl mortgage not a tax deductable expense (like for owner occupiers)
- tax rental income for all non tax domiciled
- enforce stricter credit ratings and property valuations
- ban the use of cheap introductory mortgage rates
4. Mark Wadsworth said...
"But there would be other regulations that would help controlling house prices in a matter of seconds":
- introduce some sort of tenant protection
>> We have that, in any event, rents have only increased in line with wages, it is now in many places considerably cheaper than buying - these loony BTL-ers are actually subsidising tenants
- make btl mortgage not a tax deductable expense (like for owner occupiers)
>> Unfair - the rental income is taxable, why should mortgage not be allowable?
- tax rental income for all non tax domiciled
>> In theory we already have that!
- enforce stricter credit ratings and property valuations
>> Agreed - but the banks (who should care about credit ratings etc) apparently don't care any more, as they securitise their loans and flog them on to rich, stupid people. I was mulling over a cunning plan, whereby the risk of negative equity is passed on entirely to the lender, i.e. if you have negative equity, you just hand the keys back and start with a clean slate somewhere else, that might sharpen bank's focus a bit, I just don't know how you'd enforce it (probably impossible, too many loopholes)
- ban the use of cheap introductory mortgage rates
>> Fair point, but if you want to encourage a free market, it is better to educate people about financial risks of rate increases. If you banned them, then banks would think up something else, like 6 month initial payment holidays, 110% mortgages (you can pay off the first year's repayments with the extra 10% that you don't need to spend on the property) and you cannot possibly think up legislation that will catch all this stuff.
5. wage slave said...
Why should all households pay for a TV licence ? Surely you should only pay if you have a TV.
6. wage slave said...
I agree with you confused76, I would like to see BTL tenants given security of tenure like council tenants.
I wonder how many BTL landlords would be 'in it for the long term' then ?
7. Mark Wadsworth said...
My reply to C76 doesn't show up yet!
Is it not the case that council tenants have too much security of tenure? There are plenty of better off poor in social sector paying below market rents, and a similar number of really destitute living in DSS landlord properties, which costs the State an absolute fortune.
BTL tenants should make hay while the sun shines, the BTL-er is footing the difference between the market rent and the interest payments, that in most cases are higher than the rent