Friday, Jul 09, 2010
Did anybody else watch this yesterday?
ITV: Homes From Hell
A classic of the genre. The first couple admitted they could have made more money from just selling on the land with planning, rather than building houses (rather badly). The second couple bought a new house on what turned into a ghost estate, one of 621 in Ireland, allegedly. They made themselves bankrupt because the house was worthless. LVT would have helped them, because once it became a ghost estate, their LVT bil would have fallen to nil so their debts would only have been half as big. And so on.
Posted by mark wadsworth @ 12:12 PM (1511 views) Add Comment
10 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Giordano Bruno said...
Thanks for the link, as I don't watch much box. The previous week also looks good 'Dubai Dreams' which I am about to read.
2. easybetman said...
Hi MarkW,
Can you please illustrate in numbers how does a £170k debt becomes half (£85k) when LVT falls.... and of course LVT does not
go to zero because the land value isn't zero ! (otherwise I will ring up the bank/developer and offer to buy any undeveloped
part of the estate for £1 and I am sure they will say no).
3. mark wadsworth said...
The house costs (say) £85k to build, so obviously you'd have to pay £85k for it or take out a mortgage.
If we had LVT, then instead of this couple paying another £85k for the land, they'd pay nothing up front, but would have to pay the LVT every year or every month instead. If the estate becomes popular and is full of happy young families, that might be £5,000 or £10,000 a year, but if it is abandoned half finished and only one house is sold, clearly the LVT falls to a few hundred quid or even £nil.
Let's assume the council had agreed with the developer that he has to pay £5,000 on each house until they are sold, he would be mad keen to sell them or rent them out in order to minimise his costs.
So it is a) more likely that the estate will be finished ASAP and all the houses occupied and b) Nobody gets landed with a bigger mortgage than he has to and c) there'd be no pressure on young families to buy (because no house price ladder to jump on) and there'd be a lot of pressure on developer to only build what he can rent out or sell and d) there'd be fewer or no unoccupied or half-finished houses and so on and so forth.
4. easybetman said...
Hi MarkW,
OK - looks like this is another 'version' of the LVT where basically everyone rents their land from the state and the capita valuel of land is zero.
(that is why they only pay £85k for the building) Is this correct? This is quite nice actually...
However - how do you determine your land value in this case? The last time you are talking about land value is derived from the average of all *land sales* (including land prices derived from property sales - build cost) in an area.
In this version, nobody pays (pays upfront or later sounds the same to me here) for land but just rent it via LVT. So, if there is no 'land' sales,. how do you determine your LVT? Pehaps householder who buys house will put in a bid to say how much LVT they will pay? And so if my next door neighbour comes around and bid £1k more for the LVT, how does that affect my house's LVT ?
So, which version of LVT you are proposing? Or any version of LVT will do ?
5. peter said...
And if they had got cancer or a meteorite had hit them, I suppose LVT would have cured that as well...
Why do people keep on banging this LVT drum?
6. markj69 str05 said...
' how do you determine your land value in this case?'... And more to the point, how do you determine the material property value? Identical properties in 2 different locations will still command a different price. LVT will not work. We'll end up with land tax, and ever increasing property prices.
7. mark wadsworth said...
EBM, Markj69
Working out LVT is dead easy. Rebuild costs of physical housing is a known figure (see Association of British Insurers). So the LVT gets adjusted up or down so that all buildings sell for their rebuild costs. i.e. if you buy a semi in a run down estate up north, it costs you £80,000 and the LVT is a few hundred quid a year; if you buy an indentical semi in the stockbroker belt, it costs you £80,000 and the LVT is £10,000 or £20,000 a year.
Apart from that, any version of LVT will do me just fine. If nothing else, we could have Council Tax bands from A to Z, with houses in Band A paying £100 a year and houses in Band Z paying £10,000 a year.
Peter, LVT won't prevent meteor strikes or cancer, but at least if your house gets wiped out by a meteorite, at least (in this example), the loss is only £85,000. I'd be interested to hear how bank bailouts, high house prices and income tax help cure cancer or meteor strikes...
8. markj69 str05 said...
@MW..7... I can't imagine why you state 'up north' for the urn down estate!?! However, The who's going to police/regulate the selling price to ensure it does not inflate above the material costs?
9. markj69 str05 said...
loose the 'The' before who.
10. mark wadsworth said...
Who's going to police it?
Millions of people with an interest in property prices, that's who. Quite what the rebuild value of a particular house is is open to debate (depreciated original cost? brand new rebuild cost? whatever the ABI says?) but as long as rebuild values are calculated consistently across the country (erring on the high side if necessary) and physically similar houses sell for similar prices wherever they are situated, we'll know that the tax is "about right".
There is no need to be too scientific about it - of course the tax will be a little bit "too high" on some houses and "too low" on others, but whoever is the next person to buy it will pay slightly less or slightly more than rebuild cost (so ends up no better or worse off than if the tax had been "just right"). In any event, it would be a damn sight more scientific than Council Tax or SDLT.
Don't forget that a sizeable chunk of UK housing is either 3-bed semi detached built between 1920 and 1960; or 3 bed Victorian terrace, which are pretty much identical up and down the country, so there are plenty of bellwether houses.