Toto deVeer
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Posts posted by Toto deVeer
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At last, a sane response.
The question posed by the OP was 'What's driving the rise in house prices?' and I pointed out, quite reasonably, that the rise in house prices was driven by people who still regard property as a better investment than, say, leaving their cash in the bank.
I didn't say they were right to think this. But, you'd think I'd sworn in church the way some people on here responded.
I also pointed out that if enough people think buying property at current prices makes sense - they are happy with the yields etc. and hopeful of capital growth - then, as long as they have the money to keep buying, nothing will change - no crash.
I think we ought to be accepting that the market can, apparently, shrug off relatively low transaction volumes and a lack of easy finance.
So, there you have it. My answer to 'what's driving the rise in house prices?' What's yours?
What's really holding up prices is the shell game of extend and pretend, where banks, throughout the world, have moved their poorly performing property portfolios off balance. For example the suspension of 'Mark to Market' rules.
There is a reason for mark to market though. Eventually this hits cash flow.
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I think more of us feel this way than perhaps many would like to admit. You can't go on for years like this without having doubts - it would be unnatural.
I have no doubt that they are going to keep IRs low for years and all savers will see their savings destroyed.
The only alternatives are getting into very risky shares, very risky gold and, well, property. At the end of the day you have a house over your head no matter what happens in the wider economy and so it obvious that more and more people will pile into property.
I see no sign of people bailing out of property en masse because of a fear of a crash. It is still like the Blair boom years where I live - small shops have gone bust and no one is taking their shops over... but the mass of public sector workers seemingly have no idea of anything bad on the horizon at all.
You must understand that the entire investment paradigm has changed in the last 18 months. We are in another Brave New World.
Assets cannot be considered to give returns these days, and that looks likely to remain for some time. Real interest rates are negative.
What you have to think about is relative value. For example, if you were holding dollars or gold then property prices in the UK would be down around 40% (or much more in certain cases).
Now consider that the balance sheets of the entire banking system are built upon housing. TPTB will have no choice, in this case, but to preserve house prices until the banks can be recapitalized in some other way. This will slow the decline of house prices.
The way this will be attempted is to push house price depreciation out of the UK. This means a devaluation of Sterling, if they can get away with it. Hence the need to preserve your investments in non-Sterling form, if you wish to invest in housing.
Once this is accomplished, then they will attempt to appreciate Sterling again, because the banks are holding substantial assets in other currencies, like the Dollar.
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OK, I've slept on this and am trying to get my head around the issues.
Here's another question....
What about the larger farmer, who has, say 1000 acres of wheat....
Doesn't this place him at risk under a land tax; could he not lose his farm, and all the efficiency of production that it entails?
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except these pension funds can't all hold gold without fear of default - there isn't enough.
and even if they could, that simply creates - deflation.
Look at what happened after the American Civil war; gold cornered, price shot up, then collapsed, then the long depression, one of the longest deflationary periods in history...
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OPALS?
If you really want to ride the rocket try Rhodium...
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How do you pass on the tax on an empty property to the tenant?
Incentivise enough people to bring empty homes into use - either sell or let them - and the supply/demand balance shifts significantly. A land value tax is just such an incentive.
Don't get me wrong, I think that there is far too much concentration of property ownership in the UK, I just am not convinced that taxation is the answer to the problem...
[Edit: And don't ask me what I think the answer is, because I just don't know. And I agree, that if properties were sitting empty, they would have to be put to use, under a land tax arrangement.]
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Anyone here follow Charles Nenner? He's expecting gold to be OK to the end of May or so, and then to drop to as low as $700 by November-ish, then climb to over $2000 in the following years.
The only way that could happen, in my opinion, is another ca. 10/2008 liquidity crisis. Maybe this is what Soros is anticipating.
I'll be watching...
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You don't know this even if you were a landlord there
Theory says a portion of a typical property tax can be passed on.
In the US, the mortgage is paid to the bank on a monthly basis. The mortgage payment includes interest, principal, insurance and property tax. This tax is collected by the bank, and paid by the bank to the city.
A landlord will typically look to generate a rental income in excess of monthly outgoing, unless the landlord's income tax liability is such that the net (after tax) result is positive, even though the net monthly income is negative. However, this is seldom done because interest tax relief was largely phased out in the 1980's.
It would be only in the rarest of instances that landlords would operate a model based upon negative cash flow being offset by capital gains. This is just too risky a proposition in the US (whereas this is common in the UK).
In a market as tight as the UK, the imposition of a property tax, or land tax, would almost certainly be, either in part or in whole, be passed on to the tenant. Rents would increase across the board, because the council tax would be eliminated, and replaced by a property tax that would ultimately be passed on to the tenant as part of the rental payment.
[Edit: That is why, whether tax is levied directly on the occupant, or is levied on the landlord, the tenant will end up paying it anyway. Probably the best way to deal with this problem, that is redistribution of property ownership in the UK, is to levy high CGT on second properties.]
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I do not think that property taxes are passed on to tenants in the US.
I think that they have contributed significantly towards the drop in house prices to zero in places like Michigan and Ohio.
It is easy to imagine how a death spiral in prices occurs when fixed costs are associated with the ownership of an asset which is also plummeting in value.
If we were to ever expand our council tax bands here to reflect true prices rather than capping them out at a trivial level relative to current market prices, we might see the tax impact of ownership influencing prices here too.
I have been a tenant and a landlord there.
In boom times taxes are passed on. In bust times chances are the property will sit empty. Nobody will occupy it, and it will revert to the bank, until a buyer can be found. That's the property market in the US for you. But the imposition of a property tax really has no effect upon the distribution or ownership of properties; the strength of the local economy and the availability of credit are the determinants.
Right now, property taxes in many areas are a greater cost than financing cost. That is why people are reluctant to buy a property over there, they simply cannot afford the property tax, no matter what the value of the property is. That is also why, the number of homes containing multiple generations in the US is at a 50 year high.
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I hate to pre-empt somebody's argument but are you suggesting the landlord wil simply add the tax to the rental price, thius passing the cost to the tenant?
The quick answer is he can't, because for various economic reasons the existence of the tax acts to lower the market price of land.
Thx. No argument, just discussion.
But this has not been the case in the USA. Property tax is definitely passed on to the tenant.
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No, the tax does not fall on use or occupation, only ownership. In effect you are taxing somebody for holding the special option to exclude someone else from land.
But hang on, if I do not own the land, I will pay the landlord to occupy that land, no? And that price is going to include the tax the owner pays, plus some rental value. No?
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I'm pointing out that your objections to land taxation are not actually objections to land taxation; they are objections to land ownership or exclusive possesion of land. With that missunderstanding squared away, we can compare having taxed exclusive possesion with having untaxed exclusive possesion.
Not at all - the owners now have to compete somewhat to keep possesion, the 'serfs' pay no tax on their wages but recieve government services and the price of real estate is low.
Quite a dramatic improvement.
I just don't get it.
By introducing a land tax, you are taxing someone for their existence, for life, are you not? As we all must have somewhere to live.
Whereas, a person who could buy land, without tax, would not have this burden. Am I correct?
[Edit: I'm playing devil's advocate here. You see, in the USA, property is taxed, as opposed to the council tax in the UK. Yet the income disparity is worse in America than in the UK, so is it really the solution, as proposed at the Renegade Economist website]
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Let me turn this around - if this owner inists a tenant pay him rent to use 'his' land or else he will confiscate that peace and dignity, is that fair?
So you are equating the two situations; on birth, we are forever beholden to a landlord, either in the form of a private citizen or to the state, the two are as one...and the newborn is a serf in either case....is that what you are advocating?
This seems to me to be stacked very much in favour of the rich, provided that they have serfs enough to produce income from their land to pay the state...
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Most inherited wealth in this land is nothing to do with meritocracy or a measure of a person's virtuous industriousness, it's mostly due to the fact some Lord was fortunate enough to enclose a load of common land a couple of hundred years ago then beat the peasants into submission. Have you ever done an honest day's work or put the toothpaste on your own toothbrush? If yes then you have won a moral victory over Prince Charles.
I can boil my own eggs too...another victory over Charlie..
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I love the way people think future taxes of children not yet old enough to vote, should be used to keep house prices too high
the mind boggles
Indeed it does. I despair when I see primary school children happily at play; they have no idea what is in store for them...
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How are this person's problems a specific feature of land taxation? I would say their problems are actually a specific feature of land ownership.
Not sure what you maen here
Well lets say that I am not an ambitious person, I want to keep to myself , work when I need to and pay my own way, and buy a small plot of land. When I retire, I decide that I need very little money, and wish to just live off my little plot of land, in peace.
Now with a land tax, if I could not pay, the state would confiscate my land, and take away that peace, dignity and security. Is that fair?
Do we have an inalienable right to life, liberty and the pursuit of happiness?
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So the person leaving the inheritance has a greater incentive to make money (presumably because they like the idea of working for their offspring more than working for themselves).
But what about the offspring who inherits? Surely they are brought up in the belief that they will not have to do anything other than safeguard the inheritance?
And what about the effect of this on society as a whole? People then get used to the idea that Mr/Ms inheritor has wealth that is unobtainable by working - surely the incentive for them to work hard disappears?
I say inheritance tax should be 100%
Well people like Warren Buffet and Bill Gates would largely agree with you, but I suspect they will have given their money away to charitable foundations before death. So they are a little bit jaundiced in their position.
I understand your arguments, they are quite valid and logical. It is really a balance between the good of all versus individual rights, really. Maybe the best result is somewhere in the middle.
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Nowadays Council Tax, in cr@p cheap properties (like this flat I rent)) is actually around 1% of this property market value. But for better properties it gets proportionally cheaper, and then there is a ceiling.
I've got very mixed feelings about this proposed land tax, like that promoted at the Renegade Economist web site. My concern is about the fairness of it, especially for the poor and the elderly.
My view is that people should largely be left alone by the state. I don't see how the state interfering with land rent would square with that principle.
However, I can see the merits in it, from a social equality perspective.
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Sorry, but meritocracy is one of the strongest ethical principles.
Besides, the successful investor benefits the whole society. I don't see any logical reason to stop this investor from keep working, investing. Remember that his income will still be taxed, and his estate will be taxed when he dies.
Regarding inheritance, paraphrasing you, why a heir should be allowed to inherit more than, say, 10 million pounds?
Sorry, I don't follow you. I'm against income tax. I don't see how my suggested taxation system interferes with meritocracy. It rewards the efforts of labour and physical world wealth, not speculative wealth, or the gain of wealth for wealth's sake.
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You only pay if you OWN the land. It's not a usage charge.
But all people have to live somewhere, and where do you live if own no land and have no money?
Or if you own land and have no money?
Would someone, who owns a small plot, and grows their own food, be cast adrift by the state, to starve?
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Did he inherited it, or made his own fortune?
If he inherited it, then f"ck him, take it all away. (OK, allow his parents to leave him some money, if they want to, but that is all. And tax it, of course.)
But if he is a "self made man", earned it, invested it (obviously well), and grew it, then the reason is: He is a brilliant allocator of resources, and should be allowed to keep doing it, as this benefits us all.
( Remember that the weakest point of Karl Marx theory of exploitation is that not all work adds value. Stupid work, or in the wrong direction, adds less value, and sometimes can even destroy value. Hence, people who can direct work (or investment) in wise directions are very worthy indeed for society in general. )
Then, when he dies, take it all away, and ideally invest in education - including Grammar schools, for bright poor kids.
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Well, I don't agree with this. In my view, as long as someone has not exceeded the wealth limit, they should be allowed to inherit, without taxation. After all, we do not wish to destroy the motivation for work, and some people work hard in this life so that future generations may benefit. That is their motive and it should be respected, in my view.
I'm not a supporter of inheritance tax, when a max limit tax is placed on individual wealth. As I indicated, tax revenue should only be derived from CG, tariffs and total wealth. Otherwise, the state should just butt out.
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One time HPC site doomster poster advising folk to get into hard assetts ( shiny yellow ones )
Oh, thanks. Looks like it was good advice, in hindsight.
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So you do advocate robbing the rich guy blind before kicking him out of the bar? Make your mind up
No this is the way I see it. The currency of a country should belong to the people, no single person, nor the state.
The person who has gained wealth, has done so within the regulatory structure and market framework of that country.
When any individual accumulates sufficient wealth above a certain threshold, as $1 billion, then any excess is simply returned to the treasury, and either recycled, or destroyed.
I don't call that robbing someone, I call it socially and politically responsible. And he's still the richest guy in the room.
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I think we are mixing 2 different issues here (though they overlap, of course).
I agree that land tax is a very good way to rationalise land use. I am in favour of it.
Inheritance Tax (IT?) deals with different problems: inequality and inefficiency. If you manage to implement that tax well (difficult though), you would reduce the accumulative distortion that capitalism generates. And if you have a reasonable tax revenue from Inheritance Tax you can tax less productive work.
What happens if one cannot pay the land tax, do we just put them adrift at sea?
Soros Unloads Substantial Gold Holdings
in House prices and the economy
Posted
Feteke claims that what is there, and at the Fed in New York (US holdngs), is 22 carat, and cannot be used for settlement of contracts. This is because gold coin confiscated in 1933 was standard 22 carat, and in their haste to put it in bar form, was not properly refined.