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Everything posted by arrgee1991

  1. Did I write that? I wrote "Stamp Duty causes HPI" I did not write "Stamp Duty is the sole cause of HPI" I explained exactly why as it constrains supply. Remove it, increase supply and prices will fall.
  2. I agree, buying is throwing money away these days. Average cost of moving in London is over £20K and most of that is stamp duty/ea fees). http://metro.co.uk/2014/04/21/average-cost-of-moving-house-in-london-is-now-20825-4701153/
  3. Agreed. Main reason for selling these days is death. Divorce used to account for a lot of sales, but nowadays the house is let rather than sold.
  4. Stamp duty causes HPI. Remove stamp duty, increase supply and prices fall. They are connected.
  5. Stamp duty has increased HMRC revenues, but halved the volumes of transactions. And if you think HPI is high, look at the revenue raised by stamp duty. Almost five times what it was at the end of the last century. It is a nasty vindictive stealth tax which effectively has people paying more tax in one house purchase than they would in a year's employment. It inhibits mobility and causes scarcity. Most people just add it to the mortgage, so the effect is over the period of ownership. http://www.hmrc.gov.uk/statistics/stamp-duty/stamp-tax-sep13.pdf UK £millions 1992-93 280 1993-94 465 1994-95 520 1995-96 465 1996-97 675 1997-98 830 1998-99 1,065 1999-00 1,825 2000-01 2,145 2001-02 2,690 2002-03 3,525 2003-04 3,710 2004-05 4,620 2005-06 4,585 2006-07 6,375 2007-08 6,680 2008-09 2,950 2009-10 3,290 2010-11 4,040 2011-12 4,220 2012-13 4,905
  6. Agreed. Less transactions causes scarcity and inflates prices.
  7. Stamp duty is a factor in the problem. In 2001, a property costing £240K incurred duty of £2,400 (1%), now the same property is worth £600K and incurs duty of £24,000 (4%). So a second time buyer looking at increasing the value of their house, maybe by about £100k, pays around ten times as much duty these days. So they tend to stay put. Remove duty, increase supply and prices will fall as the market will function properly rather than be driven by scarcity.
  8. Stamp duty is a barrier to mobility and restricts supply. To upgrade from a £450K home to a £550K home, costs an additional £22K in duty, so for an increase in property value of £100K, the effective rate is 22%. Little wonder people choose to extend/improve their own homes. On a longish chain, the government makes a pile charging 1-7% on each purchase. I think that duty should only be charged on the difference between a sale price and a purchase price if at all.
  9. I mostly agree with this. Stamp duty should be reformed. As much as I'd like the main property to be exempt, it should be no more than 1% up to £1 million and then just 2% on the portion from £1m-£2m, 3% on £2m-£3m and so on. I wouldn't legislate as banks should assess each purchaser on their own merits. A couple who both have jobs with good prospects and little chance of redundancy in the near future are less of a risk than someone who is self employed who has happened to have had a good year or two to raise the 10%. The banks should assume the risks and not look for a government bail out. Also not sure how legislation could force council house sales proceeds to be used to build more stock, though I agree with the principle. The danger with this approach is councils paying too much for scarce land (especially in central London) to comply. If I was chancellor, I would implement policies to encourage the increase of housing stock. There should be incentives from central government for local authorities and private developers to build on brownfield land and compulsory purchase of unused land for development. I would also the remove tax allowable expense of interest on a mortgage on BTL properties. This is a distortion that puts normal buyers at a massive disadvantage.
  10. There was far more supply in 2007. Volumes these days are far lower. The thing that will cause prices to flatten (and fall) in increased supply. There are two ways of achieving that. Either kick people out for not paying mortgage or build more homes. 2007 was a small blip and house prices recovered thanks to low interest rates which meant those who felt secure in their employment (or have cash in the case of foreign buyers/BTL) have been buying ever since. I believe that when the market falls it will more like 1991-1998 when repossessions flooded the market and sellers had to reduce prices to compete. For that to happen it will mean job losses or a significant rise in interest rates. I'm not even sure if job losses will have the impact experienced back then due to BTL. All I am writing is that this market hasn't topped out yet.
  11. Prices will continue to rise in London for some time yet simply due to lack of supply. First house in ages in our area has gone up for sale, and I suspect will be under offer on Tuesday after the open day this weekend. Market sentiment, although irrational, is such that the buyers that are there are stretching themselves as they cannot afford to hold off on their purchase. It is also catchment area season where many parents realise that they have to move to get into a school. Until people get kicked out of their homes, prices won't fall. I can't even see stability in the next six months.
  12. Or if the costs associated with buying/selling are reduced. If Stamp Duty had kept in line with house prices since 2000, then people would be more likely to sell and buy. There is more housing stock now than in 2007, yet volumes are significantly lower. Most buyers these days are buying from developers as BTL or first time, because there is no upward chain. Hard to justify buying a property for £100K more (£450K to £550K) when you are hit a tax bill of over £20K. Also if the cliff edge effect of stamp duty was removed, it is more likely that purchases at just over £250K would occur.
  13. The £2 billion cost is if just 100,000 take advantage. I expect it will be far more. The UK government estimated they would save around £1billion/annum from the progressive withdrawal of Child Benefit, yet the reality is the savings have been nowhere near as much for a variety of reasons. The predominant one is increased contributions to pensions via salary sacrifice. The OBR have admitted as much citing behavioral changes. In fact, it is a double whammy for the HMRC. People pay less tax and still get the benefit. Also by bringing more people (about 500,000) into the 40% tax band (49% actual), there are many who will contribute to their pensions given the tax advantages over a small increase in net income.
  14. Yes. Pretty much any private employer providing a money purchase scheme will offer salary sacrifice. If your employer doesn't offer salary sacrifice, they can be asked to. Employers can even pay the employers NI into a SIPP. No employer has to do it, but the only difference is they pay the 13.8% into your pension rather than the taxman. It doesn't cost them anything bar some admin on the payroll.
  15. Who grosses up the spouse's pension? The main reason I see the proposal being reversed is the massive drop in tax revenues from those in their late 40s/early 50s. Putting in up to £40K/annum (which is effectively only £20K or less net), and seeing it all back more or less tax free in a few years. If only a hundred thousand people do it, it would cost around £2 billion/annum in lost taxes.
  16. Maybe, but the effective rate of higher rate tax when you factor in NI (employers and employees) is over 49% anyway. So called basic rate tax is in reality over 40%. The tax system is complex so it catches many unawares. The child benefit cut is a case in point. Some may not yet notice that they are paying the taxman the £1,000 or more back as the stealthy amendment to their tax code is already in place. Maybe they will when they get this month's payslip.
  17. Yes. The UK educates its young to work abroad. Those who are educated elsewhere come to the UK to work. Add the student debt to the national debt. And print more money.
  18. I read the other day that the majority of the UK population is now over forty, so in about twenty five years time it is likely more people will be of state pension age than of working age. So the current generation of graduates will not only be paying back their loans but facing increased taxation to pay their parent's and grandparent's pensions. Even if nothing changes with regards to taxation (highly unlikely) when students start to pay higher rate tax , they will effectively be paying a 57% tax. If they happen to have a couple of kids they face a effective marginal rate of just over 72%. And they will have to wait longer to retire, as the state pension age will continue to be raised. Under these circumstances, I expect a lot of graduates will look to move elsewhere.
  19. I suspect many are. And it's not just the headline charges, there are other more opaque charges you may not be aware of.
  20. I have sympathy for those who have no interest on their savings and little for those with large debts. Had interest rates not dropped in 2008, I believe house prices would be at more sensible levels as this action prevented a lot of reposssesions. I bought back in 1992 in the midst of a glut of repossessions, and took advantage of lower prices thanks to others misfortune. There is no gaping whole (sic) in my argument. It is an opinion. Like that of the original article.
  21. Not at all, but my intent was to question the many assumptions in this article. The idea that people will withdraw their entire pension pot, possibly at higher rates of taxation than they paid going in just to get a 4% yield is the first flaw of many in the article. At best, they may use the tax free sum for btl, but beyond that it is likely most will drawdown paying basic rate tax until death, or when the fund is exhausted.
  22. Near impossible to justify any pension contribution at basic rate tax. The only gain is the national insurance. With salary sacrifice, the gain is only around 20%. Compelling people to have pensions who are only paying basic rate tax may be good for the government, but it produces very little benefit for the worker.
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