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Posts posted by vzzzbx

  1. I would say the odds of Lloyds bank being allowed to go bust are as near zero as you can get. They're one of those "too big to fail" banks. All losses protected by the taxpayer and all profits trousered by the bankers. Hence why I own Lloyds shares. When it's impossible to fail, the worst that can happen is you either do nothing or succeed.

    That's not to say I've bet my shirt on it, though.

  2. Actually I'm not so sure about manufacturing being doomed in the UK. Certain types of manufacturing will have to remain here, even if only for national security grounds. Sensitive military construction such as submarines is likely to be highly politically motivated to stay within the UK.

    The other thing to consider is that Chinese workers are demanding (and getting) higher and higher wages. Sooner or later it's going to be cheaper to just make it in the UK because it costs to ship stuff from China and you've got exchange rate issues to deal with.

    The end game however is automation. When you can make an almost completely automated factory it's likely to be cheaper to have it closer to where your market is because wage costs largely disappear and your main issue becomes materials and shipping costs. Automated factories require a good energy infrastructure and the local know-how to keep the machines running and easily replaceable. That's likely to be close to where those high-tech machines are made. China's quite good at low-paid factory grunt work, but not so good with the high tech innovation side.

  3. Why can't they just turn it into an estate of nice, decent-sized houses with a relatively low density? It's all very well complaining about NIMBYism, but perhaps the objections aren't so much about a new housing estate on their doorsteps but about the type of housing estate it will be.

    I'm pretty much sure anyone would object to having a high-density sink estate built right next to them. Converseley, if the Queen decides to build Buckingham Palace 2.0 right next door, you're probably not going to get too many complaints. (Cha-ching! The Queen lives next door! my_house_price=my_house_price + lots).

  4. That's how I see it, but with a higher total take.

    It won't replace income tax, but might (under normal circumstances) allow income tax to drop a bit.

    Far too much tax on labour IT, NI & ENI.

    Increasing tax on non productive land would make sense to me.

    This bit I can agree with. It does seem silly that council tax bands don't seem evenly distributed. That is, if the house is valued at twice the price of another house then its council tax should be twice as high. This doesn't really seem to be the case at the moment.

    But other issues remain regarding the land's value. Sometimes it creates perverse incentives against development. A new road or train line near a town theoretically adds value to the land which is usually a good thing, but with a land value tax it also increases the tax bill for all the residents in that town. The result? Super-Nimbyism.

    Land tax also seems to assume that your income is dependent upon the size and/or value of the land you occupy. I'm not so sure that's true for businesses. Compare Google's revenues to Tesco's. Google has a few (relatively) small server rooms and rakes in lots of cash. Tesco also rakes in lots of cash, but all its superstores take up a lot more land.

    Plus as others have said, how do you define the value of land in an objective way? Really its value is only what someone's willing to pay for it and that's hard to know unless you actually sell it. Income tax might have its flaws but it does have the benefit that it's much easier to measure how much cash someone's earning than the value of the land they occupy.

    I'm not saying I'm against some form of land tax, but I'm trying to understand how it would work in practice and how it would be different to the current system of council tax and business rates?

  5. What would be rather illuminating would be if we could get some figures on the use of the EU rights to work anywhere in Europe regarding the numbers entering or leaving each country in the EU. I have a hunch that certain countries get a lot more immigrants than others, especially since certain languages tend to be more popular than others.

    Somehow I get a feeling that countries with minority languages get less immigrants than those with the more popular ones. Depending upon the disparity in numbers, I'm wondering why that's a good deal for the popular destination countries.

    On the other hand, I recently worked in the Netherlands for a year and the fact that only a tiny number of people speak Dutch didn't seem to matter since the company's meetings were all in English. It's rather surprising to see that it's a language spoken between non-native English speakers as their only language in common.

    The whole idea of free movement of labour inside the EU was predicated on the idea that each country in the EU was roughly as rich as each other and so the net effect of immigration/emigration would balance out (e.g. 100 immigrants balanced out by 100 people leaving).

  6. Having read this forum for a few months now I keep seeing people proposing a land value tax as a replacement for income tax with the goal that this will somehow sort out the problems with the housing market. I'm not sure if it's just my perception or whether it's really happening, but it seems that this never really gets challenged - presumably because most readers of this forum seem to agree it's a good idea.

    I must be a bit slow or am missing or misinterpreting something, but I don't see why it's such a good thing or how it will help. Please bear with me if I've got this hopelessly wrong but I freely admit I'm a bit ignorant as to the whole reasoning behind this and I hope I'm not the only one. Fortunately ignorance is easily cured.

    From what I gather, the proposal is to ditch income-based taxes and replace them with taxes based on the value of the land you own. So a 100m2 plot in the north of Scotland would be taxed less than the same sized piece of land in the middle of London. From what I gather, this would discourage empty houses and house developers hoarding all the land with planning permission. In that sense, I can see it's a good idea.

    The bit where I stumble though is why we should drop income taxes and go to a wholly land tax-based system. The issue I have with this is that if I make twice the amount of cash from my land as my neighbour with an identical plot, we're both taxed the same. That's great news for me but not so good for the country, which really should benefit in some way from my increased profitability. The theory being that increased tax revenue allows countries to upgrade the infrastructure, fund blue-sky research and provide better essential services such as healthcare, schools and the like.

    I also don't see how it affects buy-to-let. Surely any tax you apply to landlords will simply be passed on to the tenants in the form of increased rents...

    Clearly I'm missing something here. Anyone care to enlighten me?

  7. To be fair to normal people, I don't think they're quite as stupid as some on here give them credit for. I would assume that at least a good percentage of the folks buying what's going to be the biggest purchase of their lives must have felt in their gut that something was wrong. But on an individual level what could they do about it? If you wanted to have the security of owning your own house during the bubble years you simply had to pay the going price or go without.

    I heard it from a number of other people with phrases back as early as 2004 such as "before the house prices went silly..." and "borrowing daft amounts".

    So you can say people who bought houses during the bubble were stupid, but I contend that they simply decided they wanted to own a house and bought one at the going rate. What was the alternative? Rent until after it all goes wrong and the prices drop back to sane levels? That's a long time to wait while living under the sword of Damocles that is renting.

    I think my basic point is that the financial side of a home purchase is only one part of the decision process. Other things also factor into the decision such as the feeling that the place you live in is yours to enjoy without the risk of being kicked out on a landlord's whim or having to put up with letting agents reminding you every few months that they will let themselves into your house to look around unless you contact them in the next X days. Sometimes the emotional side becomes more important than the financial side. If it didn't, nobody would have children.

  8. Like so many others, I have a deposit and am willing to buy, but am unwilling to pay the stupid asking prices being bandied around at the moment. Especially for houses that are seriously flawed (e.g. anything new build or right on top of a train line or smack next to the local chav school or on a really noisy main road).

    I did put in an offer on a place a few months back. Advertised at £240k, but worth nowhere near that much. A nearly identical house on the same road had a double garage (compared to this place's single), a bigger garden and was in better decorative order sold for £197k in June 2011. I was still a bit green at the time so put in an initial offer for £210k, which was immediately rejected and I then upped it to £215k which they took the weekend to think about before rejecting saying they wanted £230k. It's still on rightmove, but the asking price has been reduced to £229k and it's going nowhere anywhere fast.

    Actually I'm rather glad I didn't get it on reflection because thinking about it now the rooms were all quite small and it did need quite a bit of building work doing to get it up to scratch. Not your usual wallpaper change/painting - real building work like the drive needed resurfacing and a dodgy extension really needed rebuilding, plus some new windows needed putting in as well as a new bathroom.

    Naturally the vendor didn't want to "give it away" and had fixated on the estate agent's inflated valuation as the "real" value of the house. She wasn't even buying anywhere after moving out - she'd been given a huge barn and some farm land and was going to do a bit of conversion on it to live there. Plus she'd lived in the current house for at least 15 years so it probably cost her about £60k to buy and she'd probably paid off about £30k of the mortgage, so could easily afford to price it sensibly and still walk away with a huge pile of unearned cash in her pocket.

  9. A pity you can't buy a couple of dozen lorryloads of petrol and seal it up in a giant storage bunker for a couple of years. I bet you'd get more than 3% per year improvement on the price when you come to sell it.

    Then again some eminently sensible people would probably make the frustratingly logical and valid point that it's probably not a good idea to have loads of people buying up all the petrol and storing it in leaky jerry cans in their back garden.

  10. I am not going to look for evidence to back this up (I wouldn't know where to start), but there is a huge difference between the ratio of house/plot between Japan and the UK. I would guess from experience that in Japan 70-80% of the plot footprint is used for the house. House width drives at the front, and big gardens at the back, just don't seem to occur in Japan. I think it makes a big difference to the figures. Most Brits would look at a suburban Japanese house and think "no-way".

    A valid point. You don't tend to see many gardens in Japanese houses. I noticed the last time I was there that everything seemed a lot greyer than in the UK. Big gardens are something they don't have space for, which is hardly surprising given the above land and population statistics. A simple way to confirm this is just by doing a quick flyover of Japan with Google Earth and looking at some typical Japanese houses. You see an awful lot of grey scenery with very few open green fields like in the UK.

    Maybe new build British houses have bigger gardens than Japanese ones, but anyone who has ever been to a new build estate can tell you that those gardens aren't really any kind of decent size. Just considering the disparity in suitable land you'd expect the UK to have around 3-4 times the land area available for an individual house than Japan has.

  11. That's a really damning statistic regarding house size compared to Japan. According to:

    this article

    The population density of the UK in people / km2 is 255, whereas in Japan it's 337.

    And even more astonishing when you consider that

    This site


    Japan is an island nation, with a population of about 127,350,000 with an area of only 145,925 sq mi, giving a population density of 873.1/sq mi, making Japan the 36th most densely populated country on the planet. Of the total 145,925 sq mi of Japan, between 70-80% of this land is forested and mountainous, and unsuitable for industrial, agricultural and residential development. This area of unsuitable land makes the habitable areas in Japan even more highly populated than the numbers would suggest.

    So you've got a country with more than twice the UK's population and about the same land area, but only 20-30% of this you can actually build anything on and they still have houses that are bigger than ours.

    This seems to emphatically put to rest the argument that says that the UK is a small country with too many people and not enough land and that therefore land prices are higher and by extension house sizes are necessarily smaller. If they manage it in Japan, why can't they do it here? We don't even have to worry about earthquakes and tsunamis.

  12. Doesn't this mean there's room for some sneaky profiteering opportunities for canny housepricecrashers by shifting some savings into currencies that aren't totally screwed, waiting a while then moving it back into pounds just before you use them to buy something?

    For some reason it seems that whatever happens to Japan, the Yen keeps on getting stronger. Maybe because Japan's economy was already totally flat before the crisis so they haven't got so far to fall as everyone else. It defies common sense. They have a Tsunami, the Yen goes up. They do a bunch of QE, the Yen goes down a fraction then goes back higher than before. It's crazy!

    One thing's for sure - if my savings were in Euros I'd be wanting to shift them into other currencies until it all blows over.

  13. Indeed. It's stalemate at the moment. Buyers can't or won't pay the asking prices. Most likely can't because sensible mortgage lending has returned plus you need huge deposits which only a few will actually have. But on the other hand sellers can't or won't reduce their asking prices. This is either because they bought recently and won't have a deposit for their next place if they sell too low, or simply because they don't want to admit their house is worth less than in 2007. In both cases they can afford to stay in their current house or rent it out until prices recover.

    How will the stalemate be broken? In the blue corner we have the buyers. They will start buying again if mortgage lending gets easier and if they think prices will start going up again, or if prices fall back to historic long-term levels. In the red corner are the sellers who will drop their prices for a quick sale if they think prices start to fall off a cliff or if they're forced to sell due to a change in circumstances (job loss, repossession etc).

    The other possible outcome is that years of low interest rates and near zero house price increases allow current owners to build up equity in their places whilst buyers keep saving bigger and bigger deposits. Eventually the sellers can afford to drop the asking price a bit to get a sale and the buyers raise their (sometimes unrealistic) offering prices a bit to get the place they want. In this scenario the house prices stay pretty much flat or even drop slowly over a very long time, Japanese style. You might even make the case that it's a reasonable compromise for both sides since nobody really wins or loses in this scenario.

    Personally I'd rather have a sudden apocalyptic crash and see all those "property experts" put out on the street after having their entire "portfolio" repossessed. But maybe that's because I'm really vindictive towards these types of people and feel they need to be brought crashing back to reality.

  14. I was chatting to a friend last night about house prices. He bought in 2010 with a 25% deposit for around £140k on a 5 times salary mortgage.

    When the subject came up of moving he said he thought it was worth £10k more than what he paid for it. He's done no real work to it except bash a hole in the lounge wall to put in a TV projector and brick up the garage door to turn the garage into a recording studio. I'd argue that putting a recording studio in the garage if anything will reduce the price of the place because not everyone wants to play boogie woogie in their house and record it.

    It's clearly a sign that the house-prices-always-rise delusion is still firmly there. Even to the stage of admitting prices are dropping in the wider market, "but not in my area". His area isn't really that posh at all.

    I'd hate to wish bad things on him due to him being a good friend, but I think we need another 2008 bank crash moment to shock people like this into reality and make them realise that house prices still have a long way to fall and interest rates a long way to rise before normal service is resumed.

    I'm just trying to guess what will be the straw that breaks the camel's back....

  15. Regarding land prices, I recently saw that someone was selling some farmland on the outskirts of my home town. Without planning permission, mind - it was just bog-standard fields and something with a few cabbages planted on it. However attached to the terms of sale was what I thought was a reprehensible clause: a "clawback" term that basically said if you got planning permission to build on the land AFTER you'd bought it from the farmer, then he'd get a huge slice of the eventual profit.

    Imagine that happening with the people who sold J.K.Rowling her writing paper. It's ridiculous. The farmer is no more entitled to a cut of the profits from building a house on land he USED to own than the paper manufacturer who sold some paper to J.K.Rowling. Actually I'm surprised that clauses like that aren't banned.

    I'm thinking if the government really want to have "affordable housing", they need to look carefully at who's pocketing most of the profits from new build houses.

  16. I'd like to know why this wasn't being discussed back in 2003 when a lot of people would say that house prices had started to get silly.

    Personally I'd prefer it if the loan-to-value and loan-to-income ratios were set by the Bank of England. Basically it's another tool to stop the economy going wrong and to my mind that puts it in the same category as interest rates. Putting politicians in charge of it risks it being manipulated to get votes, just as the interest rates were changed in the past because some politician wanted a feel-good factor prior to elections. Decisions on stuff like this should be taken by experts and detached from any political influence.

  17. It depends on the business you're trying to set up. Let's take for example Virgin Media. It costs a lot of cash to put in a cable network to a lot of houses. Cash that you'll eventually pay back and eventually make a profit on, but the start up costs are high.

    For growing a business, let's look at internet companies such as Google or Facebook. They needed to borrow money to fund their growth because they had to buy a pile of web servers and the network capacity to be able to service the increasing number of users of their sites. Plus they needed to get a lot of clever ( = expensive) engineers very quickly to be able to make the whole thing work. Their strategy was to get a pile of users first, then worry about how to make cash out of them second. Risky strategy, but in Google's case it worked out pretty well.

    The common complaint you hear from businesses is the banks are too risk-averse to lend them any money. When I borrowed cash to fund my business back in the late 90's, the bank wanted me to sign a document bypassing the limited company bankruptcy protection mechanism. This meant that instead of my possible losses being limited only to the cash that's physically in the business, I would personally be liable for the entire loan should things go wrong. There wasn't any other way to borrow the cash.

  18. Playing devil's advocate for a moment here, I reckon they've got two lines of reasoning for the status quo on interest rates:

    1. They take the view that if you put up the interest rates it encourages saving, whereas what they think we need to grow the economy is for people to spend more
    2. If they put up the interest rates it will cause more repossessions which look bad for the bank's books and we don't need the banks any more screwed than they already are

    Regarding #1, personally I'm not sure I agree with that, and I'm sure a lot of other people reading this will agree. Higher interest rates means pensioners and anyone with any significant savings have more income. It also means the banks have bigger saver's deposits on which to lend for (presumably) productive things.

    Regarding #2, again, I'm not sure I agree with that either because even if the bank repossesses the house, the owner still has to pay off the shortfall. So actually the bank doesn't lose much other than all that nice juicy interest over 20 years. Plus if they really wanted the interest, they could just try to sell the place to someone who takes out a mortgage with them. Even if they don't, surely they'll pick up new mortgage business from all the other banks repossessing houses left right and centre.

    I'm surprised all this hasn't been put forward seriously by someone who's got some kind of qualification in economics. Maybe there's some huge gaping flaw in my reasoning....

  19. Nice one. Good to see a mature, well-worded flow of communication with the Land Registry. I particularly like your idea of them providing the reposessed figures separately to the main figures. They seem to think their current methodology works, so it's more likely they'll make changes if those changes don't screw up what's already there.

    I for one would love to see the sales figures at forced auctions.

    I do wonder if they have a point though. Are reposessed properties generally in a worse decorative order than "normal" properties? I mean, have they had all the fixtures and fittings and anything that isn't basically necessary to hold up the roof removed? If so I can see why they'd distort the market prices since a house that doesn't have a toilet, washbasin or much in the kitchen would fetch a lower price than a comparable house sold with those things still in it.

  20. Indeed, you can pick holes in all of those points I made, but then if you remember back to 1997 the perception was that the Conservatives were cutting and privatising everything and it had gone too far. That didn't happen so much when Labour got in (i.e. it still happened, but it happened less often)

    Sure, I'd be the first to admit that they royally screwed up a pile of things but they also had good stuff happen while they were in power. Even if they didn't originally come up with the idea, they still permitted it to happen, which surely must count for something. In particular with railways they did change what the previous lot did. Prior to that it was basically call anything involving roads an "investment" and anything involving railways a "subsidy".

  21. There's always good things that governments do, but it seems to sell more newspapers if they only report the bad things. Here's some of the good things they did:

    1) Nurses now earn something approaching a living wage

    2) Same for teachers

    3) Reversed the 30 year trend of letting the railways crumble to nothing

    4) Less focus on privatising everything (at least less than the Conservative party did)

    5) Consistent policy on europe (no xenophobe faction in the labour party - doesn't necessarily mean their ideas are any good, but at least you know what they want)

    6) Sorted out the terrorist problem in Northern Ireland

    7) Smoking ban (pub employees no longer have to risk lung cancer because they work in a pub)

    8) Less emphasis on making posh people and rich pensioners richer at everyone else's expense (excluding the house price clusterf*ck)

    This isn't to say I'm pro-labour, but there's always good points to any government, no matter how useless and misguided. Sheer blind luck means they sometimes do things right.

  22. Possibly one reason for the "house as pension" argument goes something like this:

    1) Save up a deposit for a buy-to-let

    2) Get a buy-to-let mortgage

    3) Wait 25 years for your tenants to pay off the outstanding balance

    4) Profit!

    All for the low, low cost of a deposit on a smallish house or apartment. Add to this the fact that the rent you charge on the place can be put up in line with all similar rents in the local area, basically mirroring people's rising incomes. For the final icing on the cake, your investment isn't likely to go from £40k per year income in retirement to only £10k per year income, unlike recent retirees found to their cost.

    So it doesn't sound too bad an investment - chuck in £30k now, do nothing for 25 years and suddenly you've got something that will pay £500-700 per month, inflation-proofed.

    I leave it to the others reading this to point out the inevitable flaws in this reasoning...

  23. Not sure I'd use a percentage because it ignores some fixed costs that everyone has. So if you don't earn very much and spend 70% on mortgage, that remaining 30% might only be £200. That's not going to cover gas, water, electricity, food, council tax and transport costs, which are pretty much the same for everyone.

    So I'd turn it around and say something like; after taking essentials (like food, utilities, council tax etc.) out of your take-home pay, what percentage of what's left over is acceptible for a mortgage? In that case, I'd say a lot of (stupid) people would use 100% of what's left. For first time buyers or young people just starting their first job traditionally that was only supposed to be a short-term solution because they'd get pay rises and maybe get married eventually which brings in another income to pay the bills.

    The real worry in doing that now is your average first time buyer is knocking on 40 and I would say arguably is starting to see their pay levels plateau.

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