Cgt For Housing Will Mean No One Learns The Lessons

[RichM]

I am very opposed to CGT on shares - that's not a zero sum game and it's not necessarily a casino. CGT on second homes is more interesting, however.

Clearly housing is pretty much a game weighted towards the old and the wealthy in post-1948 UK, especially with the slack credit availability etc. CGT tax on second homes would be good, for all the reasons already stated. However...

While there's so many reasons that housing prices are unsustainable, CGT on second homes could easily trigger a rush for the exit and a spectacular crash (OK, that bit's good) but the introduction of CGT would then get the blame. Tories get the nasty party label (OK, you might like that), no one thinks about the real economic mess we've been in, and no one learns anything from the whole shambles.

Maybe that's the way it will go anyway. I was surprised by the 07-09 dip by how there was never a sense of "that was a bubble, we were all daft", it just got blamed on bankers. People didn't join the dots. Plus, property never became painful to own, especially when IRs were slashed to nought and cheeky borrowers/banks were bailed out.

In short, no attitude change so far and I am concerned that CGT would mean the lessons are missed. I'm hoping for SLS to be the trigger, that might flick a few switches.

[Toilet-Currency]

How about removing the principal private residence relief once the crash has already started (say 2 years in)

If it ever were to be introduced, it would be less controversial if it were done when few people were making gains. And then the full benefit (i.e. that it would be harder for house prices to outpace savings in the broader economy) would be felt as soon as the market bottomed out and started rising again

Edited May 28, 2010 by Toilet-Currency

[RichM]

How about removing the principal private residence relief once the crash has already started (say 2 years in)

If it ever were to be introduced, it would be less controversial if it were done when few people were making gains. And then the full benefit (i.e. that it would be harder for house prices to outpace savings in the broader economy) would be felt as soon as the market bottomed out and started rising again

Nice idea, but the general public would still probably hate it. A definite vote loser, sadly.

[Toilet-Currency]

Get that Mr Laws to ram it through in the budget. He won't last long anyway.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

The CGT hike on homes and shares will damage the financial position of around a million people - yet the taxation changes it will fund will benefit 10s of millions. Which one is the vote loser again?

On the point about second homes and shares - tax them both - it's time the UK faced facts and realised there needs to be a rebalancing away from the spiv economy.

http://www.telegraph.co.uk/finance/financetopics/budget/7734803/Higher-taxes-for-a-million-as-George-Osbornes-emergency-Budget-hits-investors.html

The newspapers are doing their usual good work - sticking up for their super-rich editors and their elite friends. Shame on them.

Edited May 28, 2010 by gruffydd

[abharrisson]

The CGT hike on homes and shares will damage the financial position of around a million people - yet the taxation changes it will fund will benefit 10s of millions. Which one is the vote loser again?

On the point about second homes and shares - tax them both - it's time the UK faced facts and realised there needs to be a rebalancing away from the spiv economy.

http://www.telegraph.co.uk/finance/financetopics/budget/7734803/Higher-taxes-for-a-million-as-George-Osbornes-emergency-Budget-hits-investors.html

The newspapers are doing their usual good work - sticking up for their super-rich editors and their elite friends. Shame on them.

Thye problem with cgt change is that its being mooted now but may not change until April... prior announcement is never a good thing with these taxes as it increases the chances of unintended consequences.... we'' see quite large scall stock market sell offs and possibly some steepr house price drop offs in certain areas than would otherwise have happened

By the by i'd back cgt on your own home ( tapered) I think it would be healthy

[Lucifer]

The CGT hike on homes and shares will damage the financial position of around a million people - yet the taxation changes it will fund will benefit 10s of millions. Which one is the vote loser again?

On the point about second homes and shares - tax them both - it's time the UK faced facts and realised there needs to be a rebalancing away from the spiv economy.

http://www.telegraph.co.uk/finance/financetopics/budget/7734803/Higher-taxes-for-a-million-as-George-Osbornes-emergency-Budget-hits-investors.html

The newspapers are doing their usual good work - sticking up for their super-rich editors and their elite friends. Shame on them.

+1

[Habeas Domus]

I get the feeling theres a bit of psychology going on with this CGT tinkering

A lot of people have had a decade of property-ramping, easy-money stories, but they have thier own house on the market and its not selling. These people have a level of jealousy/envy of all the people who cashed out at the right time.

Therefore its probably been focus grouped as a popular tax - "if I'm not making money on property then no-one else should either".

The one good effect is that it might encourage people to lower asking prices as that will "save some tax"

[IP Newcomer]

What's probably happening is that the tax is being floated at a deliberately high rate. At some point they will introduce either taper relief or an indexation allowance to shelter people from purely inflationary gains, and then it will look like a tax cut of sorts - even though people are paying more than they would at 18%.

With capital gains in an inflationary climate you either have to protect against inflation or tax at a very low rate.

Second home owners have to realise that they will be taxed in some way shape or form. They've got the money, they can't move abroad and they aren't realistically going to vote Labour so they don't really have the electoral clout. All the parties tend to have more second home owners than among the average population among their activists, but the Tories have always been more likely to sting their activists.

[dances with sheeple]

What's probably happening is that the tax is being floated at a deliberately high rate. At some point they will introduce either taper relief or an indexation allowance to shelter people from purely inflationary gains, and then it will look like a tax cut of sorts - even though people are paying more than they would at 18%.

With capital gains in an inflationary climate you either have to protect against inflation or tax at a very low rate.

Second home owners have to realise that they will be taxed in some way shape or form. They've got the money, they can't move abroad and they aren't realistically going to vote Labour so they don't really have the electoral clout. All the parties tend to have more second home owners than among the average population among their activists, but the Tories have always been more likely to sting their activists.

IMO a deliberate attempt to shake some volumes out of the housing market, and crash prices a bit more, because the banks want to be lending more smaller house loans at higher rates about now. Tesco generation needs a flat at about 60k, banker wants his cut, older homeowners are the disadvantaged players in this game? By talking about taxing shares at the same time it seems more equitable, more across the board, everyone getting hit, at some point in the future they will probably ease off on shares and possibly property, but if they don`t start getting the house in order now we could have a very shaky future indeed? The CGT tax "rebellion" is pointless IMO, the new government has five years, they have an agenda for change and they see to be getting on with the job?

[Heading South]

How about removing the principal private residence relief once the crash has already started (say 2 years in)

Dream on. Electoral suicide so it's never going to happen imo. The government can cope with the wrath of the relatively small proportionof the population with second homes, but not the 14 million or so owner occupiers.

Besides which it would totally lock up the housing market. All those on this site complaining about bed-blocking older people holding on to large family homes can kiss goodbye to any of those coming up for sale. These older people could never afford to pay the CGT liability unless they downsized to a tent, and would stay put until they croaked. It would also tstiffle job mobility for working people, since everytime they moved house, they would have to downsize.

[Stars]

Besides which it would totally lock up the housing market. All those on this site complaining about bed-blocking older people holding on to large family homes can kiss goodbye to any of those coming up for sale. These older people could never afford to pay the CGT liability unless they downsized to a tent, and would stay put until they croaked. It would also tstiffle job mobility for working people, since everytime they moved house, they would have to downsize.

Unless by some bizarre miracle the housing market stabilised because people no longer found it profitable to use it to screw each other.

[RichM]

Cameron was talking about IR increases today. Makes me wonder if they would like a clear crash now, make sure the 5 year coalition works, blame Labour for the crash, take credit for any recovery.

[RufflesTheGuineaPig]

Cameron was talking about IR increases today. Makes me wonder if they would like a clear crash now, make sure the 5 year coalition works, blame Labour for the crash, take credit for any recovery.

If you can get the crash over in 3 years you might get away with it.... 2 years of recovery afterwards.

You'd really need to nuke the housing market though.

[RichM]

If you can get the crash over in 3 years you might get away with it.... 2 years of recovery afterwards.

You'd really need to nuke the housing market though.

We have the technology. We can bring it back (to 2000 levels)...

[xux42]

Dream on. Electoral suicide so it's never going to happen imo. The government can cope with the wrath of the relatively small proportionof the population with second homes, but not the 14 million or so owner occupiers.

Besides which it would totally lock up the housing market. All those on this site complaining about bed-blocking older people holding on to large family homes can kiss goodbye to any of those coming up for sale. These older people could never afford to pay the CGT liability unless they downsized to a tent, and would stay put until they croaked. It would also tstiffle job mobility for working people, since everytime they moved house, they would have to downsize.

I've told you a million times, stop exaggerating.

Old lady in big house in a smart location could easily pay the CGT by downsizing to a 2 bed bung. in the cheaper side of town.

Don't make me do the figures - I'm busy!

Truth is she wouldn't because she rather die of hypothermia than hand over £100k in CGT (her inheritors would prefer that too, more cash for them and quicker).

Young couple, both on house deeds - £20K combined CGT allowance. Offered a pay rise to relocate. As the Americans say - 'you do the math'. Doubly so in a property market that's going to stagnate for 5 years at least (hurrah!).

Will the bulls reading this please come up with some proper, objective (ie. not self serving) arguments against CGT and explain where the money will come from.

These discussions are getting irritating.