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Is The Uk "property Market" Actually A Market?

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I was trying to make a list of the various government distortions to the housing market that we have:

1. Housing Benefit £20bn

2. Council housing rents (much lower than market rents)

3. Support for Mortgage Interest

4. Buy-to-Let mortgage interest offset against income tax

5. Zero council tax on empty properties for 6 months

6. Second home council tax discount

7. 28% capital gains tax (versus 20%+11% basic PAYE+NI or 40%+11% upper PAYE+NI)

8. Artificially low interest rates courtesy of the Bank of England

Are there any others?

It strikes me that there are so many distortions now that the amount you pay for housing is much less a function of supply and demand than it is which distortions you happen to qualify for. If you are somebody who works and pays a market rent, you are a loooser on all counts. It would be interesting to try to put a figure on how big these distortions are, I have got a figure for HB and will look for the others but if anybody has any numbers please add them to this thread.

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I was trying to make a list of the various government distortions to the housing market that we have:

1. Housing Benefit £20bn

2. Council housing rents (much lower than market rents)

3. Support for Mortgage Interest

4. Buy-to-Let mortgage interest offset against income tax

5. Zero council tax on empty properties for 6 months

6. Second home council tax discount

7. 28% capital gains tax (versus 20%+11% basic PAYE+NI or 40%+11% upper PAYE+NI)

8. Artificially low interest rates courtesy of the Bank of England

Are there any others?

It strikes me that there are so many distortions now that the amount you pay for housing is much less a function of supply and demand than it is which distortions you happen to qualify for. If you are somebody who works and pays a market rent, you are a loooser on all counts. It would be interesting to try to put a figure on how big these distortions are, I have got a figure for HB and will look for the others but if anybody has any numbers please add them to this thread.

4) should be "Buy-to-Let mortgage interest offset against RENT".

I doubt that 5 has any effect.

tim

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4) should be "Buy-to-Let mortgage interest offset against RENT".

I doubt that 5 has any effect.

tim

If people don't have to pay council tax on an empty house it means they might be able to hang on a bit longer before they sell. It should be at least doubled on anything that isn't main residence. There's supposed to be a housing shortage don'tcha know?

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Here's another one: No capital gains tax on main residence.

The current, stupid CGT rules introduced by the coalition mean that you are charged CGT even for the effects of inflation, i.e. there is no indexation or taper relief applied to gains. Buying the most expensive house you can when young and watching its value appreciate, tax free, then selling up when you want to retire, is now one of the very fe CGT-free investments you can make.

Because of this, it (wrongly) makes it more financially sensible for people to put money into property than into productive investments - i.e. with shares you still pay income tax at the full rate on dividends, and you pay CGT even on the result of the effects of monetary inflation on the capital value of your shares.

Also, re: point 4), rent from a BTL is taxable income, so saying that you can offset interest costs against income is correct.

Re point 5), it is arguable that allowing owners of properties to leave them empty with minimal financial penalties encourages owners to wait and hold out for higher rents if they can't get tenants, rather than be forced to let at a lower value in order to cover costs. This may reduce the attractiveness of BTL. I agree, though, that it probably has a minimal effect on housing prices, although I think it does affect rents more significantly.

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1) Windfall gains from the granting of PP.

2) EU subsidies for "farmers" like Prince Charles.

3) Subsidised insulation and boilers for home owners that qualify.

4) Reduced council tax for single occupiers

5) A special tax free lodger scheme worth about £5Kpa

The list is endless because land ownership as it's currently implemented is little more than a racket.

Edited by Chef

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Open market homebuy and homebuy direct: and other government funded schemes to allow people to buy overpriced properties they can't really afford.

But the biggest distorsion is surely the fact that when banks lent so much money to people who couldn't afford to repay it, the debt was nationalised, wiped clean and paid by the government. You can't put a figure on this distorsion because it is by definition unlimited. Last figure I saw was 385 billion, but who knows?

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I was trying to make a list of the various government distortions to the housing market that we have:

1. Housing Benefit £20bn

2. Council housing rents (much lower than market rents)

3. Support for Mortgage Interest

4. Buy-to-Let mortgage interest offset against income tax

5. Zero council tax on empty properties for 6 months

6. Second home council tax discount

7. 28% capital gains tax (versus 20%+11% basic PAYE+NI or 40%+11% upper PAYE+NI)

8. Artificially low interest rates courtesy of the Bank of England

Are there any others?

It strikes me that there are so many distortions now that the amount you pay for housing is much less a function of supply and demand than it is which distortions you happen to qualify for. If you are somebody who works and pays a market rent, you are a loooser on all counts. It would be interesting to try to put a figure on how big these distortions are, I have got a figure for HB and will look for the others but if anybody has any numbers please add them to this thread.

Artificial supply restriction via the planning system

Base II/III crazily favourable treatment of 'mortgages' (75% LTV+) on RWA

BoE misguided idea that house price rise will fuel economic and spending growth and hence will tweak policies towards the objective

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1. Housing Benefit £20bn

2. Council housing rents (much lower than market rents)

3. Support for Mortgage Interest

4. Buy-to-Let mortgage interest offset against income tax

5. Zero council tax on empty properties for 6 months

6. Second home council tax discount

7. 28% capital gains tax (versus 20%+11% basic PAYE+NI or 40%+11% upper PAYE+NI)

8. Artificially low interest rates courtesy of the Bank of England

Stop! You're making me cry :(

1 is the most interesting one for me. Prevents me getting a decent rental at the moment. Lower end is artificially high, larger houses are out of the reach of anyone working and paying taxes.

Phoney

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Stop! You're making me cry :(

Yeah, it's not great, especially when you realise you are on the wrong side of every single one of the property subsidies. £20bn in housing benefit is a lot, that's £1000 per full time worker per year. Working class Britons born around 1900 were mostly lifelong renters paying private rents out of wages, and I think they probably had an easier time of doing that than somebody attempting to do the same today. Why? Because they weren't competing with their own taxes when they came to pay rent.

High property prices are a big problem in the British property market, but they're not the only one. The government is interfering far too much with the inner mechanics of the system. In my opinion every subsidy on that list and those named by other posters should be abolished, and a citizens income/universal cash benefit provided to help those in need. Half a century of accumulating interference means there is almost no connection between supply and demand in British property. Getting government out of people's way is something Tories are meant to be good at. I'm worried though that they will be just as vulnerable to handing favours to special interests as Labour were.

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I would love a proper newspaper to publish a story about this, but there's no chance.

I would happily write two versions of the story:

one to satisfy right-wingers using phrases like 'social engineering' to decry the situation, and possibly deploying the line 'the UK housing market now gets more subsidies than could be cooked up in even the most fervent Brussels Eurocrat's wet dream';

the other to satisfy left-wingers who, despite the fact that high and rising property prices should be against everything left-wingers stand for in terms of class-based inequality, don't yet seem to fully grasp how much Brown's housing boom destroyed any last vestiges of social mobility in the UK.

Edited by WageslaveX14

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I would love a proper newspaper to publish a story about this, but there's no chance.

I would happily write two versions of the story:

one to satisfy right-wingers using phrases like 'social engineering' to decry the situation, and possibly deploying the line 'the UK housing market now gets more subsidies than could be cooked up in even the most fervent Brussels Eurocrat's wet dream';

the other to satisfy left-wingers who, despite the fact that high and rising property prices should be against everything left-wingers stand for in terms of class-based inequality, don't yet seem to fully grasp how much Brown's housing boom destroyed any last vestiges of social mobility in the UK.

I suspect the telegraph would publish something like this, the right wing version

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If people don't have to pay council tax on an empty house it means they might be able to hang on a bit longer before they sell. It should be at least doubled on anything that isn't main residence. There's supposed to be a housing shortage don'tcha know?

remove the kitchen & bathroom, then no CT adinfinitum......it's no longer a house see ;)

they keep this one quiet so sussshhhhhhhhhh

oh yer, convert a bedroom to a "mini mosque" of "pagan shrine" and get a band reduction, can't be a bedroom if it's a room dedicated to religious wa&k can it ?

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If people don't have to pay council tax on an empty house it means they might be able to hang on a bit longer before they sell.

I fail to see how a one thousand pound CT bill will encourage a person to knock 30-50K off the price of an overpriced house.

tim

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show me a market that is really a market.

All complex markets have some degree of regulation.

The closest thing to a true market is probably a car boot sale.

I agree that there are no perfect markets in the real world, but there is a spectrum going from Ayn Rand at one end to a single dictatorial bureaucrat setting all prices at the other end. Our housing market has been slowly sliding further and further from the ideal free market as the number and size of government interferences has increased. Housing benefit went from £11bn in 1997 to £20bn now. The Bank of England interest rate is at its lowest since the Bank was founded in 1694, and the Special Liquidity Scheme was set up to keep mortgage rates artificially low. A council house is not just another type of rented house, it is now a golden ticket compared to free market rents. How can any of this lead to efficient allocation of resources? How is this a fair society which rewards productive work?

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I fail to see how a one thousand pound CT bill will encourage a person to knock 30-50K off the price of an overpriced house.

tim

A lot of people's cashflow is significantly tighter than you might think.

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  • 149 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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