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Where Are Sipps Coming From?

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Does anyone have any idea where the push behind SIPPs (in particular investment in property) is coming from?

It won't be estate agents because they are unlikely to see commission from any of the deals.

It won't be developers because as information-rich market insiders they can make more money without the smoothing effect of SIPPs.

It won't be the rich because they wouldn't lobby for the ability to invest in a market that is overvalued.

It won't be the political-philosophy drivers of the government because SIPPs goes against everything Labour (used to?) stands for.

But it could be current economic academic thinking.

Any other motivated vested interests?

For example, when Gordon Brown made the best decision of his life and gave BoE "independence" in 1997, this was a change that had been called for by the economic theories in the early nineties (e.g. see C. A. E. Goodhart - Money, Information and Uncertainty). The governments prior to 1997 had had no appetite for giving up this useful power and it only fitted with Brown's best interests because he desparately needed to give Labour economic credibility.

Going back to the property market, the bubble nature of it is a huge failure in the market. I suspect that SIPPS may have been suggested as a method of trying to reduce this market failure. It will not happen immediately because you can't short property you don't have in your SIPP portfolio but it will mean that when property falls below some long run trend or "fundamental" value, SIPPs will start to invest. This will provide some sort of bottom to the market and prevent it over-shooting on the way down.

Consequences would include:

property will never again generate the quantity of abnormal returns seen by the latest generation of STRs

if you assume that the drop you are expecting in property prices is composed of two halves - the return to long term trend and then over-shoot on the way down - you maybe should divide the number by about 2 to estimate the potential drop in the market.

But is there any evidence of (the reduction in the property market failure) being the driver for the creation of SIPPs? Is there another vested interest that has pushed SIPPs through? Or have I made a blunder in looking at the situation and SIPPs will not put a bottom to the market?

Any thoughts?

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Did SIPPS kill zzg?

Did he open HPC one day and see the 10000th article posted by a newbie and die of sudden heart attack?

Is he going to be the first ghost of HPC, doomed forever to live on in lore? :ph34r:

(Apologies newbie, I've been watching too much Scrubs)

Edited by BandWagon

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Did SIPPS kill zzg?

:D

Does anyone have any idea where the push behind SIPPs (in particular investment in property) is coming from?

It won't be estate agents because they are unlikely to see commission from any of the deals.

Err, and why is that? Are properties bought by SIPP's not going to be sold in the usual way, ie through estate agents? So it is in EA's interest to push SIPP's.

It won't be developers because as information-rich market insiders they can make more money without the smoothing effect of SIPPs.

SIPP's= more buyers =higher prices = more profit for developers.

It won't be the rich because they wouldn't lobby for the ability to invest in a market that is overvalued.

But they would lobby for a massive tax handout for whatever investments they do make, ie art, race horses, jewelry, etc; which is what SIPP's are.

It won't be the political-philosophy drivers of the government because SIPPs goes against everything Labour (used to?) stands for.

LOL, yeah right, Labour stopped being a socialist party years before they got into power. Now they're slightly to the right of Attila the Hun. This is NU Labour, remember. :rolleyes:

the bubble nature of it is a huge failure in the market. I suspect that SIPPS may have been suggested as a method of trying to reduce this market failure.

Rubbish. SIPP's are a half-arsed effort by a desperate government to shore up growth in a faltering economy.

when property falls below some long run trend or "fundamental" value, SIPPs will start to invest.

Professional landlords would do this anyway, SIPP's or no SIPP's.

is there any evidence of (the reduction in the property market failure) being the driver for the creation of SIPPs?

No.

Is there another vested interest that has pushed SIPPs through?

What, apart from all the VI's listed above you mean? I suppose you could count mortgage lenders as well.

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He's alive!  you been on holiday or what zzg? its been weeks

Nah, just taking a break from HPC is all. My brother is working out in China at the moment, so I'm staying with him, seeing the sights. I'll probably be back in the UK for Christmas, although with house prices the way they are I don't think I'll bother coming back!

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Nah, just taking a break from HPC is all. My brother is working out in China at the moment, so I'm staying with him, seeing the sights. I'll probably be back in the UK for Christmas, although with house prices the way they are I don't think I'll bother coming back!

Im quite looking fowards to christmas when we are in full blown recession, i havnt seen christmas spirit in over 10 years.

I take it china is pretty cool?

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I take it china is pretty cool?

Well, we're in Shanghai at the moment, which is an awesome city; some bits of the city look like they've been copied straight out of Blade Runner,

03C_PudongSkylineAtNight.jpg

whereas other bits look how I imagine they would have looked a hundred years ago ( ie narrow alleys, wires all over the place, people cutting up animals in the street etc); so the contrast between the old China and the new China is very interesting.

Anyway, my brother's internet connection is really cr@p, so I'm going to have to sign off now.

Keep on truckin',

Z.

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It won't be developers because as information-rich market insiders they can make more money without the smoothing effect of SIPPs.

Talk is that a lot of developers will set up sipps companies ( they're not regulated ) and sell off their overpriced stock to mug punter btl'rs which they cant currently sell.

D

:blink:

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Err, and why is that? Are properties bought by SIPP's not going to be sold in the usual way, ie through estate agents? So it is in EA's interest to push SIPP's.

Maybe. If I was managing a SIPP though I would avoid the high transaction costs and lack of economies of scale with EAs and deal with developers - similar to what the BTLs have done.

SIPP's= more buyers =higher prices = more profit for developers.

I would say that it is rising prices rather than higher prices that lead to more profit for developers (is that splitting hairs?). Or even volatility in prices - in the same way that traders dislike stable markets.

And SIPPs will not lead to more buyers at all times - investors will try and maximise their retirement savings and act in a less emotional way than the way in which they deal with their family homes. At some stage they will also have to be cashed in.

But they would lobby for a massive tax handout for whatever investments they do make, ie art, race horses, jewelry, etc; which is what SIPP's are.

True.

LOL, yeah right, Labour stopped being a socialist party years before they got into power. Now they're slightly to the right of Attila the Hun. This is NU Labour, remember. :rolleyes:

:D

Rubbish. SIPP's are a half-arsed effort by a desperate government to shore up growth in a faltering economy.

Professional landlords would do this anyway, SIPP's or no SIPP's.

Thanks - completely forgot about professional landlords. Why are they all not selling at the moment?

What, apart from all the VI's listed above you mean? I suppose you could count mortgage lenders as well.

Forgot about mortage lenders too - guess they're going to be in favour.

zzg - if it's not an attempt to add stability in the future to the housing market then if you had to line up the groups in order of which had most actively campaigned for SIPPs, who would be at the front of the line?

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Nah, just taking a break from HPC is all. My brother is working out in China at the moment, so I'm staying with him, seeing the sights. I'll probably be back in the UK for Christmas, although with house prices the way they are I don't think I'll bother coming back!

How about instigating a House price crash in China like you did here?

:D

Sipps stink!.......apart from the general bad effect of attracting even more dosh to the already over-hyped property market...there is no way in the world lower income or average income people could afford to get in on the act so as with stakeholder pensions Sipps will be just another tax break for the rich............

and NOT a way to encourage saving by lower income people ...as originally intended.

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Does anyone have any idea where the push behind SIPPs (in particular investment in property) is coming from?

It won't be estate agents because they are unlikely to see commission from any of the deals.

It won't be developers because as information-rich market insiders they can make more money without the smoothing effect of SIPPs.

It won't be the rich because they wouldn't lobby for the ability to invest in a market that is overvalued.

It won't be the political-philosophy drivers of the government because SIPPs goes against everything Labour (used to?) stands for.

But it could be current economic academic thinking.

Any other motivated vested interests?

There is no "push". This is a relatively minor technical change that is being hyped out of all proportion by, well, everyone.

SIPPs exist now, and have done for many years. You can go out and buy a SIPP today, if you want. All they are doing is tidying them up. It is, in general, bad economics to give different tax treatment to different types of investment, as it causes misallocation of resources in favour of those classes of investment that have the most favourable tax treatment. So more types of investment are being allowed in SIPPs in order to sort out long-standing anomalies.

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  • 301 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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