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volvos60

Sipps Will Save The Day....

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Until the last couple of weeks I have been very bearish on the outlook for house prices, & indeed the wider economy.

However, the more I think & read about SIPPs giving the high earners in society the ability to replace FTBs in the housing market, the more concerned I become at Gordon Brown's cynical methods that he is willing to employ to save his skin.

I know many on this forum will say that SIPPs will not have a big effect in stopping a crash on the basis of who would put the lions share of their pension into the property market right now. Well, that's all well & good if there was an alternative way to save yourself (on the basis of the rationale from a high earner's perspective) from a 40% tax bill, but with equities looking over valued surely many city bonuses will find their way straight into FTB properties. Even a, say 20%, drop in house prices is better than a 40% tax bill.

This investment into the housing market would in turn enable people to achieve a sale on their 1 or 2 bed rabbitt hutches & trade up, thus keeping the economy rolling for a few more years & even, dare I be so cynical, get Labour re-elected next time around.

I wish that I could feel that my assessment was irrational or overly cynical, but in all honesty I am feeling quite depressed that a HPC is now going to be many years away - & FTB home owning aspirations a pipedream - which Gordon Brown is only too happy to destroy for his own ends. After all, the majority of the population would actually benefit from falling property prices.

Comments please

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Thing is though, surely with a saturated rental market already, all these people piling into the buy to let market is only going to bankrupt existing highly-geared BTLers? Many of them will be forced to sell by this. It really won't make much difference, if anything, only worsen the final outcome.

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Guest prudence

Have you ACTUALLY done any calculations to work out what the possible effects of Sipp changes are likely to be on the market.................

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volvos60

As a high rate taxpayer i thought about SIPPs. However with all these

folks buying houses it doesnt take a phd from oxbridge think about what

will happen.

Rental yield will collapse - more empty houses waiting for tenants.

Just wait and see.

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You seem to be looking at it from outside in - You see it as todays mentality and sentiment with a 20% fall, it doesnt work that way, the herd wont want to touch property as an investment and only the super rich (and financially smart) will invest at the right time. There will be loads of reasons why property will never recover ... ever. You will hear the "its differnt this time" mantra on the downside. IMHO

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Have you ACTUALLY done any calculations to work out what the possible effects of Sipp changes are likely to be on the market.................

The reality is we all hate paying tax. When someone offers you a chance to buy a property at a 40% discount (I read somewhere that when you do the number crunching actually gives a higher discount) then that kind of tax saving tends to be all persuasive, irrespective of the finer points regarding rental yields.

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You seem to be looking at it from outside in - You see it as todays mentality and sentiment with a 20% fall, it doesnt work that way, the herd wont want to touch property as an investment and only the super rich (and financially smart) will invest at the right time. There will be loads of reasons why property will never recover ... ever. You will hear the "its differnt this time" mantra on the downside. IMHO

Exactly , people with that sort of money will be putting in the next growth asset - what ever that be.

With that sort of money you'd expect them to have the financial nouse/advice that will be pointing them AWAY from property for now.

Leaving the lemmings trying to underpin the foundations that are crumbling upon the sand (credit boom ) on which they've been built.

D - IMHO of course. :)

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The reality is we all hate paying tax. When someone offers you a chance to buy a property at a 40% discount (I read somewhere that when you do the number crunching actually gives a higher discount) then that kind of tax saving tends to be all persuasive, irrespective of the finer points regarding rental yields.

So thats it then, no average person will be able to buy an average house at an average price ever again? From next April onwards only higher rate tax payers will be able to buy property? because ultimatly that is what your suggesting, wouldnt happen instantly but if FTB'rs are priced out now and prices hold or continue to rise thats it game over no joe bloggs with wife and kids will ever be able to afford a 2 up 2 down.

Volvos60, Its all very well having a 40% 'discount' but not when its initially >100% overpriced - going off historic fundamentals, and GB himself stating a few days ago that we are in a housing bubble. Oh and keep in mind that we all know what bubbles do, GB knows what bubbles do, joe public know what bubbles do. GB wouldnt of used the word bubble buy 'accident'. Its an admission for the rich folk to bail, only the herd will poor (sic) in the dumb money.

None of this is me having a direct go at you btw.

Edited by theChuz

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I know I make this point a lot.

but for the prices to stay where they are.. For house prices not to drop.

We would have to see FTB's embracing the sort of debt levels that have already pushed us £600,000,000,000 more in debt over the last few years.

Remember that this is a peak.. so the debt levels required would be the largest the boom showed us.

The economy is already failing with current debt levels..

It cannot maintain current prices as the debt required to embrace current prices would ruin the country.

Already the economy is reacting to current debt levels.

To maintain these levels of house prices requires debt levels to be increased on massive levels.

Levels which have already started to cause a huge crisis in the greater economy.

In essence the sums do not even begin to add up.

January was peak last year.

We are below that by a good amount.. as house prices hit peak.. we will see percieved accelerated drops..

Sipps might have helped temporarily.. but they are not going to be in time.

Also.. you want to see riots..

You see a generation priced out of housing while their taxes cover 40% of the purchase cost to their rich landlord..

Even if there was room in the BTL arena for this to work..

.. I think there would be tears before bedtime.

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So thats it then, no average person will be able to buy an average house at an average price ever again? From next April onwards only higher rate tax payers will be able to buy property? because ultimatly that is what your suggesting, wouldnt happen instantly but if FTB'rs are priced out now and prices hold or continue to rise thats it game over no joe bloggs with wife and kids will ever be able to afford a 2 up 2 down.

Volvos60, Its all very well having a 40% 'discount' but not when its initially >100% overpriced - going off historic fundamentals, and GB himself stating a few days ago that we are in a housing bubble. Oh and keep in mind that we all know what bubbles do, GB knows what bubbles do, joe public know what bubbles do. GB wouldnt of used the word bubble buy 'accident'. Its an admission for the rich folk to bail, only the herd will poor (sic) in the dumb money.

None of this is me having a direct go at you btw.

The Chuz - I did not interpret your reply as 'having a go' as this is a genuinely useful discussion & some of the replies already posted give good alternative perpectives - although in my mind not, so far, persuading me away from my initial point of view - I really wish they did!

Your comment 'So thats it then, no average person will be able to buy an average house at an average price ever again?' may unfortunatly be close to the mark for the next five years or so.

Edited by volvos60

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So thats it then, no average person will be able to buy an average house at an average price ever again? From next April onwards only higher rate tax payers will be able to buy property? because ultimatly that is what your suggesting, wouldnt happen instantly but if FTB'rs are priced out now and prices hold or continue to rise thats it game over no joe bloggs with wife and kids will ever be able to afford a 2 up 2 down.

Taking up this point, renters generally don't tend to be very good consumers over the long term - why bother to spend money on somebody else's housing asset - not much point at all. If you are correct volvo we have only seen the tip of the iceberg in regards to the collapse of the consumer driven economy.

Ultra-small property will have exactly the same effect - you can't buy stuff that you can't fit into your living space.

Meanwhile the real economy contiues its rapid slide - check out the rate of job erosion to cheaper locations - it is up to 1,000's per week and showing no signs of slowing in fact if anything it is spreading across a wider range of sectors and activities.

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Must admit that I swing from not being worried about the SIPPS threat to being very worried and back again. I have found the economic and financial arguments and reasoning presented on HPC and other sites comforting and pursuasive in terms of arguing that SIPPS should have minimal impact in holding up the house price market. However, as we know it's not just the economics and the logic of the situation that matter .... it's also the spin that matters and the impact that spin has on sentiment and how this influences beliefs and behaviour. Whilst I feel that my 'worry' can be calmed by the economic arguments about SIPPS I find it much harder to reduce my worry about the opportunity it will provide VI's for spin, propaganda, lies - call it what you will. I can only imagine that the VI's are already planning a big 'spin campaign' to coincide with the introduction of SIPPS ('A' Day????). At times I feel we should be more active in fighting the spin and generating alternative discourses - hence my banging on about sending letters to newspapers every now and then. Some days I have day dreams of us initiating campaigns that are influenced by the anti-vivisection brigade. All kinds of nasty things happen to certain TV presenters. Perhaps 5 of us could dig up one of the TV presenters dead pet dog. (In no way do I advocate such a campaign ... the day dream is therapeutic though). Other times I day dream about house price campaigns that are more influenced by the 'Fathers For Justice' gang. I think any campaign needs to concentrate on highlighting the benefits of falling house prices, the negatives of high and rising prices, the flaws in VI spin, and identify some badies (certain TV presenters come to mind yet again). Effective campaigns are usually presented in a fairly straightforward and easy to grasp way. British democracy has a long history of small groups doing things that are really quite clownish but have had a significant impact on the political and social landscape. Perhaps we could/should be doing more to fight and challenge the spin? Or perhaps I will just have to be satisfied with my day dreams.

If nothing else this post is an expression of some of my frustration whilst waiting house prices to fall far enough for me to feel comfortable about jumping in and buying a property. It seems to me that over the last few weeks quite a few of us have been experiencing some level of frustration with the situation we find ourselves in.

Edited by Alfie Moon

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I've got a tin of beans for sale they cost me 30p a week ago, they are heinze and the tin is in excellent condition because i paid someone 5p to spend ages polishing it and making it look nice. Do you want to buy the tin of beans? Im asking £1 for it, which if you think about it is a bargain because of all the work ive put into it, hey and i tell you what ... if you have blue eyes i will reduce the price from £1 to 60p.

For you blue eyes after that massive discount ive given you wouldnt you be a fool not to buy it?

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Guest The_Oldie

What worries me, is the possibility of unscrupulous Financial Advisers being bribed by EAs to recommend these deals to the less financially astute of their, nonetheless wealthy, clients.

Hopefully, this will not be commonplace enough to make a real difference.

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Volvo,

This is the reality of the economy, stuffed with debt and stuffed by high costs. Sipps will do nothing to change this situation and if anything make this worse.

........

More jobs to go at Bernard Matthews

30 September 2005

CHRIS STARKIE, EDP BUSINESS EDITOR

Turkey producer Bernard Matthews yesterday announced a restructuring of the company with the loss of up to 110 jobs.

......

More jobs to go at Bernard Matthews

30 September 2005

CHRIS STARKIE, EDP BUSINESS EDITOR

Turkey producer Bernard Matthews yesterday announced a restructuring of the company with the loss of up to 110 jobs.

.....

RAC wheels out 200 jobs in India

Daily Mail

30 September 2005

THE RAC became the latest British firm to transfer jobs abroad last night after it said 200 call centre posts would go to India.

....

350 jobs go as final ferry sails

The company is selling off several of its vessels

The final cross-channel ferry is setting sail between Portsmouth and Le Havre on Friday as 350 jobs are lost

......

Jobs at risk at Virgin Money

30 September 2005

Norwich-based Virgin Money is to restructure its business which could lead to scores of staff losing their jobs.

......

Firm closes with loss of 250 jobs

The company was still taking on new staff this week

Two-hundred and fifty jobs have been lost at a company that runs call centres in Devon and Cornwall.

Market Reach has telesales operations in Falmouth, Plymouth and Sidmouth.

......

SEVENTY MORE JOBS TO BE AXED AT CAR FIRM

Next Story | Previous Story | Back to list

ANTHONY O'CONNELL

18:00 - 29 September 2005

Seventy jobs are to be axed at a Llanelli car components firm.

Krupp Camford Pressings, in Llethri Road, made the announcement at a staff briefing this week. The company has already cut 144 Llanelli jobs this year, blaming a loss of orders from Midlands manufacturer MG Rover.

......

City jobs agony as Steads axe 61 staff

Published on 29/09/2005

By Mark Preskett

THE OWNERS of textile print works Stead McAlpin have confirmed that 61 people have been made redundant at their Carlisle factory.

Some staff left the troubled plant last Friday. The majority will go tomorrow.

....

100 JOBS MAY BE LOST AT R-R'S SUBMARINE DIVISION

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BY ANDREW HIBBERD

09:30 - 29 September 2005

Up to 100 jobs at the Rolls-Roycesubmarine division in Derby may be lost.

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Guest tenant super
volvos60

As a high rate taxpayer i thought about SIPPs. However with all these

folks buying houses it doesnt take a phd from oxbridge think about what

will happen.

Rental yield will collapse - more empty houses waiting for tenants.

Just wait and see.

I think BTL's are a red herring, the real danger is second homers. The government is creating lebensraum for wealthy middle britons and snuffing out the prospects and ambitions of young britons such as myself.

Does anybody know why socally, economically or morally how the government can justify this? Did this ever appear in an election manifesto - if so why no discussion?

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I too am worried about Sipps. I've heard the arguments about how investors have more attractive markets to pile cash into and I am not at all convinced.

Super-rich investors spread their dough across differenyt sectors. Sipps will mean that many still keep investing into property (alongside equities and commodities).

A 40% discount is an incredible amount and there are plenty of people rich enough to take a punt on property doing well in the long-term if they are insulated by a 40% discount in the first place.

It is not good news for the HPC or the FTB. How can it be?

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I too am worried about Sipps. I've heard the arguments about how investors have more attractive markets to pile cash into and I am not at all convinced.

Super-rich investors spread their dough across differenyt sectors. Sipps will mean that many still keep investing into property (alongside equities and commodities).

A 40% discount is an incredible amount and there are plenty of people rich enough to take a punt on property doing well in the long-term if they are insulated by a 40% discount in the first place.

It is not good news for the HPC or the FTB. How can it be?

Its definatly not good news for a HPC or FTB on the same note its raining today ... thats not benificial to the HPC either.

Not a good comparrison i know, i just think that maybe people are worrying a little to much about sipps

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Surely this SIPPs topic has been flogged to death already. It is a complete red herring. I forget the exact figures but given the modest borrowing limits etc there are very few personal pension plans out there with sufficient funds to buy property even if the lunatic investor wanted to put 100% into a single property.

You have always been able to get tax relief on pension contributions. This is nothing new. Sure, the contribution limit goes up substantially, but you still cannot put more than 100% of your salary in in one year. How many people out there earn 200k?

How many people contribute up to the current modest limit into their penions? Will the ability to invest it in a holiday home (on which you pay tax for the use of the benefit but thats yet another topic) or BLT suddenly make them save alot more? If so, the rule changes arent necessarily a bad thing, but I very much doubt it will happen.

You ask where else you can invest your pension contributions other than equities and housing. Well, how about bonds, cash, commercial real estate (either directly or via a quoted fund) or even gold (for Dr B).

I never cease to be amazed by the nonsense spouted in the media about the impact of A day and the modest rule changes for SIPPs. Even the FT at the weekend was full of cr@p about putting fine wine and race horses into a pension. Its all complete VI spin.

Can anyone come up with some facts (not opinions) that suggest otherwise?

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You guys seem to not be worried about SIPPs because you think few people will be able to buy more properties under the new regime.

What about the existing buy-to-letters? e.g. bought a house 5 years ago for 50K, now worth 180K - transfer into a SIPP for the 100+K tax advantage.

Get ready to pay more tax - for the BTL bonanza.

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In the SE you would be shocked...

I live and work in the city where its common. But my point is on a national scale its irrelevant (I think less than 0.1% of the working population).

Last year and this year Gordon Brown gifted the higher rate tax payers a very generous tax break for VCTs. For those not familiar with this scheme, you put 200k into a fund investing in small companies (allegedly high risk companies, but often backed by real estate or other hard assets) and you can instantly claim back 40% tax provided you keep your money in the fund for 3 years. In my view its a more attractive prospect than SIPPs, yet the schemes only raised 400m. That may sound like a big number but its far too small to influence the housing market (e.g. compared with 800bn of mortgage debt).

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Guest prudence
The reality is we all hate paying tax. When someone offers you a chance to buy a property at a 40% discount (I read somewhere that when you do the number crunching actually gives a higher discount) then that kind of tax saving tends to be all persuasive, irrespective of the finer points regarding rental yields.

An investment should not be made on the basis that it is tax efficient. An investment should be made on the basis that it is going to be profitable. I think that if you look at the figures for those who would even be in a position to use part of their pensions to buy an investment property, set this against the current climate of the market, appreciate the restrictions that apply putting a property into your pension scheme etc. you will find that the effect of Sipp changes on the market are likely to be insignificant..

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  • 302 Brexit, House prices and Summer 2020

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      • down 5% +
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      • up 5%



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