Jump to content
House Price Crash Forum
Logic

Simple Solution For House Prices

Recommended Posts

The solution to unaffordable residential housing is easy, just set capital gains tax on residential investment properties and second homes to 80% or higher. It's absurd and unfair that hard working people and families cannot afford normal basic accomodation because others are using housing as a capital gains investment vehicle.

Capital appreciation from residential property should never be encouraged as a good investment to anyone let alone pension funds or institutional investors because of the damaging social implications that high property prices have on society. The lack of affordable housing for hard working families is a direct result of residential property being used as an investment vehicle for capital gains.

Given that other basic life essentials such as gas, water, electricity, telephone etc are all subject to price caps and regulation by government, why is housing affordability not regulated in the same way when it has equally if not greater impact on society and living standards than the items listed above?

It would be difficult to suggest a model where government was directly able to regulate house prices, but by creating policies that discourage residential housing and second homes as an investment for capital gains purposes, it would certainly have a large impact on property prices for ordinary working people. It would also reduce the asset bubble effect so people wouldn't have to worry as much about negative equity when they do make the biggest financial decision of their life and buy their first house.

If you agree then start lobbying your local government representative today for a 80+% Capital Gains Tax on residential investment properties and second homes.

Your thoughts?

Share this post


Link to post
Share on other sites

Your thoughts?

What would your position be on properties that are currently in ownership, bearing in mind that the only reliable way to value a property is to sell it?

Share this post


Link to post
Share on other sites

This topic and that suggestion has been done before many times and debunked - it is impractical, statist, electoral suicide, unjust and at odds with the rest of our free market economy. "Tax it" is not a fix for anything in my book. There are other ways to potentially achieve the same ends (eg see my thread on asset prices being included in cpi measures in future http://www.housepricecrash.co.uk/forum/ind...opic=17131&hl=)

Share this post


Link to post
Share on other sites

What would your position be on properties that are currently in ownership, bearing in mind that the only reliable way to value a property is to sell it?

I don't see the relevance of your question, as capital gains tax is only paid when you sell and make a realised profit. Valuation is not required at any point.

Share this post


Link to post
Share on other sites

What would your position be on properties that are currently in ownership, bearing in mind that the only reliable way to value a property is to sell it?

You couldn't bring this in retrospectively (unfortunately) but a policy like this would help ensure that the boom / bust cycle of housing is reduced in future. If it was implemented now, I think it would have a pretty big effect in bringing down prices more quickly because there wouldn't be nearly as many new entrants of investment buyers.

Share this post


Link to post
Share on other sites

You couldn't bring this in retrospectively (unfortunately) but a policy like this would help ensure that the boom / bust cycle of housing is reduced in future. If it was implemented now, I think it would have a pretty big effect in bringing down prices more quickly because there wouldn't be nearly as many new entrants of investment buyers.

I agree that it is a good idea, I haven't seen this so-called "debunking" that is mentioned by Tempest.

The main problem is we have a government with an official policy of encouraging investment in residential property. They basically want to privatise the provision of local authority housing by encouraging private landlords to take their place.

As for electoral suicide - I doubt it, as most people do not own more than 1 property. It would be no more difficult to administer than the current system.

Share this post


Link to post
Share on other sites

This topic and that suggestion has been done before many times and debunked - it is impractical, statist, electoral suicide, unjust and at odds with the rest of our free market economy. "Tax it" is not a fix for anything in my book. There are other ways to potentially achieve the same ends (eg see my thread on asset prices being included in cpi measures in future http://www.housepricecrash.co.uk/forum/ind...opic=17131&hl=)

CPI would probably be a good input into helping control house prices but unfortunately I don't think it would be as effective as taxing capital gains on residential investment property and second homes. The problem with CPI is that there are so many different assets being included in the CPI figure that price rises of one asset can be offset by price drops in another. My point is that the main thing government should do is to discourage residential house price inflation by investors that hoping to make a return on their investment via capital gains.

Share this post


Link to post
Share on other sites

I don't see the relevance of your question, as capital gains tax is only paid when you sell and make a realised profit. Valuation is not required at any point.

It would be unjust to apply it retrospectively to gains that have already accrued to properties that were purchased many years ago, but the only way to tell exactly how big those gains are, and the starting point for the new 80% rate, would be to sell the property.

Share this post


Link to post
Share on other sites

I agree that it is a good idea, I haven't seen this so-called "debunking" that is mentioned by Tempest.

The main problem is we have a government with an official policy of encouraging investment in residential property. They basically want to privatise the provision of local authority housing by encouraging private landlords to take their place.

As for electoral suicide - I doubt it, as most people do not own more than 1 property. It would be no more difficult to administer than the current system.

I don't think that genuine private landlords would be discouraged (ie. those that aren't just in it for the capital gains). If house prices are lower then rental yields are higher so you can still invest in residential property and use it as a "business to provide housing" as long as you were in it for the long term and weren't just trying to make a relatively quick profit from the capital gains.

Share this post


Link to post
Share on other sites

This topic and that suggestion has been done before many times and debunked - it is impractical, statist, electoral suicide, unjust and at odds with the rest of our free market economy. "Tax it" is not a fix for anything in my book. There are other ways to potentially achieve the same ends (eg see my thread on asset prices being included in cpi measures in future http://www.housepricecrash.co.uk/forum/ind...opic=17131&hl=)

On the other hand, governments should not encourage greed by reducing tax to help people buy extra homes. I understand second home owners get a REDUCTION in council tax. This must be Labour policy to help people with more than one home to afford their indulgence. :angry:

Share this post


Link to post
Share on other sites

For me, it would be a shame.

Landlords relying in capital gains are likely to be in a position to charge less rent (esp. if you look like a no hassle tenant).

/G

I disagree - that would imply that when house prices come back down (as we all know they will in the long run) that you would be charged more rent to compensate the landlord for his capital losses. The landlord will always charge as much as the rental market is willing to bare - there's not much charity in their cause as far as I can tell!

Share this post


Link to post
Share on other sites

It would be unjust to apply it retrospectively to gains that have already accrued to properties that were purchased many years ago, but the only way to tell exactly how big those gains are, and the starting point for the new 80% rate, would be to sell the property.

As a general rule, laws are not applied retrospectively. As the OP stated, no need to apply it retro. Apply it for all future sales, and the number of new entrants to the market would plummet. Speculation would be wiped out, and most people could afford to buy.

Share this post


Link to post
Share on other sites

As a general rule, laws are not applied retrospectively. As the OP stated, no need to apply it retro. Apply it for all future sales, and the number of new entrants to the market would plummet. Speculation would be wiped out, and most people could afford to buy.

So does anyone have any good suggestions on how we can get enough people to put pressure on the government to put forward a policy like this to parliament?

Share this post


Link to post
Share on other sites

As a general rule, laws are not applied retrospectively. As the OP stated, no need to apply it retro. Apply it for all future sales, and the number of new entrants to the market would plummet. Speculation would be wiped out, and most people could afford to buy.

If you apply it to future sales, you're applying it retrospectively, to gains that have been made up to the current date but not yet realised by selling the property.

Share this post


Link to post
Share on other sites

If you apply it to future sales, you're applying it retrospectively, to gains that have been made up to the current date but not yet realised by selling the property.

Yes, but you would have to apply it to future purchases, not existing holdings that are being sold in the future. I'm sure this policy would have the desired effect though.

Share this post


Link to post
Share on other sites

I'm sure this policy would have the desired effect though.

I think that it would be much simpler to put limits on mortgage lending to 3.5x salary for everyone and police it properly.

Share this post


Link to post
Share on other sites

I think that it would be much simpler to put limits on mortgage lending to 3.5x salary for everyone and police it properly.

That doesn't help stop price rises when you've got pension funds, investment institutions, and wealthy people with lots of equity trying to speculate and push the prices up. A high capital gains tax on residential investment properties is the simplest way of regulating the price rises.

Share this post


Link to post
Share on other sites

I think that it would be much simpler to put limits on mortgage lending to 3.5x salary for everyone and police it properly.

I think that would be a great idea. Stop people borrowing more than they can afford. How many houses would be sold to first time buyers then?

How Much Can You Borrow? - http://www.housepricecrash.co.uk/forum/ind...showtopic=17173

Share this post


Link to post
Share on other sites

I think that it would be much simpler to put limits on mortgage lending to 3.5x salary for everyone and police it properly.

This would actually be much harder to police. Every mortgage application would have to be carefully vetted, and ways would be found to get around it.

The capital gains tax method would be much simpler because the system is already in place. Investment properties are already subject to CGT at the normal rate, so there is no additional regulation or expense required. It would simply go on the tax return as disposal of property as it already does. Evading the tax would be treated in the same way as all other evasion (i.e. stiff penalties which are sufficient to put most people off lying to the taxman when there is a clear paper trail).

Share this post


Link to post
Share on other sites

This would actually be much harder to police. Every mortgage application would have to be carefully vetted, and ways would be found to get around it.

The capital gains tax method would be much simpler because the system is already in place. Investment properties are already subject to CGT at the normal rate, so there is no additional regulation or expense required. It would simply go on the tax return as disposal of property as it already does. Evading the tax would be treated in the same way as all other evasion (i.e. stiff penalties which are sufficient to put most people off lying to the taxman when there is a clear paper trail).

Oh dear, another lunatic idea for even higher taxes and state intervention to tangle our economy in even more red tape and drive enterprising people and their hard earned capital abroad.

Share this post


Link to post
Share on other sites

Oh dear, another lunatic idea for even higher taxes and state intervention to tangle our economy in even more red tape and drive enterprising people and their hard earned capital abroad.

That is hilarious....you won't find much sympathy from me if you describe BTL or any other form of speculation as "enterprising". Where is the red tape? Capital gains tax is already payable on investment property - only a change in the rate is being proposed here. There would be no additional red tape.

Share this post


Link to post
Share on other sites

That is hilarious....you won't find much sympathy from me if you describe BTL or any other form of speculation as "enterprising". Where is the red tape? Capital gains tax is already payable on investment property - only a change in the rate is being proposed here. There would be no additional red tape.

Why isnt it enterprising? Its a business like any other. Some people have made a lot of money. Others will probably lose a lot. BTLs are providing a service.

Targetting one sector or asset class with special taxes is a favourite tactic of labour. It distorts the market and pushes investment elsewhere.

I am sure you will disagree about this but i would expect no more from someone who thinks mortgages should be banned and thinks the German banking industry is a role model for the rest of the world.

Share this post


Link to post
Share on other sites

Why isnt it enterprising? Its a business like any other. Some people have made a lot of money. Others will probably lose a lot. BTLs are providing a service.

Targetting one sector or asset class with special taxes is a favourite tactic of labour. It distorts the market and pushes investment elsewhere.

I am sure you will disagree about this but i would expect no more from someone who thinks mortgages should be banned and thinks the German banking industry is a role model for the rest of the world.

What a load of cobblers.....thanks for revealing your new identity.

Pushing investment elsewhere is exactly the intention. Speculation in the housing stock is exactly what needs to be prevented, the money would be diverted to useful enterprise which actually benefits the economy rather than acting as a millstone around its neck.

Are you seriously suggesting that speculation in housing stock with its resultant asset bubble is beneficial to the economy? That we wouldn't be better off discouraging it, having lower house prices and more money invested in genuine wealth creating businesses?

As for your talk of German banks, banning mortgages etc. I merely put the topics up for discussion. If you can't separate that from my personal opinions you have a problem.

Share this post


Link to post
Share on other sites

What a load of cobblers.....thanks for revealing your new identity.

... and what is my "new identity"?

Pushing investment elsewhere is exactly the intention. Speculation in the housing stock is exactly what needs to be prevented, the money would be diverted to useful enterprise which actually benefits the economy rather than acting as a millstone around its neck.

Government is cr@p at directing investment. Look at its track record. Let the market decide.

Are you seriously suggesting that speculation in housing stock with its resultant asset bubble is beneficial to the economy? That we wouldn't be better off discouraging it, having lower house prices and more money invested in genuine wealth creating businesses?

Do you live in rented accomodation? If so, do you think your land lord is providing you with a useful service?

As for your talk of German banks, banning mortgages etc. I merely put the topics up for discussion. If you can't separate that from my personal opinions you have a problem.

To be fair your suggestion of banning mortgages was an interesting discussion, if a little far fetched. On German banks I seem to recall that you strongly believed that the German banking model was superior to ours without the slightest bit of knowledge to support your view.

Edited by balamory

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.