The New Property Tax Regime Is The Catalyst ......

[Bland Unsight]

Slightly off topic, but in relation to prices the top of the London market, sticking £18bn worth of tax on the City wouldn't help either.

DT article - Brussels offers UK €7.7bn to adopt controversial bank tax.

Could it happen?

[Son of Taeper]

It certainly seems that way to me.

In my view, renting, as I do, is effectively being short the housing market.

Dead cat bounces attract many of the last shorts (FTBs, STRs etc) who act as the last prop to the market before it falls away again to its eventual bottom. I

actually feel bad for this cohort as they were right about what will happen but not patient enough to see things through to the end.

An interesting op, and you obviously put time and intel into it.

You say you are renting atm.

Might I be rude enough to enquire if you ever owned a property, str'd in the past, etc?

What you pay in rent atm and how long you have been renting?

[okaycuckoo]

being seen to ***** the bubble

Whatever you're doing to that innocent bubble, stop it now.

[Rare Bear]

The buyer has the stamp duty burden to pay when those companies come to sell.

If you mean the proposed annual tax for companies holding property over £2m+, then it's possible that could happen. For now I'm happy enough with the stamp duty changes and crackdown on companies over £2m with 15% rate.

For any annual charge tax, and capital gains owed, any selling and leaving without paying it, could be prevented by a checkout process where sale can only go through after checks the company has paid all the tax they owe. They do something similar with IHT that's owed, with HMRC ensuring it gets paid first.

I personally think there's something in the thread of yesterday, with the suspicion Government and banks are getting pro-HPC. The shared-ownership and mortgage guarantee just being sops for the fools and the developers as it plays out, and Government can play innocent to those buyers who again, get stuck in starter homes despite buying in 2012-13 from their own free will.

So many homeowners who think they've got £2m+ homes. That banana mansion the seller has been trying to sell for years. Many others I can think of similar. And London is awash with £2m+ homes. This London woman never sold according to Zoopla and prices getting much keener on her road with new supply coming on. Going to be many seller pain stories coming up I think, at the upper end of the market.

Yes; quite suddenly the debt to equity position could go from something they've never worried about to very uncomfortable for those owners with some significant falls in value. John Pessimist, maybe, but if they do intend to full clamp down, then property taxes are one of the hardest to escape. And buyers or those owning in companies would also have to pay specialists to find any such loopholes. Osborne sounded very firm when saying they'd act retrospectively on buyer finding ways to bypass it in ways that haven't come to light.

The problem with acting retrospectively on any taxation related issue is that it would make the UK seem like a banana republic to possible foreign investors.

[The Masked Tulip]

Doubt it. For MEWing, your income is still used to calculate the multiples. So to get to more than 10-20% debt:equity on a 5m property you need to have rather substantial amounts of ongoing income.

Have you seen middle to senior BBC manager salaries - a lot of them are couples as well.

[Bland Unsight]

The problem with acting retrospectively on any taxation related issue is that it would make the UK seem like a banana republic to possible foreign investors.

And seeing as these foreign investors are investing in houses and fuelling our bubble, when did appearing like a banana republic to them get to be a problem?

For real investors you got a cut in the tax on their employees' earnings and a cut in Corporation Tax. I'm no Tory, but to the untrained eye it looks like they're getting this right.

Maybe next year George can dress up in fatigues, get some sunglasses and a stick on moustache - really work the whole banana republic angle, stand to attention for a couple of verses of Jerusalem and then put in a tapered Property Tax hitting people with £1m houses...

[Giordano Bruno]

I thought the nature of a bubble is that the final process is instantaneous.

I see a stagnant moribond Market waiting stubbornly for prices to rise up to sellers expectations.The belief that the government would attempt to keep house prices deliberately high for the foreseeable future has just gone pop.

That was it, the turning point.

If there is not an immediate stream of smarter BTL properties up for sale and a downward surge on asking price from keener sellers, just before the flood of all the rest, then logic no longer applies.

I haven't come across the idea that the bursting of a bubble is instantaneous before. Transactions in property can take about 3 months to implement, I believe, and selling can take years if no buyers come forward. So I don't see how the collapse could be instantaneous for property.

The last uk property bubble had the fall starting almost instantaneously, as I recall, because it was ready to go pop and there was rush to buy before a deadline (of partners being included in miras, I believe) so when the deadline passed there was a downward pressure, and the gov't did not try to prop up prices. But the fall itself showed an intertia which would be expected for illiquid assets.

I think logic always applies to reality.

Just my take.

[mightytharg]

I haven't come across the idea that the bursting of a bubble is instantaneous before.

Hahaha. What a Maroon!

[Giordano Bruno]

Hahaha. What a Maroon!

Would you care to elaborate?

[mightytharg]

Would you care to elaborate?

No need for me to explain.Try it yourself.

[Giordano Bruno]

No need for me to explain.Try it yourself.

The topic is asset bubbles, not soap bubbles.

[Bland Unsight]

No need for me to explain.Try it yourself.

Try it yourself with a camera shooting 2,500 frames per second, won't look very instantaneous then...

http://www.youtube.com/watch?v=SpcXtmkk26Q

[Bland Unsight]

And if you're hard to shock and think that bubble formation always happens nice and slow, put Byford Dolphin into wikipedia, to find out what happens when you shift people from 8 atmospheres of pressure back to 1 atmosphere in less than a second, and as the man said, the topic is asset bubbles, not soap bubbles or exploding divers.

[19 year mortgage 8itch]

And if you're hard to shock and think that bubble formation always happens nice and slow, put Byford Dolphin into wikipedia, to find out what happens when you shift people from 8 atmospheres of pressure back to 1 atmosphere in less than a second, and as the man said, the topic is asset bubbles, not soap bubbles or exploding divers.

Property is always cited as being illiquid so I suppose it goes without saying. What's the average time between offer accepted and completion? 12 weeks? More? Less? Not exactly instant is it?

[Giordano Bruno]

Property is always cited as being illiquid so I suppose it goes without saying. What's the average time between offer accepted and completion? 12 weeks? More? Less? Not exactly instant is it?

SeeYouNextTuesday & ChairmanOfTheBored, Thanks Guys.

[Bland Unsight]

Property is always cited as being illiquid so I suppose it goes without saying. What's the average time between offer accepted and completion? 12 weeks? More? Less? Not exactly instant is it?

I suppose the problem is that the "bubble" metaphor is being mistreated. We call asset prices bubbles "bubbles" because they are full of nothing but metaphorical air, and usually hot air at that and once the people buying into them change their minds and start selling, they rapidly vanish, like a bubble that is popped. The metaphor is apt but imperfect.

[There is no happiness inside these brackets, only pedantry, save yourself, don't read it!: Strictly speaking nothing happens in an instant, but rates of change can have instantaneous values, i.e. values at an instant. Any process that occurs in time requires time to elapse. You find the instantaneous rate of change by letting the elapsed time, over which you considered the change, tend towards zero - gotta love your differential calculus ]

[Asheron]

retroactive ??????????????????

WTF LOL

How can they get away with that?

[19 year mortgage 8itch]

retroactive ??????????????????

WTF LOL

How can they get away with that?

I don't think anything is retrospective as such but he'll think about introducing a new tax for property held in a manner that seemed to avoid tax when it was bought. Alls fair in love and war.

[frederico]

the government are going to get more and more desperate over the next couple of years, I can't see how there can be growth and I can't see anything but unemployment rising.

because the numbers don't add up, whether or not this leads to HPC we shall see, we are way over populated.

[rantnrave]

Is the consensus that this announcement in the budget is more significant than the recent SVR hikes re a HPC?

Very interesting that this was one of the few items that wasn't leaked. Suggests to me that it was agreed late in the day but also that TPTB are serious about seeing this one through.

[bmf]

Hahaha. What a Maroon!

Hey - don't bring colour into this!

[WageSlaveBear]

Not sure why bubble applied to house prices is contentious, but I think the moment a bubble collapses is a fairly sharp turning point in sentiment.

That moment just before a tipping point is reached in general awareness in society.

Bit like the off topic thread on how brain activity shows preparation to move about 0.5 secs before you consciously decide to move.

The time taken to process that offloading of property is not so important.

That's just the balloon endlessly wailing round the room until final collapse.

Already been burst and that was the instantaneous bit.

[okaycuckoo]

That moment just before a tipping point is reached in general awareness in society.

Bit like the off topic thread on how brain activity shows preparation to move about 0.5 secs before you consciously decide to move.

Link?

Would like to see a debate on free will and its impact on HPI!!

[Venger]

Not sure why bubble applied to house prices is contentious, but I think the moment a bubble collapses is a fairly sharp turning point in sentiment.

That moment just before a tipping point is reached in general awareness in society.

Bit like the off topic thread on how brain activity shows preparation to move about 0.5 secs before you consciously decide to move.

The time taken to process that offloading of property is not so important.

The bubble collapsed when the funding model crashed. Government panicked, interest rates lowered with all sorts of measures brought in to arrest the declines and even pump prices back up. It's done very little for economic growth and prospects, possibly making the impending house price crash even worse. Now it's going to be allowed to be allowed to crash because of economic necessity.

Warped and damaging belief systems are hard to break. Such as the one house prices always go up, reinforced by house price hyperinflation since 2000, and longer term over the decades. It's finally been broken by economic necessity. The only thing which could break the belief system, other than invasion or a plague or massive disaster. Sentiment though is still very strong (my house is special, this area is always in demand). That budget will go a long way to bringing house price sentiment down over the remainder of this year.

Market forces creeping into play such rising LIBOR SVRs and tougher interest only mortgages criteria. Inflation in fuel and energy prices with less money for people to spend. Now this shock and awe budget for housing, with the market being so top heavy.

Those who move first to lower prices in order to find a buyer and sell, bring down values for all the other owners. It doesn't take many sales at margin, at ever lower prices to sharply bring down values for all owners. In turn bringing out new sellers. The vast majority of owners do nothing but their homes lose value as the market falls around them.

Lenders restrict new mortgage lending as prices fall. The top end of the market looks especially vulnerable and brittle at so many other levels. Banks and their agents are beginning to take harder attitude for those in arrears is what I'm hearing.

Someone on this thread said they were surprised the Conservatives have allowed this budget and stamp duty changes They didn't really intervene with the market in the late 80s early 90s crash. You can't protect or please all voters, and there are new voters who are grateful for a crash. For the first time I can actually imagine myself being able to buy a house, sometime in the next 2-3 years.

Edited March 25, 2012 by Venger

[Mikhail Liebenstein]

The thing that is interesting about this new tax is whether it will dent prices.

Short term I'd say yes, but only as a one off, what would have had more effect would be a 1% LVT on those same properties.

Long term I am less sure, remember prices rose a lot whilst the previous rate of stamp duty existed, and it is thought stamp duty actually increased prices as by increasing costs, it lowered housing liquidity.