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spacepidgeon

How to force a HPC

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1st time poster here - I would like to get some thoughts on a bit of blue sky thinking -to relieve the misery of reality... the possibility of forcibly reducing house prices through the collaboration of people.

To start up I will offer a proposal that saves people money on tax, while benefiting society (hopefully!).

The first thing would be starting a 'project' and getting it up on the internet etc. to find homeowners who are looking to step UP the 'ladder' in a chain (as they do) -
as an example lets say there are 10 families whos nominal house values differ by £100k, i.e. -from the lowest priced=£100k to the highest=£1m, each wants to move up to the next step to the next dearest house.

Next we need a pot of money that will be used in the process of lowering house prices, this could be a (ftb?) crowdfunded pot of money or even a loan since the money will not be spent.
If this is not a viable option, an alternative is for the 10 homeowners (and a ftb) to first agree to pay into the pot the cost differences between houses which everyone pays into proportionally, i.e a £100k difference each in our example, giving a target figure of £1.1m.
 
Now the money is spent and the lucky 'outside the chain' seller gets his £1.1m which instead of consisting of 100k from the buyer plus the sale of their 1m house, is now paid for in 'cash'...

Each of the remaining 9 buyers, plus the ftb then buys for just 10% of the nominal cost - in the example the most expensive will be 100k and the cheapest (to the ftb) 10k!
 
If the 1.1m was crowdfunded, then each now pays their £100k, if they have already paid their £100k then no further money is actually paid, but each legally 'buys' for 10k more than they sell their previous home for.
This will save an amount of stamp duty dependent on the price - in this example it would be reduced to zero for all of the buyers (inc ftb)? This is a total saving of almost 150k, with those higher up the chain saving most.
How this money gets redistributed will be crucial, - one example may be everyone simply gets their money back, or alternatively everyone gets 15k.
I think there may also be potential for some capital gains tax savings? - tho im not sure how that works to be honest, and it may come back to bite when selling?

Anyway at the end of the day, the 1.1m is replaced, everyone saved some money (their incentive to take part), and we can do it all over again. Meanwhile house prices are lowered in the area. Which seems like its happy days for everyone? except the banks!? or is it?

Some thoughts...
- I dont know enough to know if people could move on mortgages etc.
- It would initially only help out one ftb at a time

More thoughts... Possible outcomes (good or bad?) include:

- less stamp duty, tax for uk gov
- a ftb gets a house at reduced cost
- now everyone lives in 'undervalued' houses? - an issue when they come to sell again?
- HPC? would such reduced house prices actually put downward pressure on other sales

There may need to be extra terms/conditons, but as far as I can tell the underlying principle is OK? What do you think?
Ive just come up with this so appreciate it may be total ********!!
Do you have any other ideas to share?

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I think if you want a hpc, there is a far simpler way. Give every estate agent a truth serum. That way their bs techniques of ramping up prices for their own profit would be irrelevant.

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I've often thought of how we could help to start a HPC .. and the best I could come up with would be to try and get the young and FTB's to boycott purchasing a house. This would involve a national campaign aimed at the young and anyone else aspiring to buy their first home, explaining exactly how and why they have been utterly screwed by the system. Of course, doing such a thing would be an uphill battle.. and I'm not convinced it would have much effect. 

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Seems to me effectively a part exchange scheme where only the ftb and the chain ender win. The ftb effectively pays less than100k and the chain ender gets more than market value because such a scheme would lower price anchoring. Two winners, eight losers, don't think it would work. Also the inbetweeners would presumably plunged themsrlves into negative equity willingy. They buy a house for 100k and have a mortgage of say 500k.

The Hmrc wouldn't wash it as a tax evasion px scheme.

Edited by crashmonitor

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12 hours ago, spacepidgeon said:

1st time poster here - I would like to get some thoughts on a bit of blue sky thinking -to relieve the misery of reality... the possibility of forcibly reducing house prices through the collaboration of people.

To start up I will offer a proposal that saves people money on tax, while benefiting society (hopefully!).

The first thing would be starting a 'project' and getting it up on the internet etc. to find homeowners who are looking to step UP the 'ladder' in a chain (as they do) -
as an example lets say there are 10 families whos nominal house values differ by £100k, i.e. -from the lowest priced=£100k to the highest=£1m, each wants to move up to the next step to the next dearest house.

Next we need a pot of money that will be used in the process of lowering house prices, this could be a (ftb?) crowdfunded pot of money or even a loan since the money will not be spent.
If this is not a viable option, an alternative is for the 10 homeowners (and a ftb) to first agree to pay into the pot the cost differences between houses which everyone pays into proportionally, i.e a £100k difference each in our example, giving a target figure of £1.1m.
 
Now the money is spent and the lucky 'outside the chain' seller gets his £1.1m which instead of consisting of 100k from the buyer plus the sale of their 1m house, is now paid for in 'cash'...

Each of the remaining 9 buyers, plus the ftb then buys for just 10% of the nominal cost - in the example the most expensive will be 100k and the cheapest (to the ftb) 10k!
 
If the 1.1m was crowdfunded, then each now pays their £100k, if they have already paid their £100k then no further money is actually paid, but each legally 'buys' for 10k more than they sell their previous home for.
This will save an amount of stamp duty dependent on the price - in this example it would be reduced to zero for all of the buyers (inc ftb)? This is a total saving of almost 150k, with those higher up the chain saving most.
How this money gets redistributed will be crucial, - one example may be everyone simply gets their money back, or alternatively everyone gets 15k.
I think there may also be potential for some capital gains tax savings? - tho im not sure how that works to be honest, and it may come back to bite when selling?

Anyway at the end of the day, the 1.1m is replaced, everyone saved some money (their incentive to take part), and we can do it all over again. Meanwhile house prices are lowered in the area. Which seems like its happy days for everyone? except the banks!? or is it?

Some thoughts...
- I dont know enough to know if people could move on mortgages etc.
- It would initially only help out one ftb at a time

More thoughts... Possible outcomes (good or bad?) include:

- less stamp duty, tax for uk gov
- a ftb gets a house at reduced cost
- now everyone lives in 'undervalued' houses? - an issue when they come to sell again?
- HPC? would such reduced house prices actually put downward pressure on other sales

There may need to be extra terms/conditons, but as far as I can tell the underlying principle is OK? What do you think?
Ive just come up with this so appreciate it may be total ********!!
Do you have any other ideas to share?

Thats too complicated for my brain to cope with, I cant see the prices really falling hard until some of the credit dries up, so as a cash buyer I'm just going to have to wait.

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1 minute ago, simon49 said:

Thats too complicated for my brain to cope with, I cant see the prices really falling hard until some of the credit dries up, so as a cash buyer I'm just going to have to wait.

MMR should mean not many people are able to prop up the pyramid ( unless people are lying  to access cash ).

Therefore the pyramid was being propped up by the BTLers accessing cheap funds.

Take away the BTLers, tax them into the ground of force them to borrow at sane levels...then guess what happens

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Its relatively easy to cause a house price crash whilst also keeping the market juiced IMHO.  Any of the below would help it along some are simple to implement and just show that there has been no real effort to cause an HPC or manage prices.

Minimum 30% deposit required max 70% LTV.  I may be wrong but do they not have a automatic rise for deposits in places like Hong Kong when prices go loopy.  It shows you the real aims of the HTB scheme eg 50k with a 5% deposit = £1,00,000 30% = £167k  leverage is the devil. 

When a bank lends on a house they lend on the house only no other income/asset can be used as a guarantee on residential property/retail mortgage.  When you cannot pay you enter a ADR scheme/mediation and hand back the keys a nice clean departure by the buyer facilitates a nice clean drop of liability by the lender.  If a lender is stupid enough to allow you to by at an unaffordable they suffer as they have the professionals.  They should have a nice deposit to cover this eventuality, once repossessed the bank will have to dispose within 6 months on the open market.  Subsidised bank lending cannot be used to land bank homes via shady offshore vehicles or bulk sale.

Stamp duty replaced with a 1% annual property tax.  Less for cheap houses more for huge ones and very expensive for hoarders.

Capital gains payable if house sold under 5 years and bill reduced by 1/5 every year.  No more buying holding and flipping.

You can continue to subsidise mortgages etc its just that mortgages will be cheap when they are safe mortgages.

I appreciate the crash needed is in the order of 50% and I also appreciate that this will cause huge problems so by stating prices have to come down but also subsidising mortgages you create a more vibrant market at this lower level.

However its all ******** as the market is run for the banks benefit and we own big chunks of banks so better to just keep it all in the air until it collapses.



 

Edited by Fromage Frais

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2 minutes ago, Fromage Frais said:

Its relatively easy to cause a house price crash whilst also keeping the market juiced IMHO.  Any of the below would help it along some are simple to implement and just show that there has been no real effort to cause an HPC or manage prices.

Minimum 30% deposit required max 70% LTV.  I may be wrong but do they not have a automatic rise for deposits in places like Hong Kong when prices go loopy.  

When a bank lends on a house they lend on the house only no other income/asset can be used as a guarantee on residential property/retail mortgage.  When you cannot pay you enter a ADR scheme/mediation.

Stamp duty replaced with a 1% annual property tax.  Less for cheap houses more for huge ones and very expensive for hoarders.

Capital gains payable if house sold under 5 years and bill reduced by 1/5 every year.  No more buying holding and flipping.

You can continue to subsidise mortgages etc its just that mortgages will be cheap when they are safe mortgages.

I appreciate the crash needed is in the order of 50% and I also appreciate that this will cause huge problems so by stating prices have to come down but also subsidising mortgages you create a more vibrant market at this lower level.

However its all ******** as the market is run for the banks benefit and we own big chunks of banks so better to just keep it all in the air until it collapses.



 

I'd add more penal inheritance tax, the problem we have at the moment is inter-generational Equity accumulation. If affordability is off the scale then it's not surprising if the house some people own is part derived from income earned by their grandfather in 1930.

As i said on another thread houses aren't really bought anymore, they are transferred between parties using the existing 10.5 trillion of National wealth in private hands (including the bogus house valuations) that could simply mean  swapping the Equity from one property to another. Meanwhile anybody new to the game is locked out, especially as far as the Market in the south is concerned.

 

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4 minutes ago, BuyToLeech said:

The issue needs a properly funded lobby group.

The politics is what it is because there is no high profile opposition to the status quo.

There will never be the funds available to the extent of the other side.

The big money is always in getting people on crack not in getting them off it.

Edited by Fromage Frais

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13 minutes ago, Fromage Frais said:

There will never be the funds available to the extent of the other side.

The big money is always in getting people on crack not in getting them off it.

No, but you don't need more money, just some, particularly when the issue is so indefensible. 

Sadly, I think even that isn't likely.

You need on the order of a million quid, and raising that in small amounts from lots of contributors is probably impossible. 

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16 hours ago, spacepidgeon said:


Now the money is spent and the lucky 'outside the chain' seller gets his £1.1m which instead of consisting of 100k from the buyer plus the sale of their 1m house, is now paid for in 'cash'...

So the incentive to join this scheme is for people to have bought the most expensive property they probably couldn't afford? 

It's far simpler to lower house prices. Just start a website campaign called "3timesmainincome". House prices are related to what people are willing to borrow. The rise from 3x Main income houses of £60k in the late 90's to 4.5x (or 5x) joint income £200k houses now, accounts for the house price rises. The speculators and BTLers have ridden that lending wave up for the capital appreciation. If people only borrowed 3x main income and told bankers trying to persuade them to borrow more, to sod off, prices would fall. Then with no capital appreciation we would be back to house prices relating to main income not banker induced over borrowing. This would give the joint income JAMs a disposable second income again and instead we could have BOMs (Bankers Only Managing).

 

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3 hours ago, TheCountOfNowhere said:

MMR should mean not many people are able to prop up the pyramid ( unless people are lying  to access cash ).

Therefore the pyramid was being propped up by the BTLers accessing cheap funds.

Take away the BTLers, tax them into the ground of force them to borrow at sane levels...then guess what happens

I really hope your right Count, Ive been waiting to buy for 15 years now, thought it was in the bag in 2007 and so it should. I didn't bank on interest rates been lowered and money been printed, my mind is not wired to deal with those things.

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9 hours ago, simon49 said:

I really hope your right Count, Ive been waiting to buy for 15 years now, thought it was in the bag in 2007 and so it should. I didn't bank on interest rates been lowered and money been printed, my mind is not wired to deal with those things.

I did not see that coming either.

Now hoping for interest rate rise, BTL falls and oversupply due to new builds and coming white paper. Pop

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Best way to force a house price crash, I think, is just to watch the weight of demographics crush the pyramid scheme into dust.

Look at the headlines over the last few months about the NHS and the crisis in social care. Britain is in an unsustainable social and economic situation because most of society is hooked on the idea that houses are "worth" the crazy amounts they've been pumped up to over the past couple of decades. But, at the same time, no one is prepared to use that wealth for anything socially or economically useful. Release some equity to pay for your own care in old age? Absolutely not. Find a way to tax that wealth to fund the burden of an ageing population on the NHS? No way, that's for working people to do.

Eventually the scales tip one way or the other. Either politicians decide "this can't go on", and house prices are pulled down in a relatively orderly way. Or, social services collapse, taxes on incomes rise and demand continues to get sucked out of the economy. If we go that second route, then the value of houses - which, at a very fundamental level, are a claim on life in Britain - collapse in a disorderly fashion because the fundamental case for making huge sacrifices to get a stake in society have disappeared.      

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On 2/3/2017 at 7:29 AM, crazypabs said:

I think if you want a hpc, there is a far simpler way. Give every estate agent a truth serum. That way their bs techniques of ramping up prices for their own profit would be irrelevant.

Would make no difference.  HPI HPI solid values, and future HPI, not enough houses etc.   They make their mind up about value-for-money before they even approach EAs.  Buyers look at RM etc.  See asking prices.

No HPC risk, only a few deluded 'supreme-knowledge' numbskull anarchists - and the possibility exists we are.    What's the use of being 'right' about housing financialisation, if you're end up paying multiples more in rent down the years, and into the future, than the buyers who are £100Ks/£1ms up already from when hpcers first began worrying about 'they don't know what they're doing' for buyers.

 

On 2/3/2017 at 8:51 AM, RickyD said:

I've often thought of how we could help to start a HPC .. and the best I could come up with would be to try and get the young and FTB's to boycott purchasing a house. This would involve a national campaign aimed at the young and anyone else aspiring to buy their first home, explaining exactly how and why they have been utterly screwed by the system. Of course, doing such a thing would be an uphill battle.. and I'm not convinced it would have much effect. 

Some people think houses are great value.  No one is dragging people to viewings and into arranging mortgages.  Bomads happily enabling to pay these prices too.

It's a market out there.   No conspiracy.  If there was wider fear of it being a bubble, would be a lot more sellers in the market imo.

We don't need another 'completely wrong' HPC hero, imo.  Way too many of them already.  People make their own choices.  If people thought prices too high, there would be more sellers, and houses wouldn't have been selling at ever more expensive prices in my area for past 8 years of HPC wrongness.

 

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On 2/3/2017 at 0:29 PM, crashmonitor said:

I'd add more penal inheritance tax, the problem we have at the moment is inter-generational Equity accumulation. If affordability is off the scale then it's not surprising if the house some people own is part derived from income earned by their grandfather in 1930.

As i said on another thread houses aren't really bought anymore, they are transferred between parties using the existing 10.5 trillion of National wealth in private hands (including the bogus house valuations) that could simply mean  swapping the Equity from one property to another. Meanwhile anybody new to the game is locked out, especially as far as the Market in the south is concerned.

 

If you're half-right about this, then consider the day that banks want to get a lot more fresh debt on all this owner side £Trillions of wealth, in a shakeup.

I contend the banks have been readying for it.  Including allowing foreverHPIers to dance into over £200Bn of fresh BTL debt, on over 1.8 million houses, since 2010 alone, with their own homes there as security against that debt.

For all the hpc cries about owner victims and debt, and the banks pulling some sort of con, there appears to be resistance to the idea that millions of owners are sitting pretty on £Trillions in equity wealth, and that people in the market are capable of making their own market decisions.  Risk.  There is no all-knowing superior being to guide you through every decision in life, and certainly not any on HPC. 

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On 02/02/2017 at 9:21 PM, spacepidgeon said:

1st time poster here - I would like to get some thoughts on a bit of blue sky thinking -to relieve the misery of reality... the possibility of forcibly reducing house prices through the collaboration of people.

To start up I will offer a proposal that saves people money on tax, while benefiting society (hopefully!).

The first thing would be starting a 'project' and getting it up on the internet etc. to find homeowners who are looking to step UP the 'ladder' in a chain (as they do) -
as an example lets say there are 10 families whos nominal house values differ by £100k, i.e. -from the lowest priced=£100k to the highest=£1m, each wants to move up to the next step to the next dearest house.

Next we need a pot of money that will be used in the process of lowering house prices, this could be a (ftb?) crowdfunded pot of money or even a loan since the money will not be spent.
If this is not a viable option, an alternative is for the 10 homeowners (and a ftb) to first agree to pay into the pot the cost differences between houses which everyone pays into proportionally, i.e a £100k difference each in our example, giving a target figure of £1.1m.
 
Now the money is spent and the lucky 'outside the chain' seller gets his £1.1m which instead of consisting of 100k from the buyer plus the sale of their 1m house, is now paid for in 'cash'...

Each of the remaining 9 buyers, plus the ftb then buys for just 10% of the nominal cost - in the example the most expensive will be 100k and the cheapest (to the ftb) 10k!
 
...

The HMRC would regard this as tax evasion, do their own valuations and bill accordingly.  

The (world, let alone UK) economy has been completely unbalanced by CB actions since 2007.  If house prices crashed, even a little, wealthy people would come in and support it.  You could crash it by changing tax policy by various governments, but they don't want to be responsible for the crash, so won't instigate it.

The easiest way to get a 'crash' at this point would be to have a currency crash.

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Forcing HPC is not necessary; just need to stop forcing HPI.

And a slightly different angle from MSM.  Like a program where Krusty and Phil help to find a good place to rent, not to buy! 

And continue shifting BTL landlords' image from savvy investors to leaches that they are.  Hopefully, in 10 years time, admitting that one has BTL portfolio will be on a similar level to admitting having spent some time in jail for selling drugs.

I am not saying property is theft, I am saying that unproductive rent-extraction is.

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22 minutes ago, dgul said:

The HMRC would regard this as tax evasion, do their own valuations and bill accordingly.  

The (world, let alone UK) economy has been completely unbalanced by CB actions since 2007.  If house prices crashed, even a little, wealthy people would come in and support it.  You could crash it by changing tax policy by various governments, but they don't want to be responsible for the crash, so won't instigate it.

The easiest way to get a 'crash' at this point would be to have a currency crash.

change of tax policy - section 24 over the next 3yrs, also SDLT increases

currency crash - Brexit vote caused almost 20% crash in sterling plus the threat of hard brexit are further spooking the market over the next 24 months.

further more if inflation increases past 2% bank of England will have to seriously consider counter measures such as more quantitative easing or more likely an increase in interest rates, thus causing the mortgages of not just btl but all homeowners to increase.

repossession repossession repossession!

 

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1 hour ago, Bear Hug said:

And continue shifting BTL landlords' image from savvy investors to leaches that they are.  Hopefully, in 10 years time, admitting that one has BTL portfolio will be on a similar level to admitting having spent some time in jail for selling drugs.

Agree on this one. You don't even have to go the whole nine yards of portraying landlords as leeches (although that is true) because the fact is that BTL is just not a very savvy investment.

Apparently, it's too difficult to make people realise that buying one asset, in one currency, that's probably tied to the same local economy that your own job relies on is concentrating rather than spreading risk. Apparently, it's also too difficult to make people compare the returns on entirely sterling-denominated UK property versus a balanced portfolio of other assets.

But what you can't hide from people is a whole business model being wiped out at the stroke of the Chancellor's pen. When that happens, you're not a savvy leech, you're an arrogant and dumb one.

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