guest_northshore Posted October 30, 2017 Share Posted October 30, 2017 9 minutes ago, iamnumerate said: They did say Sounds fair to me. Why do you think the report's headlined "Why we should abolish SDLT" rather than "Why we should increase Council Tax a lot". The answer is because the latter part wouldn't happen, and they know it. They even allude to it in the section on rights and the conclusion. Quote Link to comment Share on other sites More sharing options...
goldbug9999 Posted October 30, 2017 Share Posted October 30, 2017 3 hours ago, iamnumerate said: Suppose it were only abolished for your first property? I.e Landlords still have to pay it? The problem is that any reduction in SDLT is not passed on to buyers - its pocketed by sellers in the form of price increases. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 30, 2017 Share Posted October 30, 2017 3 hours ago, iamnumerate said: Suppose it were only abolished for your first property? I.e Landlords still have to pay it? Or keep the existing SDLT rules for landlords and second homies, or raise it further, and then give full relief to FTBs or people just moving from one home to the other. Quote Link to comment Share on other sites More sharing options...
goldbug9999 Posted October 30, 2017 Share Posted October 30, 2017 42 minutes ago, Venger said: Not fully certain how I feel about any change to SDLT. My main view is sellers should pay it. It doesnt matter who technically hands over the money because a tax is effectively paid by the transaction participant with the least pricing power. For example employers national insurance is technically paid by employers but in reality it is funded by employees in the form of lower salaries because the employer generally has more pricing power in the transaction. Quote Link to comment Share on other sites More sharing options...
goldbug9999 Posted October 30, 2017 Share Posted October 30, 2017 1 hour ago, Freki said: If you buy the limited company holding the property, you are not paying SDLT correct? If you live in such a house you would be taxed on the imputed rent as a benefit in kind (unless you pay actual rent to the limited company and extract the money later somehow). Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 30, 2017 Share Posted October 30, 2017 1 hour ago, Wayward said: I would worry about what lower SDLT means for prices...because of scarcity and competitive bidding prices are always as high as folks can afford ie as much as they can borrow. Lower SDLT opens up more credit availability = higher prices.??? I read a study on this a while ago. I've been trying to find it to post for you but in summary there was no link between abolition of SDLT and house prices. There was no real impact in transactions during the period other than a rush as the Stamp Duty holiday expired. I guess this stands to reason although in a situation where the stamp duty would get you over an interest rate threshold people might be more willing to borrow more it seems that this isn't the case. Perhaps it's because people are already borrowing as much as they can? Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted October 30, 2017 Author Share Posted October 30, 2017 32 minutes ago, adarmo said: Or keep the existing SDLT rules for landlords and second homies, or raise it further, and then give full relief to FTBs or people just moving from one home to the other. That is what I meant - so obviously I agree with you. Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted October 30, 2017 Author Share Posted October 30, 2017 12 minutes ago, adarmo said: I read a study on this a while ago. I've been trying to find it to post for you but in summary there was no link between abolition of SDLT and house prices. There was no real impact in transactions during the period other than a rush as the Stamp Duty holiday expired. I guess this stands to reason although in a situation where the stamp duty would get you over an interest rate threshold people might be more willing to borrow more it seems that this isn't the case. Perhaps it's because people are already borrowing as much as they can? The ASI think the 60% of the cost is borne by the buyer. Of course if you are moving from house worth x to house y you pay it all either way. Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted October 30, 2017 Author Share Posted October 30, 2017 1 hour ago, Venger said: Not fully certain how I feel about any change to SDLT. My main view is sellers should pay it. Especially older owners, when you look at the charts, and see how much equity wealth they have as a whole (mad-gainz). Get the market moving. Even thought of that might bring more sellers to market, in a market that has been full of bed-blockers of larger family homes, not selling because they expect more HPI. Yet as with others, if it's not a cost for buyer, then I suspect prices rise. Buyers have more money to put down/deposit. If you buy do you want to be able to move in future? SDLT stops people from being able to move if we want to get back to a pre 1997 world where housing is affordable then SDLT should be abolished. Quote Link to comment Share on other sites More sharing options...
Mr Banks Posted October 30, 2017 Share Posted October 30, 2017 1 hour ago, Venger said: Not fully certain how I feel about any change to SDLT. My main view is sellers should pay it. Especially older owners, when you look at the charts, and see how much equity wealth they have as a whole (mad-gainz). Get the market moving. Even thought of that might bring more sellers to market, in a market that has been full of bed-blockers of larger family homes, not selling because they expect more HPI. Yet as with others, if it's not a cost for buyer, then I suspect prices rise. Buyers have more money to put down/deposit. This is my feeling too if the stamp duty mmoves from they buyer as an up front cost for a typical 225K home the stamp duty is 2k. With a this means you need about 11.5k (5% deposit) + 2k stamp duty + lawyers and survey fees of 1k so 14.5k with stamp duty removed you now have a a bigger deposit chasing the same house so deposit raising to 13.5k but leveraged with a 95% mortgage you can now pay 40k more for the same house and the seller sees 38k of that. If i was someone who profited from selling houses then i would be all over this idea. For FTBers it is pretty terrible. Quote Link to comment Share on other sites More sharing options...
guest_northshore Posted October 30, 2017 Share Posted October 30, 2017 44 minutes ago, adarmo said: I read a study on this a while ago. I've been trying to find it to post for you but in summary there was no link between abolition of SDLT and house prices. There was no real impact in transactions during the period other than a rush as the Stamp Duty holiday expired. I guess this stands to reason although in a situation where the stamp duty would get you over an interest rate threshold people might be more willing to borrow more it seems that this isn't the case. Perhaps it's because people are already borrowing as much as they can? The opposite. SDLT is capitalized into prices so abolishing it just increases prices. eg. https://econpapers.repec.org/paper/izaizadps/dp7463.htmhttp://www.landecon.cam.ac.uk/pdf-files/cv/pete-tyler/Bond_Gardiner_Tylertaxincidence_article061211.pdf (on business rates, but theory & practice same for all land taxes because burden falls on most inelastic supply/demand factor) Still an inefficient tax though in terms of thresholds and overall. Should be replaced. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 30, 2017 Share Posted October 30, 2017 16 minutes ago, guest_northshore said: The opposite. SDLT is capitalized into prices so abolishing it just increases prices. eg. https://econpapers.repec.org/paper/izaizadps/dp7463.htmhttp://www.landecon.cam.ac.uk/pdf-files/cv/pete-tyler/Bond_Gardiner_Tylertaxincidence_article061211.pdf (on business rates, but theory & practice same for all land taxes because burden falls on most inelastic supply/demand factor) Still an inefficient tax though in terms of thresholds and overall. Should be replaced. I should have said Stamp Duty Holiday. Temporary zero rates seem only to cause a rush as they expire. Your first link is interesting. What is not known is that if you abolish stamp duty does the new price paid by the purchaser equal the old price plus the old tax? Also what are the Stamp Duty rates in Australia where the research was conducted? So if buying a £500k house and they abolish stamp duty would it then cause the price to go to £515k which is the total of what you'd paid anyway? Second link is I think totally irrelevant. It discuses the impact of business rates in Enterprise Zones. That is nothing like a blanket Stamp Duty band on residential property. The closest one might get is to say what happens to the rental value of a flat in Bedford if they abolished council tax for ten yeas while leaving all neighbouring boroughs flat. Business rates are extortionate. They can be at least as much as the rent paid and as far as Enterprise Zones are concerned it's a locality issue. If one can move down the road and get no business rates, or markedly reduced business rates that's not the same as no business rates anywhere. In the long term would rents increase so that new rent = old rent + old business rates? Quote Link to comment Share on other sites More sharing options...
Freki Posted October 30, 2017 Share Posted October 30, 2017 (edited) 28 minutes ago, adarmo said: So if buying a £500k house and they abolish stamp duty would it then cause the price to go to £515k which is the total of what you'd paid anyway? The maths are more complex than that. For a non cash buyer buying a 500k + 15k SDLT or a 515k is totally different. In one case you need to disburse 40k in cash at the transaction, in the other 26k (LTV 90% excluding all the other costs for the demo purpose) The first barrier to ownership just fell dramatically by years of savings... Once again, SDLT is a bad tax that adds friction to the market. Instead a LVT would create an incentive for limiting hoarding, levy a steadier stream of tax, and incentivize downsizing. Edited October 30, 2017 by Freki Quote Link to comment Share on other sites More sharing options...
Parkwell Posted October 30, 2017 Share Posted October 30, 2017 I'm all in favour in of abolishing stamp duty. And council tax. And business rates. Replace them all with a land tax charged directly to the freeholder. Not likely to see that though, are we? Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted October 30, 2017 Author Share Posted October 30, 2017 9 minutes ago, Freki said: The maths are more complex than that. For a non cash buyer buying a 500k + 15k SDLT or a 515k is totally different. In one case you need to disburse 40k in cash at the transaction, in the other 26k (LTV 90% excluding all the other costs for the demo purpose) The first barrier to ownership just fell dramatically by years of savings... Not only that if you were to buy a house £515K and there was no stamp duty and you had to move after a couple of years then the cost of moving would be about £5-6k or less - with stamp duty £20k! Making the total cost of ownership much cheaper over time. Quote Link to comment Share on other sites More sharing options...
iamnumerate Posted October 30, 2017 Author Share Posted October 30, 2017 1 minute ago, Parkwell said: I'm all in favour in of abolishing stamp duty. And council tax. And business rates. Replace them all with a land tax charged directly to the freeholder. Not likely to see that though, are we? The ASI would like that. Quote Link to comment Share on other sites More sharing options...
guest_northshore Posted October 30, 2017 Share Posted October 30, 2017 26 minutes ago, adarmo said: I should have said Stamp Duty Holiday. Temporary zero rates seem only to cause a rush as they expire. Your first link is interesting. What is not known is that if you abolish stamp duty does the new price paid by the purchaser equal the old price plus the old tax? Also what are the Stamp Duty rates in Australia where the research was conducted? So if buying a £500k house and they abolish stamp duty would it then cause the price to go to £515k which is the total of what you'd paid anyway? Second link is I think totally irrelevant. It discuses the impact of business rates in Enterprise Zones. That is nothing like a blanket Stamp Duty band on residential property. The closest one might get is to say what happens to the rental value of a flat in Bedford if they abolished council tax for ten yeas while leaving all neighbouring boroughs flat. Business rates are extortionate. They can be at least as much as the rent paid and as far as Enterprise Zones are concerned it's a locality issue. If one can move down the road and get no business rates, or markedly reduced business rates that's not the same as no business rates anywhere. In the long term would rents increase so that new rent = old rent + old business rates? SDLT holiday - ok, I think the ONS produced a report on that but it focused on transactions rather than prices. First link - I'd have to read it again to refresh but would guess a price rise between [old price + old tax] & [old price + (old tax * 4.5)] where 4.5 is the max lending multiple on what now becomes extra leverageable deposit. Second link - I don't think it's irrelevant because interpretation of the supply/demand curve interaction wrt to price sensitivities is the same. But that's referring to the general issue of incidence rather than any attempt to quantify it. I don't agree on 'extortionate' Business Rates because they're a reflection of our stupid 'market' not a source for it. But that's a separate topic. Quote Link to comment Share on other sites More sharing options...
Kurt Barlow Posted October 30, 2017 Share Posted October 30, 2017 7 hours ago, fru-gal said: How would cutting stamp duty (meaning landlords don't have to pay anything extra to buy more properties plus the price of their "investment" increases) while raising council tax (which is paid by the tenant) be bad for landlords? The Government needs money (if they cut stamp duty they will increase it elsewhere). Young people have no money and if you target them they will flock to Corbyn. The old have money (unearned wealth). The best thing to do is to make everyone pay CGT on the sale of their main home but get rid of Inheritance tax. Do what Australia does and make the Landlord responsible for Council tax. More recoverable this way because if the landlord doesn't pay it can go as a charge on the property. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 30, 2017 Share Posted October 30, 2017 1 hour ago, Freki said: The maths are more complex than that. For a non cash buyer buying a 500k + 15k SDLT or a 515k is totally different. In one case you need to disburse 40k in cash at the transaction, in the other 26k (LTV 90% excluding all the other costs for the demo purpose) The first barrier to ownership just fell dramatically by years of savings... Once again, SDLT is a bad tax that adds friction to the market. Instead a LVT would create an incentive for limiting hoarding, levy a steadier stream of tax, and incentivize downsizing. Yes I am aware of that, but you are assuming that someone earning enough to have those lending multiples is hamstrung by a deposit. It would be interesting to understand what constrains people more, the lending multiple, or the deposit. In my experience people will tend to borrow as much as they possibly can and work back from tat ti determine the deposit required to get a given interest rate. I do not dispute that SDLT is a bad tax and that LVT is far superior. If I could I'd replace all taxes (save those designed to internalise negative externalities) with an LVT. Quote Link to comment Share on other sites More sharing options...
guest_northshore Posted October 30, 2017 Share Posted October 30, 2017 2 hours ago, adarmo said: I should have said Stamp Duty Holiday. Temporary zero rates seem only to cause a rush as they expire... p.29: "Considering the impact on prices, after controlling for wider economic and credit conditions, SDLT relief of 1 per cent is estimated to have increased FTB prices by 0.5‐0.7 per cent on average. This implies that the majority of the 1 per cent tax relief was capitalised in higher prices. It is equivalent to stating that the post‐tax outlay for buying property is estimated to have decreased by 0.3‐0.5 percentage points. The relief therefore appears to have had a small impact on reducing the overall outlay of buying a first home."https://www.gov.uk/government/publications/evaluating-the-impact-of-stamp-duty-land-tax-first-time-buyers-relief Via David Gauke, p.42: "We must also consider who ultimately bears the burden of SDLT ... HMRC analysis of the impact of [the SDLT holiday for first-time buyers] … indicated that the majority of the saving was incorporated into higher property prices, which made the relief largely ineffective and poor value for money; what buyers did not pay in stamp duty, they paid in higher property prices. [While it is the case that] ... it is easier to get a mortgage that covers the purchase price rather than one that covers the purchase price and the SDLT, but we must bear in mind that the impact of changes in SDLT can result in benefits to the seller, rather than to the buyer ..."http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN07050#fullreport As only FTBs had SDLT relief I'd assume (but don't know) that 1) The overall net effect of capitalisation into prices increased the overall outlay of buying a home; 2) Prices did not decrease when the relief ended and that overall net effect was embedded & compounded over time (e.g. it altered the earnings profile of a future FTB). Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 30, 2017 Share Posted October 30, 2017 1 minute ago, guest_northshore said: what buyers did not pay in stamp duty, they paid in higher property prices So a stamp duty holiday doesn't make them better off... but one impact is that there is a rush towards towards the end of the holiday which would create a bit of a frenzy as people would happily pay slightly more to avoid the stamp duty coming back in. There was a hockey stick increase in transactions during Labour's tinkering with it for FTBs and then again in the build up to before the 3% surcharge for BTL. In this scenario the threat of paying a higher rate of SDLT pushed up transactions and one could assume prices. An increase therefore in SDLT lead to an increase in prices before it's implementation. *****I haven't' got a link for that*** I just bought a fixer upper and the £11,500 I parted with for SDLT would have been jolly useful. The key difference (as you've alluded to) is that if the SDLT was scrapped and the prices went up by £12k I could borrow that £12k and worry about it over 25 years instead of worrying about it on day one. The piece on Enterprise Zones just doesn't really prove anything tbh. It's not a scrapping of stamp duty, it's a localised reduction of business rates while neighbouring areas maintain them and therefore shifts demand regionally for that area which would naturally push up rents in the Enterprise Zone and reduce them in neighbouring areas cet. par. Anecdotally I have a friend who is holding off buying anything until they scrap it or grant a holiday. Who knows what the chancellor has in store for the budget. Quote Link to comment Share on other sites More sharing options...
guest_northshore Posted October 30, 2017 Share Posted October 30, 2017 Yeah I don't think it's straightforward either way due to relief subset, thresholds etc, but was just to address your question. Also seems the research was published before the end of the relief period, so not ideal for completeness or before/during/after comparisons. I wouldn't dispute that a cut in SDLT may be relatively advantageous for first-comers. Capitalisation into prices won't be instant or uniform. Choosing to spread the otherwise SDLT money over time isn't good for broad prices and afffordability, but obviously valid as an individual preference. We're at cross-purposes on the 2nd paper (you specific, me general) so will leave it there. Quote Link to comment Share on other sites More sharing options...
adarmo Posted October 30, 2017 Share Posted October 30, 2017 34 minutes ago, guest_northshore said: Yeah I don't think it's straightforward either way due to relief subset, thresholds etc, but was just to address your question. Also seems the research was published before the end of the relief period, so not ideal for completeness or before/during/after comparisons. I wouldn't dispute that a cut in SDLT may be relatively advantageous for first-comers. Capitalisation into prices won't be instant or uniform. Choosing to spread the otherwise SDLT money over time isn't good for broad prices and afffordability, but obviously valid as an individual preference. We're at cross-purposes on the 2nd paper (you specific, me general) so will leave it there. Agreed. I'm also glad you're keen on LVT. There was a prolific poster on here a while ago called Mark Wandsworth (or Wadsworth) and he was literally married to it. I think he was booted though for doing something he shouldn't. Quote Link to comment Share on other sites More sharing options...
guest_northshore Posted October 30, 2017 Share Posted October 30, 2017 19 minutes ago, adarmo said: Agreed. I'm also glad you're keen on LVT. There was a prolific poster on here a while ago called Mark Wandsworth (or Wadsworth) and he was literally married to it. I think he was booted though for doing something he shouldn't. I can't remember why, but agree with him on most things land & housing. http://markwadsworth.blogspot.co.uk/ Quote Link to comment Share on other sites More sharing options...
Freki Posted October 30, 2017 Share Posted October 30, 2017 3 hours ago, adarmo said: Yes I am aware of that, but you are assuming that someone earning enough to have those lending multiples is hamstrung by a deposit. It would be interesting to understand what constrains people more, the lending multiple, or the deposit. In my experience people will tend to borrow as much as they possibly can and work back from tat ti determine the deposit required to get a given interest rate. I do not dispute that SDLT is a bad tax and that LVT is far superior. If I could I'd replace all taxes (save those designed to internalise negative externalities) with an LVT. Another way of seeing this is that it more quickly removes a marginal top renter from the market, putting pressure down on rents. There are substitution effects and it is hard to understand each ones' elasticity. The transition could easily be done by discounting the SDLT against LVT as well, so someone like you who just bought would have a credit in LVT. Quote Link to comment Share on other sites More sharing options...
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