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Drummer

Explain how reduced SDLT increases house prices

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FTBs are usually the bottom of the chain. Various FTBs compete with their SDLT discount for the bottom of the chain house, pushing the price up by e.g. £5k. The second person up now has an extra £5k to bid on the next house up the chain etc.

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House costs £295,000.

Two willing buyers.

One is a home-mover. Can pay £299,750 (£295,000 for house + £4,750 SDLT).

The other is first-time buyer, can pay the same amount.

Before tax change house sells to either of them at £295,000

After tax change the FTBer can bid £299,750.

The FTBer's taxation exemption allows them to pass the money that would have been paid as tax to the seller and win the auction.

Edited by Beary McBearface

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Arguably you're no worse off, and if you wanted a house then you get a house too so whilst I think it's a bit of a nothing policy it's not a disaster for first-time buyers. It does give them a pretty big edge over a BTL investor who is paying £13,760 more SDLT than you'd be paying.

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9 minutes ago, A third of everything said:

Or in my case have a mortgage for 5k lower... If anyone is dumb enough to think yay another 5k to add to the offer overall then more fool them

If you don't, then you'll be outbid by someone who will. 

Edit: I'm a bit surprised the OBR are forecasting the impact they are, but with the restriction to first time buyers it's not an easy thing to work out. You need a model.

Edited by BuyToLeech

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10 minutes ago, Beary McBearface said:

Arguably you're no worse off, and if you wanted a house then you get a house too so whilst I think it's a bit of a nothing policy it's not a disaster for first-time buyers. It does give them a pretty big edge over a BTL investor who is paying £13,760 more SDLT than you'd be paying.

The money Hammond just gave to homeowners will lead to more borrowing, higher taxes, or reduced services for everyone else. 

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28 minutes ago, Dorkins said:

FTBs are usually the bottom of the chain. Various FTBs compete with their SDLT discount for the bottom of the chain house, pushing the price up by e.g. £5k. The second person up now has an extra £5k to bid on the next house up the chain etc.

Worse than that...the get 5k more to lever up on...increasing as it goes.

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15 minutes ago, Beary McBearface said:

Arguably you're no worse off, and if you wanted a house then you get a house too so whilst I think it's a bit of a nothing policy it's not a disaster for first-time buyers. It does give them a pretty big edge over a BTL investor who is paying £13,760 more SDLT than you'd be paying.

On a house btlers have bumped up 70% since 2012....odd logic. That's no advantage

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1 minute ago, BuyToLeech said:

The money Hammond just gave to homeowners will lead to more borrowing, higher taxes, or reduced services for everyone else. 

Fair comment - I was thinking about the last five years of taxation and the matter of first-time buyers competing with leveraged investors where what they are competing with is the ability of the prospective buyer's earnings to service a mortgage, however I obviously didn't say that and what I did say isn't going to stand up to scrutiny. In terms of a direction of travel and winning auctions it's still net positive for FTBers who may find themselves seeking to purchase a property that might previously have been targeted by leveraged investors. It would be interesting to run the numbers for a portfolio landlord vs a first time buyer and June 2015 tax and lending rules vs November 2017 tax and lending rules. Bit off topic here though, so I'll duck out.

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2 minutes ago, TheCountOfNowhere said:

On a house btlers have bumped up 70% since 2012....odd logic. That's no advantage

Yeah - I've now owned that mistake. Sorry. Talking to adarmo too much. His silvery tongue has got me all interested in buying houses. Lots and lots of houses.

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5 minutes ago, Odysseus said:

Additional £5k cash saved from stamp duty can be leveraged up 3.5x. £17,500 in extremis.

 

more likely will add 5-10k to offers

I don’t follow that logic. Just because the deposit is bigger doesn’t mean a bank will let your typical ftb borrow more

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10 minutes ago, BuyToLeech said:

If you don't, then you'll be outbid by someone who will. 

Edit: I'm a bit surprised the OBR are forecasting the impact they are, but with the restriction to first time buyers it's not an easy thing to work out. You need a model.

Not in my local area I won't, hardly anything is selling and most either reduce or come off... and I'll be damned if I get swept up in someone else's frenzy!

(Could explain why I'm still looking 18 months after starting though, I have a price in my head I'm not willing to budge on, used to be only 2 bed houses in the crap areas we could afford, now it's dropping it's 2 beds in better parts of town, I'm happy to sit tight until the 3 beds are in reach at the same price though)

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1 minute ago, Houdini said:

I don’t follow that logic. Just because the deposit is bigger doesn’t mean a bank will let your typical ftb borrow more

A bigger deposit means the bank can lend a higher salary multiple at a lower LTV.

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1 minute ago, Houdini said:

I don’t follow that logic. Just because the deposit is bigger doesn’t mean a bank will let your typical ftb borrow more

This. Borrowing is based on earnings, particularly for FTBs with a lowly deposit over say £10-30k.

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22 minutes ago, Houdini said:

I don’t follow that logic. Just because the deposit is bigger doesn’t mean a bank will let your typical ftb borrow more

Purchasers who are limited by LTV of say 90% can now use the additional 5k to increase their offer.

On reflection they can actually leverage the sdlt x10 in this case another £50k.

 

obviously I’m ignoring salary but in many cases salary is not the limiting factor. It’s saving a deposit - you know avocados and iPods etc

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22 minutes ago, Drummer said:

This. Borrowing is based on earnings, particularly for FTBs with a lowly deposit over say £10-30k.

Depends whether the affordability limiter is income or deposit. Hypothetically it could increase the price of a £300k HTB new build by £100k. £5k SDLT + £15k deposit = £20k deposit @ 95% LTV. Has the potential to really screw-over potential FTBs on lower incomes, effectively moving the dial ever upwards on typical FTB profile.

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40 minutes ago, Beary McBearface said:

Fair comment - I was thinking about the last five years of taxation and the matter of first-time buyers competing with leveraged investors where what they are competing with is the ability of the prospective buyer's earnings to service a mortgage, however I obviously didn't say that and what I did say isn't going to stand up to scrutiny. In terms of a direction of travel and winning auctions it's still net positive for FTBers who may find themselves seeking to purchase a property that might previously have been targeted by leveraged investors. It would be interesting to run the numbers for a portfolio landlord vs a first time buyer and June 2015 tax and lending rules vs November 2017 tax and lending rules. Bit off topic here though, so I'll duck out.

No, I agree it's not necessarily a disaster for FTB, but it might be and it certainly doesn't help.

It may sustain the momentum of prices, and allow them to overshoot. That's a real possibility.

Also, it clearly flags the government's priority is to bail-out homeowners at all costs, and that makes 'investing' in homes less risky. 

I said a couple of days ago that if May's commitment to solve the housing crisis was real then prices would fall immediately - who'd buy into an asset the government had committed to making cheaper?

This budget proves beyond all doubt that the commitment is not real, and I expect the market reaction will be consistent with that. 

Edited by BuyToLeech

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31 minutes ago, Drummer said:

This. Borrowing is based on earnings, particularly for FTBs with a lowly deposit over say £10-30k.

Not many people in the UK got £30k in the bank...that's for sure.

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2 minutes ago, BuyToLeech said:

No, I agree it's not necessarily a disaster for FTB, unless it sustains the momentum of prices, allowing them to overshoot. That's a real possibility.

Also, it clearly flags the government's priority is to bail-out homeowners at all costs, and that makes 'investing' in homes less risky. 

I said a couple of days ago that if May's commitment to solve the housing crisis was real, then prices would fall immediately. This budget proves beyond all doubt that the commitment is not real, and I expect the market reaction will be consistent with that. 

I think the last 15 years was more the giveaway

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And so it begins. According to this post in MSE anyway.

http://forums.moneysavingexpert.com/showthread.php?t=5748543#topofpage

Seller Hikes Asking Price

Hi,

My partner and I are FTBs due to exchange on our property in 2 weeks and complete soon after. The stamp duty changes mean that we save 5k on what we would have paid earlier.

Our seller has emailed us saying that he expects prices to rise significantly as a result of the changes (gave me some guff about how the extra money towards a deposit can now be leveraged by buyers 4-5 times to get a mortgage 20-25k bigger, etc) and has said that he wants 10k more. 

I'm hopeful that he is open to negotiation but essentially I guess he wants us to fork over the stamp duty saving to him.

We definitely can't afford 10k more (unless we go back to our mortgage broker to see if we can get a bigger mortgage).

I know there's no law against the seller pulling out before exchange, but any tips on how to handle this?

Cheers.

 

 

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46 minutes ago, A third of everything said:

Not in my local area I won't, hardly anything is selling and most either reduce or come off... and I'll be damned if I get swept up in someone else's frenzy!

(Could explain why I'm still looking 18 months after starting though, I have a price in my head I'm not willing to budge on, used to be only 2 bed houses in the crap areas we could afford, now it's dropping it's 2 beds in better parts of town, I'm happy to sit tight until the 3 beds are in reach at the same price though)

That's the definition of a market price though - someone is willing to pay it. 

If the market price is currently 200k, then someone is willing to pay that, and someone only willing to pay 199k will lose out.

Well now the loser will be willing and able to pay, say 204k (because it'll be the same net cost in the absence of stamp duty) so you'll have to pay 205k if you want the house. 

Prices might be falling for other reasons, but this will still push them up relative to where they would have been with the tax.  

Edited by BuyToLeech

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First time buyers as a percentage of the total housing market? Must be quite a small figure.

I don't think this stamp duty change will have anywhere near a big an impact as the late 2014 changes, which in some areas effectively lifted the 'cap' on prices held back at the 250k mark, due to the then big jump in SDLT bill when going even a penny over 250k. 

First time buyers don't seem well placed nor have the means to cause a further bubble of house prices on the back of this. Time will tell.

 

 

 

 

 

 

 

 

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19 minutes ago, Starla said:

And so it begins. According to this post in MSE anyway.

http://forums.moneysavingexpert.com/showthread.php?t=5748543#topofpage

Seller Hikes Asking Price

Hi,

My partner and I are FTBs due to exchange on our property in 2 weeks and complete soon after. The stamp duty changes mean that we save 5k on what we would have paid earlier.

Our seller has emailed us saying that he expects prices to rise significantly as a result of the changes (gave me some guff about how the extra money towards a deposit can now be leveraged by buyers 4-5 times to get a mortgage 20-25k bigger, etc) and has said that he wants 10k more. 

I'm hopeful that he is open to negotiation but essentially I guess he wants us to fork over the stamp duty saving to him.

We definitely can't afford 10k more (unless we go back to our mortgage broker to see if we can get a bigger mortgage).

I know there's no law against the seller pulling out before exchange, but any tips on how to handle this?

Cheers.

 

 

:lol: sounds like a genuine post that does, not fabricated by a nasty VI at all :lol::lol::lol:

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  • 406 Brexit, House prices and Summer 2020

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      • down 5% +
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