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HovelinHove

The one graph that matters - when the house market died

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So I recently arrived back from Canada, and I was about to go into a property in Sussex on the market for a million, and was thinking of offering 950k. I suddenly thought about property tax as I was unfamiliar with the UK changes...I found a calculator online and put my target price in...40,000 quid...just the tax. If the estate agent hadn’t turned up just then I would have legged it. It really blew me away. The tax is punitive. So I get home and look into all, and the tax really changed and became punitive in Dec 2014...look at the graph from the link below on page 2 for home sales history from the Halifax...look at Jan 2015, they drop by bout 30% and never recover. This shows the effect of over taxation on people’s behaviour and why socialism is a non-starter. They stop doing business.

https://static.halifax.co.uk/assets/pdf/mortgages/pdf/February-2019-Halifax-House-Price-Index.pdf

When I first arrived in canada the top marginal rate was 42% in Ontario, within 3 years of arriving the liberals had increased it to 53%. I got offered a promotion, and an extra $20,000, but I decided no as I would only take home an extra $9,000 and the workload would have been harsh. If I got to keep 12k I might have thought about it.

Anyway, I believe the current property market is being killed by tax...among other things. People won’t move because the cost of the transaction is too high, so they will stick it out. Most houses in the South east are well over 300k and so fall in the 5% band...it really makes a difference. Prices haven’t fallen because people aren’t trading. No one is selling and no one is buying. 

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".. a property in Sussex on the market for a million, and was thinking of offering 950k."

I'd be "thinking" of £750k max in the current market. Ho-hum.

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17 minutes ago, HovelinHove said:

Most houses in the South east are well over 300k and so fall in the 5% band...it really makes a difference. Prices haven’t fallen because people aren’t trading. No one is selling and no one is buying. 

You know it’s not 5% on the full £300k, right?  If it’s your only property and you’re not a first time buyer, it’s 5% on only the bit above £250k.  Total stamp duty on a £300k property is £5000 which is 1.67%.

For a first time buyer it’s £0.

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It's a house price crash forum so I guess killing the market is kind of the aim...? (Personally I hope for a long slow stagnation that allows everyone to play catch up with anyone being made homeless by repossession). 

Canada has a lot more land to play with and fill with houses. For our market I think stamp duty is working better than ever - discouraging people from buying multiple properties. 

Edited by PeanutButter

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1 hour ago, HovelinHove said:

Anyway, I believe the current property market is being killed by tax...among other things. People won’t move because the cost of the transaction is too high, so they will stick it out.

The thing that people always forget is that taxes like this actually cost far less than you think because the housing market is so leveraged.

Adding 40K in tax means in practice that the sale price will fall (in real terms) by maybe 120K. Why? because mortgages are based on LTV and unless the buyers have a massive deposit (most don't) they will need to use actual cash to pay the tax - this limits how much people can bid up the property sale price.

The drop in price will be more than the tax, so overall - this will actually SAVE THEM MONEY!!

Now when you come to sell - the tax will also reduce what you are able to sell for, but most people will be either first time buyers or moving up to a larger house, so between the 2 transactions they still win.

But of course, math is hard, you will go ahead and blame the liberals anyway.

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Thinking of offering nine fifty k on a mill prop? Grow some balls and bang in a sealed bid in an envelope marked “best and final offer” smash the asking price one one one two I’m thinking, one two fiver if you want to make a statement, blow the competition out the water.

 

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High tax just means everyone voted to spend your money on themselves. 

High leverage means people with access to leverage get to profit from a pump and dump racket. 

Imagine a country where you had no parasites. It's called a successful economy. 

First step: don't vote for thieves who promise you freebies. 

It'll never happen because half the population think they're entitled to sponge?

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50 minutes ago, thewig said:

Thinking of offering nine fifty k on a mill prop? Grow some balls and bang in a sealed bid in an envelope marked “best and final offer” smash the asking price one one one two I’m thinking, one two fiver if you want to make a statement, blow the competition out the water.

 

The range was 1-1.25 million and he’d previously turned down an offer of 1 milliomn cash. 

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38 minutes ago, 24gray24 said:

High tax just means everyone voted to spend your money on themselves. 

High leverage means people with access to leverage get to profit from a pump and dump racket. 

Imagine a country where you had no parasites. It's called a successful economy. 

First step: don't vote for thieves who promise you freebies. 

It'll never happen because half the population think they're entitled to sponge?

Agreed. 

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9 hours ago, Habeas Domus said:

The thing that people always forget is that taxes like this actually cost far less than you think because the housing market is so leveraged.

Adding 40K in tax means in practice that the sale price will fall (in real terms) by maybe 120K. Why? because mortgages are based on LTV and unless the buyers have a massive deposit (most don't) they will need to use actual cash to pay the tax - this limits how much people can bid up the property sale price.

The drop in price will be more than the tax, so overall - this will actually SAVE THEM MONEY!!

Now when you come to sell - the tax will also reduce what you are able to sell for, but most people will be either first time buyers or moving up to a larger house, so between the 2 transactions they still win.

But of course, math is hard, you will go ahead and blame the liberals anyway.

I have a Ph.D. so don’t find maths hard. I understand the effect it may have on prices, and I agree that is a good thing. I don’t however believe that liberal tax interventions are on the whole a good thing having been subjected to an Ontario government that squeezes every penny out of people to pay government workers huge salaries and benefits for doing sod all.

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9 hours ago, PeanutButter said:

It's a house price crash forum so I guess killing the market is kind of the aim...? (Personally I hope for a long slow stagnation that allows everyone to play catch up with anyone being made homeless by repossession). 

Canada has a lot more land to play with and fill with houses. For our market I think stamp duty is working better than ever - discouraging people from buying multiple properties. 

I have been on HPC since pretty much when it began, so I know what the forum is about, and I was posting this chart as an observation. I suspect that in the long term it will have an effect on prices since people will think twice before upping their offers, and that is a good thing. 

You are right about Canada having more land, but the vast majority is completely uninhabitable and unless you want to be a Carib our herder, or don’t need to work, you need to live near a city, where space is in high demand.

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10 hours ago, elephant said:

You know it’s not 5% on the full £300k, right?  If it’s your only property and you’re not a first time buyer, it’s 5% on only the bit above £250k.  Total stamp duty on a £300k property is £5000 which is 1.67%.

For a first time buyer it’s £0.

I have two options...buy with my mother and have an annex (hence the million quid house), or buy on our own. Would I qualify as a first time buyer since I owned a house in canada?

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10 hours ago, Nomadd said:

".. a property in Sussex on the market for a million, and was thinking of offering 950k."

I'd be "thinking" of £750k max in the current market. Ho-hum.

It is stunning and someone already offered a million cash. I think the owner will rue the day he turned them down.

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Being able to charge money for access to land, something you have had no part in creating or finding, is a tax.

It’s no different to the BBC charging for the use of a television.  For ideological reasons, people seem happy to call the TV license fee a tax (which it is).  But if we apply the housing market logic, the BBC license fee is no different to a Netflix subscription, and that is clearly nonsense.

The problem, politically, with anti-tax arguments, is this hypocritical separation of private sector tax concessions - rents - that have been granted to individuals by the state, and those taxes directly imposed by the state themselves. 

Edited by BorrowToLeech

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11 hours ago, Nomadd said:

I'd be "thinking" of £750k max in the current market. Ho-hum.

Of course no property in Sussex sells for above 750k and you have extensive knowledge of the individual property., the area and prices 

1 hour ago, thewig said:

Thinking of offering nine fifty k on a mill prop? Grow some balls and bang in a sealed bid in an envelope marked “best and final offer” smash the asking price one one one two I’m thinking, one two fiver if you want to make a statement, blow the competition out the water.

and be laughed at 

1 hour ago, 24gray24 said:

First step: don't vote for thieves who promise you freebies. 

It'll never happen because half the population think they're entitled to sponge?

No the snowflakes see it as their entitlement

36 minutes ago, HovelinHove said:

The range was 1-1.25 million and he’d previously turned down an offer of 1 milliomn cash.

but you have been advised by an expert it is not worth more than 750k  :) 

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11 hours ago, HovelinHove said:

Prices haven’t fallen because people aren’t trading. No one is selling and no one is buying. 

Well that can't continue indefinitely. 

But I don't actually think it was Osborne's plan to cap or quell the market when he brought this in. 

It's essentially a cash grab to help pay for HTB and make up the hole in tax revenue the big cuts to corporation tax have left us with. 

Not really socialism as such. More crony capitalism where the workers are asked to foot the bill and those above take the benefits. 

(I'm not some mad Corbynista btw. Tory my whole life. I just think "Grrr socialism!" is a bit dangerous in this instance. Distracts from what has really happened. Which is actually useful/beneficial for Osborne and his ilk. I'm just trying to not be a useful idiot I guess!) 

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9 hours ago, Habeas Domus said:

The thing that people always forget is that taxes like this actually cost far less than you think because the housing market is so leveraged.

Adding 40K in tax means in practice that the sale price will fall (in real terms) by maybe 120K. Why? because mortgages are based on LTV and unless the buyers have a massive deposit (most don't) they will need to use actual cash to pay the tax - this limits how much people can bid up the property sale price.

The drop in price will be more than the tax, so overall - this will actually SAVE THEM MONEY!!

Now when you come to sell - the tax will also reduce what you are able to sell for, but most people will be either first time buyers or moving up to a larger house, so between the 2 transactions they still win.

But of course, math is hard, you will go ahead and blame the liberals anyway.

This would only include purchasers on the boundary of lenders deposit threshold, which most wouldn't be/ assumes people are bidding as much as possible which might not be the case it also ignores that some people, aware of the high tax, will not want to move multiple times and will bid up as much as possible for the one move they do. 

Why the ad hominem re maths? 

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8 hours ago, HovelinHove said:

I have two options...buy with my mother and have an annex (hence the million quid house), or buy on our own. Would I qualify as a first time buyer since I owned a house in canada?

According to this you would not qualify as a first time buyer, but how would they know that you owned abroad?

https://www.moneyadviceservice.org.uk/blog/stamp-duty-for-first-time-buyers-your-questions-answered/amp

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9 hours ago, happyguy said:

but you have been advised by an expert it is not worth more than 750k  :)

Indeed. There’s a fair few who have only been alive for five minutes on this forum. I tend to avoid posting now because of the prevalence of snowflakes and Cobynistas. I am lucky that I got to own a fabulous home in Canada for the price of a single bed flat in Hove...just suffering now because I am only child and responsibility calls. Back to the total insanity that is the UK housing market

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1 hour ago, elephant said:

According to this you would not qualify as a first time buyer, but how would they know that you owned abroad?

https://www.moneyadviceservice.org.uk/blog/stamp-duty-for-first-time-buyers-your-questions-answered/amp

Thanks. The tax really stings once you get above k500. I think it has had a significant effect and once/if forced sales appear it will help in any downward acceleration.

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10 hours ago, BorrowToLeech said:

Being able to charge money for access to land, something you have had no part in creating or finding, is a tax.

It’s no different to the BBC charging for the use of a television.  For ideological reasons, people seem happy to call the TV license fee a tax (which it is).  But if we apply the housing market logic, the BBC license fee is no different to a Netflix subscription, and that is clearly nonsense.

The problem, politically, with anti-tax arguments, is this hypocritical separation of private sector tax concessions - rents - that have been granted to individuals by the state, and those taxes directly imposed by the state themselves. 

Sorry, I haven’t got a clue what you are talking about. Makes about as much sense as a reply by Theresa May in PMQs. Totally foxed me mate.

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5 minutes ago, HovelinHove said:

Indeed. There’s a fair few who have only been alive for five minutes on this forum. I tend to avoid posting now because of the prevalence of snowflakes and Cobynistas. I am lucky that I got to own a fabulous home in Canada for the price of a single bed flat in Hove...just suffering now because I am only child and responsibility calls. Back to the total insanity that is the UK housing market

Hmmmm well you could have used some of that life experience and considered that arriving on a forum for the 'priced out' and glibly announcing you've nearly a million quid to spend on a house (with or without parental money) may have raised hackles...just a thought. And then backing it up by telling us you've owned - not just a home, but a 'FABULOUS home' just in case we didn't get how smart you are the first time around. Plus the mention of your 20K salary bump, to really gild the lilly.

Comes across as tactless and more than a little smug TBH. Totally Typical Thatcherite Tory, in fact.

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21 hours ago, HovelinHove said:

So I recently arrived back from Canada, and I was about to go into a property in Sussex on the market for a million, and was thinking of offering 950k. I suddenly thought about property tax as I was unfamiliar with the UK changes...I found a calculator online and put my target price in...40,000 quid...just the tax. .... The tax is punitive.

I think saying the tax is punitive is the wrong way of looking at it. There should be no stamp duty (as you observe, stamp duty is a terrible tax as it makes moving expensive), but other taxes would have to be higher. From the perspective of people who may spend 40k on stamp duty it may not make much difference if you pay this in stamp duty, income tax, VAT, inheritance tax, or in disguised forms (having a smaller pension, lower dividends, less capital growth on share portfolio due to higher corporation tax).

If you don't move often then you are better off paying a big stamp duty bill once and then benefitting from lower taxes elsewhere. If you move often you'll be worse off.

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12 hours ago, HovelinHove said:

The range was 1-1.25 million and he’d previously turned down an offer of 1 milliomn cash. 

Who told you that, the estate agent? They lie easier than they breathe.

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13 hours ago, happyguy said:

Of course no property in Sussex sells for above 750k and you have extensive knowledge of the individual property., the area and prices

No, like yourself, I used my psychic abilities.

Glad we cleared up the confusion. :)

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  • 297 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%



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