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Sajid Javid refuses to rule out stamp duty reversal so seller pays ‘I’m a low-tax guy’ says chancellor as he reveals he is considering policy changes


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8 hours ago, dugsbody said:

Another pointless and completely stupid tax change that doesn't solve anything for anyone and almost certainly makes things worse as now there is even less incentive for people to sell.

It can't be both pointless and reduce the incentive to sell. 

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5 hours ago, Kosmin said:

I think this is the clip:

 

Maybe people who aren't looking will wait for a policy announcement, but I don't think it's likely many people will try to hold up their transaction for months in the hopes of being better off. Surely buyers will realise if the tax rate has been changed in their favour the seller won't reward them for holding up the transaction by allowing them to grab the entire benefit! Some buyers probably even realise that prices may rise making them worse off. Sellers might expect the stamp duty cut to increase prices, but realise this could well be outweighed by the downward trend of prices, exit of BTLers, recession, Brexit chaos... Bear in mind that most buyers and sellers actually want to move as well!

I’m in this exact situation, agreed offer on one bed in Clapham (not a first time buyer and not needing to sell)  Unsure as to whether to progress, given the potential of house prices decreasing further and stamp duty (15K currently)

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Seems there could be a few subtle reasons for this odd transfer of Tax responsibility:

- Currently prices are flat or falling. If the Seller adds the Stamp Duty cost of sale Tax to the price, the headline prices will rise, which could avoid the price statistics going negative.

- The Stamp duty being hidden in the price allows more borrowing without the pesky stamp duty needing to be VISIBLY paid by the buyer. More borrowing makes the party backers happier.

- Sellers paying the Stamp duty creates a bit more of a barrier to multiple property owners exiting the market with the added  Capital Gains Tax bill (such as BTL offloading, sales due to death/probate etc.).

 

Are there any other possible side effects? What happens if a highly mortgaged large debt carrying FTB, who is using the 40% Help To Buy scheme, becomes distressed in a downturn and is forced to sell (lets say at a loss), who pays the Stamp Duty? Does it matter?

 

Edit: It seems some have already mentioned some of these observations.

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9 hours ago, DarkHorseWaits-NoMore said:

Seems there could be a few subtle reasons for this odd transfer of Tax responsibility:

- Currently prices are flat or falling. If the Seller adds the Stamp Duty cost of sale Tax to the price, the headline prices will rise, which could avoid the price statistics going negative.

It seems likely that many politicians would like to avoid falling prices. But I think more important is that it has the pretence of helping buyers without actually helping them. This is perhaps even better than Help to Buy because it probably won't cost anything.

 

Maybe they are thinking slightly long-term as well: sellers will think they are being harmed by having to pay the tax, and this will lead to growing calls for stamp duty to be cut. So, this change could pave the way for cuts to stamp duty. I think it would be easier to just cut stamp duty though.

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10 hours ago, Kosmin said:

It can't be both pointless and reduce the incentive to sell. 

There is no point to making this tax change because it reduces the incentive to sell, which is the opposite to what we want.

Are we just arguing for the sake of arguing or should we discuss the actual issue?

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Assuming sellers can increase the house price and buyers absorb the cost in this way then the significant losers are the first time buyers for less than £300K, this becomes an additional cost currently unaccounted for.

Would be interesting to see if this affects property sales as you are requiring more money from those already stretched to their limits, slowing the market from the bottom of the chain. I appreciate it’s a relatively small amount of money but could still be enough to have a knock on effect; I could see the sellers taking the hit in this situation.

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27 minutes ago, dugsbody said:

There is no point to making this tax change because it reduces the incentive to sell, which is the opposite to what we want.

Are we just arguing for the sake of arguing or should we discuss the actual issue?

The threat of this tax change might be enough to bring some more houses to the market. Which is a start. But there would most likely be a bit of a standoff where buyers are considering waiting for the announcement.

And there will be those who will sell for a 25k reduction just to avoid the 10k of stamp duty going to the government.

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It will be sold if it has to be sold, death, divorce and debt.....falling prices, lower rents, and high ongoing costs to it keep and maintain it, might be more of a persuasion....as will the local environment is it declining or improving?......I shouldn't think SD payable when sold would be a major reason not to sell.......?

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12 hours ago, Pop321 said:

I guess the issue is landlords who are exiting may hold off. Last thing we need is a disincentive to sell. 

Of course the ‘rights and wrongs’ may be a different matter but I have been exiting the market since S24. S24 doesn’t impact me directly but I knew the tide was turning.  

With CGT plus  SDLT together with low saving rates....for those in debt there is no real incentive to sell until death. 

Yes, agree but holding onto something not using that costs money to keep it is like tying your money up whilst losing it, if sold there are still other things can buy with it, do with it, or ways to spend it....all depends on individual circumstances....what the property is, and where it is....holding a large chunk of debt still costs money, the higher LTV the greater the cost......free yourself or never benefit from the gains.....nobody will ever  be as young as they are today.......?

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Another aspect to take into account if the seller adds SD to the sale price is the banks. Will they agree to lend additional funds to buyers? 

I've heard of a few instances recently whereby the bank, some cases weeks before completion, refuse to lend agreed funds due to revaluating the property price. Risking the chain and testing sellers. Latest example was a sale agreed at £280k and bank revalued at £260k. Not sure on buyer circumstances but seller had to agree to reduction. This could cause ripples through a chain. (And show in Land Registry figures later down the line)

If the banks are pricing that in now what does it mean long term - or what do they know what we don't.

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9 hours ago, dugsbody said:

There is no point to making this tax change because it reduces the incentive to sell, which is the opposite to what we want.

Are we just arguing for the sake of arguing or should we discuss the actual issue?

It only reduces the incentive to sell if prices don't adjust. Surely prices will adjust.

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41 minutes ago, winkie said:

Yes, agree but holding onto something not using that costs money to keep it is like tying your money up whilst losing it, if sold there are still other things can buy with it, do with it, or ways to spend it....all depends on individual circumstances....what the property is, and where it is....holding a large chunk of debt still costs money, the higher LTV the greater the cost......free yourself or never benefit from the gains.....nobody will ever  be as young as they are today.......?

I couldn’t agree more about freeing oneself and benefitting from gains. But the debt argument is a moot point for the LLs I am referring to.

Those with debt are hopefully already panicking and S24 should nearly destroy them and their model. And it needs to be extended to companies and all tax relief removed completely. Only because I believe the old model could have resulted in massive borrowing and 80% of all homes owned by indebted 118’ers. 

Many LLs I know are in their 70’s, no debt...ever, and the never sell despite my encouragement otherwise. The reason is the CGT for these guys makes the sale ineffective and they are already ‘free’ because they have £4/5/6 or £7k a month coming in and haven’t worked for 30 years.

I say the sale is ineffective because after tax they lose the buying power. The real capital gains/losses are no longer relevant...many would happily encourage a 50% house price drop. Deflation hurts but not when you bought a house for £20k in the 1970’s now worth £400k. If the price of everything falls (houses and other things money can buy) then the tax effect is less and the relative buying power increases. No violin for these guys...they don’t ask for it, just explaining why they don’t sell.  

What my concern is that those like me who morally want to exit but don’t financially need to may just hang on (like the old guys I know did, I guess). It the ‘easy option’ and little point selling £100k house and getting £70k (cost, tax, sdlt) and trying to find something to use the money for....when the £100k was already generating £6k net a year. Many costs have been already been incurred buying so why incur more cost to sell....just take £60k rent over ten years. 

SDLT has been a good disincentive to buy second homes....move it to the seller and it becomes an equally effective disincentive to sell. 

I know there are valid differing perspectives on this. So not something I think I am ‘right’ about...just I think the impact could be quite complex. 

A land value tax is probably the only way old people, old landlords and even younger indebted landlords will actively sell. Another thread I guess. ?

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8 hours ago, dugsbody said:

Sorry, I think you're wrong. 

Do you think prices won't adjust? Or do think a significant proportion of potential sellers will be too stupid to realise they could add the cost of the stamp duty to the price?

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3 minutes ago, Kosmin said:

Do you think prices won't adjust? Or do think a significant proportion of potential sellers will be too stupid to realise they could add the cost of the stamp duty to the price?

I think prices will rise in compensation but now instead of a transaction tax on new buyers who might be quite desperate, you've got a transaction tax on sellers who have a little more choice on whether to move or stay put. This will create a disincentive for some sellers who may otherwise have done so, regardless of the upward pressure on prices. People soon will forget they "made" a bit more and just see the tax they have to pay in order to just sell their house.

The whole transaction tax on moving houses is utterly, utterly bonkers. Social mobility is a good thing. We want people to be able to move for better jobs, lifestyle, any reason whatsoever. Putting a tax on this activity is, as I say, bonkers.

Just kill it and move to an annual tax.

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8 hours ago, dugsbody said:

I think prices will rise in compensation but now instead of a transaction tax on new buyers who might be quite desperate, you've got a transaction tax on sellers who have a little more choice on whether to move or stay put. This will create a disincentive for some sellers who may otherwise have done so, regardless of the upward pressure on prices. People soon will forget they "made" a bit more and just see the tax they have to pay in order to just sell their house.

I think most who would consider that a disincentive already consider that they have enough disincentives.

I'm not sure it will make much difference to downsizers. There a lot of unavoidable costs aside from stamp duty (conveyancing, removals, EA fees, surveys and work necessitated by surveys). Adding this to the hassle of moving (especially downsizing, which likely involves reducing possessions etc.) and the difficulty of finding something suitable for a reasonable price (I think I've read posts on this forum along the lines of "We could sell our 4 bed house for 500k, but it would cost well over 250k for a nice 2 bed flat) and many rationally rule out downsizing regardless of stamp duty.

Many downsizers would have paid stamp duty on their purchase under the old system, so I imagine even they would look at the change in amount paid rather than just the total (e.g. selling at 500k and buying at 300k, you are paying 10k more stamp duty, rather than just suddenly having to pay 15k on the sale).

I can see it making a bit more of a difference to people considering sell their BTLs, but again I suspect other factors will be more important to this decision. Those landlords who aren't facing difficulties with tax or interest payments generally can't think of where they would re-invest the money if they sold. Again, I suspect a lot of these people would rule out selling even if they could do so without incurring any costs.

9 hours ago, dugsbody said:

The whole transaction tax on moving houses is utterly, utterly bonkers. Social mobility is a good thing. We want people to be able to move for better jobs, lifestyle, any reason whatsoever. Putting a tax on this activity is, as I say, bonkers.

Just kill it and move to an annual tax.

I agree.

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2 hours ago, dugsbody said:

The whole transaction tax on moving houses is utterly, utterly bonkers. Social mobility is a good thing. We want people to be able to move for better jobs, lifestyle, any reason whatsoever. Putting a tax on this activity is, as I say, bonkers.

Just kill it and move to an annual tax.

Yes, stamp duty is a bad tax and should go. It's even starting to affect the only demographic the Tories are interested in i.e. homeowners over 50. My pensioner parents toyed with the idea of moving nearer to us to be able to spend more time with their grandchildren but decided not to even look into it due to the cost of stamp duty.

Edited by Dorkins
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I see this policy is abandoned now but if it had gone ahead I think it would have led to a spike in prices.

Money saved for stamp duty would have been added to the deposit and for folk who max out their borrowing with say a 10% deposit the stamp duty would been 10X onto the price.

Eg. I have 10k saved and need to pay 2k stamp duty. I have 8k deposit and can can pay 80k for a house.

I have 10k saved and no deposit. I can now pay 100k for the house.

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On 18/08/2019 at 12:11, Dorkins said:

Yes, stamp duty is a bad tax and should go. It's even starting to affect the only demographic the Tories are interested in i.e. homeowners over 50. My pensioner parents toyed with the idea of moving nearer to us to be able to spend more time with their grandchildren but decided not to even look into it due to the cost of stamp duty.

+1. 

 

On 17/08/2019 at 20:50, dugsbody said:

Another pointless and completely stupid tax change that doesn't solve anything for anyone and almost certainly makes things worse as now there is even less incentive for people to sell.

Scrap stamp duty and replace it with an ongoing annual LVT. 

+1

I would just add - keep it for investment properties.

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On ‎18‎/‎08‎/‎2019 at 08:40, Tabs said:

Another aspect to take into account if the seller adds SD to the sale price is the banks. Will they agree to lend additional funds to buyers? 

I've heard of a few instances recently whereby the bank, some cases weeks before completion, refuse to lend agreed funds due to revaluating the property price. Risking the chain and testing sellers. Latest example was a sale agreed at £280k and bank revalued at £260k. Not sure on buyer circumstances but seller had to agree to reduction. This could cause ripples through a chain. (And show in Land Registry figures later down the line)

If the banks are pricing that in now what does it mean long term - or what do they know what we don't.

Yep, and this...

We offered £299K on a £315k property in July (previously on for £365k 2 years ago)

Offer accepted. Arranged a valuation via Parents in law who are financial advisers (free of charge survey).  Survey came back with a house value of £275k.  So we considered a bigger deposit, but said no.

Property now on for £280k - Offers in excess of.

They've not come back to us, and with all that's going on we're going to watch and see.  I think I've got a fairly good gauge of property around my patch, but we've been offered a 'Drive buy value survey' - again through contacts of Parents in law - as a way to better gauge the offer and avoid spending on detailed survey fees (as we can't have free surveys forever!) in case we are wide of the mark when comparing our offer with a banks willingness to lend. Apparently drive by surveys are becoming more popular and can be as little as £50.

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