Bank's Posen calls for housing bubble taxes

Mr_Mumble

Graham_Devon wrote: »

I don't want to pay more tax to own a house however. If prices do run away, the treasury gets richer, which could allow for more social housing, instead of "lucky" individuals getting richer and speculating.

The treasury would be richer (and property buyer poorer) during a particular time-period but the subsidies for social housing would then carry-on regardless. The general taxpayer will stump up the ongoing costs of providing socialist housing even if private housing plummeted in price.

This idea seems wholly unfair on forced sellers (be it downsizers or the deceased). The deadweight loss of extra taxation will reduce transactions which in-turn will exacerbate housing problems (i.e. older couples with two-three spare bedrooms will find an added expense to downsize to a one or two bed property as will the young couple who are expecting a child and need those extra bedrooms).

edgex wrote: »

an alternative, to get rid of speculators:

Why would anyone want to get rid of speculators? Speculators provide a vital service with regards price discovery, clearing and efficient use of residential space.

lostinrates

Graham_Devon wrote: »

Yes, because they were pulled up, and a lot of that pull up was entirely profit making, which would also be, not punished, but less worthwhile with these plans.

sorry Graham, I don't understand. I need Generali. Or anyone who reckons they can rival him for clear explanation and a Q &A session.

chucky

lostinrates wrote: »

I think thats how I read it too...but, of course, property HAS gone up in price, and people HAVE kept paying the price, albeit the deals which allowed them to borrow the stamp duty/fees are now not available, but with this change who knows what the market would offer. Again. of you are going to pay, say 30% more for a trade up, and have equity....would the tax increase being a greater percentage of what you'd pay make a difference?

apart from this never being implemented - it would stop people moving property as frequently as they have done due to doing well out of HPI. so those who are forced to sell will be hurt the most due to this being in place.

the only people that would want this implemented are those who have done well financially or those who have missed out,

lostinrates

chucky wrote: »

apart from this never being implemented - it would stop people moving property as frequently as they have done due to doing well out of HPI. so those who are forced to sell will be hurt the most due to this being in place.

the only people that would want this implemented are those who have done well financially or those who have missed out,

OK, I get slow down, because the tax is not HPI and to mve on you need the equity to cover the next tax bill (as it stands with lending..but is that necessarily forever), but I'm still not quite clear why this would have too much downward pressure on price. I realise I'm having a brain hiccup, because I accept that lower transactions have resulted in depressed prices to a degree....but why? And would not the want to ''get back'' the tax as well as make some equite not have some upward pressure on price too?

And yet conversely Also, it is further pressure on FTB who have done a conventional chain, surely? or people recently entering property market...so I sort of get the beginning and the end but I'm missing something crucial in the middle!:o

chucky

lostinrates wrote: »

OK, I get slow down, because the tax is not HPI and to mve on you need the equity to cover the next tax bill (as it stands with lending..but is that necessarily forever), but I'm still not quite clear why this would have too much downward pressure on price. I realise I'm having a brain hiccup, because I accept that lower transactions have resulted in depressed prices to a degree....but why? And would not the want to ''get back'' the tax as well as make some equite not have some upward pressure on price too?

And yet conversely Also, it is further pressure on FTB who have done a conventional chain, surely? or people recently entering property market...so I sort of get the beginning and the end but I'm missing something crucial in the middle!:o

you've got it right - what would happen is that the seller would pass this tax indirectly onto the buyer by increasing the asking/selling price.

when there is less demand it would mean that people would move less often and not put their property on the market as is happening now. unless they are forced sellers of course.

those that were hoping it would have downward pressure on house prices have got it all a bit wrong...

lostinrates

Thank you very much Chucky.

I think it sounds as if it would be ..unfortunate...as Mr Mumble says (that post didn't show when I last posted ) for forced sellers...relocators, etc. It also seems it might have what I would see as negative issues for society (moving for work inhibited by risks of loss in a new area for example).


I also think it might be very good for LLs, and that it could lead to inreased demand on rental....as fewer people buy somewhere for a couple of years placement/new endeavor.

edgex

Mr_Mumble wrote: »

The treasury would be richer (and property buyer poorer) during a particular time-period but the subsidies for social housing would then carry-on regardless. The general taxpayer will stump up the ongoing costs of providing socialist housing even if private housing plummeted in price.

This idea seems wholly unfair on forced sellers (be it downsizers or the deceased). The deadweight loss of extra taxation will reduce transactions which in-turn will exacerbate housing problems (i.e. older couples with two-three spare bedrooms will find an added expense to downsize to a one or two bed property as will the young couple who are expecting a child and need those extra bedrooms).


Why would anyone want to get rid of speculators? Speculators provide a vital service with regards price discovery, clearing and efficient use of residential space.

i take it you wouldnt then?
i didnt say they would want to, i simply showed an easy way of doing so.


how do speculators provide a 'vital service' in the areas you have stated?

are a resident buyer & a resident seller unable to 'discover' their own price?

is a speculator the only person able to build a property?
if a speculator 'sits' on an empty site or property on the basis of making a profit from hpi, how is that an efficient use of space?

Generali

lostinrates wrote: »

Isn't the amount paid as stamp duty raised by the percentage remaining the same and house prices rising? Doesn't this risk making the problem of getting on/moving up lower rung.. of the ''ladder'' harder and therefore penalise those benefiting least from HPI?

I'm sure I've misunderstood this, where is Generali....?

Here I am!

What he's saying is that as house price inflation rates change, the rate of stamp duty should change.

For example, you could pass a law saying that if HPI is -10%, stamp duty is 0%, if HPI is 0% stamp duty is 0.5%, if stamp duty is +10%, stamp duty is 1% and so on.

That would act as a stabiliser on house prices to some extent as if stamp duty is higher, less money would be available for house purchases.

lostinrates

Generali wrote: »

Here I am!

Thank goodness!

What he's saying is that as house price inflation rates change, the rate of stamp duty should change.
Uhuh, I follow
For example, you could pass a law saying that if HPI is -10%, stamp duty is 0%, if HPI is 0% stamp duty is 0.5%, if stamp duty is +10%, stamp duty is 1% and so on.
still with you
That would act as a stabiliser on house prices to some extent as if stamp duty is higher, less money would be available for house purchases.

Lost. I just don't get (as you'll have discovered on reading the thread) exactly why ...as increased house prices didn't so why house prices increased by tax would....


Just like to say your explanation above the bit I say I'm still with you is the best...better than the original even.

nightwatchman

Why stamp duty?
Would not be simpler if the interest rate was taxed?
Whatever the bank rate is the taxman will have his cut on top of that.
Bank rate 1% + 10% tax on that rate = payable rate 1.1%
Bank rate 2% + 10% tax on that rate = payable rate 2.2%
The tax could apply selectively only to the mortgage rates, or to any kind of other rates necessary.

Could this work?