What would encourage you to divest property?

westernpromise

I let out a west London flat that I bought in 1999 and live in a north London house I bought in 2012. I intend if possible never to sell either.

Mainly this is because I am thinking multi-generationally. Over the last 60 to 70 years there has never been a time when buying and holding London property for 10 years was a bad idea. I figure this will remain true and thus that selling property unnecessarily does my daughters a bad turn (any CGT liability is cancelled by IHT when you die so you can ignore that).

I've been mulling over whether there is any incentive the state could chuck my way that would induce me to sell. Two things might do it. One would be a CGT holiday so I could sell the flat and keep the inflation. The other would be the abolition of stamp duty when you trade down - so if you sell a million quid house and buy a two million quid house you'd pay SDLT but in the reverse case you'd pay nothing.

In other words, if the penalties for selling up and for downsizing were removed I'd consider both, where at the moment both are utterly out of the question.

What would work for you?

HAMISH_MCTAVISH

Imminent Death.

CLAPTON

westernpromise wrote: »

I let out a west London flat that I bought in 1999 and live in a north London house I bought in 2012. I intend if possible never to sell either.

Mainly this is because I am thinking multi-generationally. Over the last 60 to 70 years there has never been a time when buying and holding London property for 10 years was a bad idea. I figure this will remain true and thus that selling property unnecessarily does my daughters a bad turn (any CGT liability is cancelled by IHT when you die so you can ignore that).

I've been mulling over whether there is any incentive the state could chuck my way that would induce me to sell. Two things might do it. One would be a CGT holiday so I could sell the flat and keep the inflation. The other would be the abolition of stamp duty when you trade down - so if you sell a million quid house and buy a two million quid house you'd pay SDLT but in the reverse case you'd pay nothing.

In other words, if the penalties for selling up and for downsizing were removed I'd consider both, where at the moment both are utterly out of the question.

What would work for you?

to downsize to £1 million house cost £43,750 stamp duty
to downsize to £0.5 million cost 15,000

are you really saying that to save this money would make you trade down?

cells

For a lot of people there are only 3 options

Bank account
Property
Spend it

If you are trying to save then the last one isn't an option and of the two that remain its inconceivable that bank accounts will outperform property so that is the British public go to saving once they have enough for it to be an option

Without property investment the savings of the public would be a great deal lower. Some will argue that without property investment then more people would won their own homes so overall savings would be similar but I'm not so sure. I think companies would have jumped onto the band wagon to become landlords if the public hadn't

westernpromise

CLAPTON wrote: »

to downsize to £1 million house cost £43,750 stamp duty
to downsize to £0.5 million cost 15,000

are you really saying that to save this money would make you trade down?

Yes. Last year I paid £72,000 in income tax and the year I bought the house I paid £37k stamp duty on top. I've paid enough tax, thanks.

To sell a million quid house costs agents' fees, legal fees, and removal costs. To buy another cost surveys, searches, more legal fees and a lot of refurbishment. All of those, while costly, offer value in the form of the service. But stamp duty is a just a colossal gimme. Likewise CGT. So I will pay neither.

If they were reduced it might free up some property. There's a thought.

CLAPTON

westernpromise wrote: »

Yes. Last year I paid £72,000 in income tax and the year I bought the house I paid £37k stamp duty on top. I've paid enough tax, thanks.

To sell a million quid house costs agents' fees, legal fees, and removal costs. To buy another cost surveys, searches, more legal fees and a lot of refurbishment. All of those, while costly, offer value in the form of the service. But stamp duty is a just a colossal gimme. Likewise CGT. So I will pay neither.

If they were reduced it might free up some property. There's a thought.

to sell at a million and buy 0.5m is indeed expensive but I assume you would be doing that because you wanted to : a mere 15k surely really stop you doing what was in your best interest

and you would have a lot of spare cash

westernpromise

CLAPTON wrote: »

to sell at a million and buy 0.5m is indeed expensive but I assume you would be doing that because you wanted to : a mere 15k surely really stop you doing what was in your best interest

and you would have a lot of spare cash

Not necessarily. An elderly relative was in this position a few years ago. Her 5-bedroom house (bought in 1962) was worth £1.2 million. To downsize to somewhere near the family with 2 beds and a garden she would be looking at £800k.

So that's

£30k selling fees
£2k moving fees
£32k stamp duty
£3k surveys searches etc
£150k to refit the place (easily more) - CP Hart bathrooms (like the old house), John Lewis of Hungerford kitchen (like the old house), do the garden (properly)...soon adds up.

So it costs £220k+ to live in a smaller house. Sure she has £180k in cash but she's left her home of 50 years to live somewhere half the size and all that cash is going to get IH taxed anyway whether she gives it away or doesn't. So she stayed put because £180k wasn't enough. No SDLT would have meant she kept more than half of the downsize proceeds rather than less than half.

I think it is often wrongly assumed that anyone buying a million quid house must be so caked that £40k here and there is small change. It isn' t true. I think I pay obscene amounts of tax and I'm not about to volunteer for any more.

CLAPTON

westernpromise wrote: »

Not necessarily. An elderly relative was in this position a few years ago. Her 5-bedroom house (bought in 1962) was worth £1.2 million. To downsize to somewhere near the family with 2 beds and a garden she would be looking at £800k.

So that's

£30k selling fees
£2k moving fees
£32k stamp duty
£3k surveys searches etc
£150k to refit the place (easily more) - CP Hart bathrooms (like the old house), John Lewis of Hungerford kitchen (like the old house), do the garden (properly)...soon adds up.

So it costs £220k+ to live in a smaller house. Sure she has £180k in cash but she's left her home of 50 years to live somewhere half the size and all that cash is going to get IH taxed anyway whether she gives it away or doesn't. So she stayed put because £180k wasn't enough. No SDLT would have meant she kept more than half of the downsize proceeds rather than less than half.

I think it is often wrongly assumed that anyone buying a million quid house must be so caked that £40k here and there is small change. It isn' t true. I think I pay obscene amounts of tax and I'm not about to volunteer for any more.

you misunderstand what I am saying : but no matter.

Graham_Devon

cells wrote: »

For a lot of people there are only 3 options

Bank account
Property
Spend it

Erm, why?

Are they barred from all other investments?

cells

Graham_Devon wrote: »

Erm, why?

Are they barred from all other investments?

They don't know of any other investment's

Also even if you include shares in the list you end up with

Bank accounts
Property
Shares
Spend it

Still of all those options the primary one will be bank accounts followed by property once people can get enough fund for it. Most people won't go to an asset manager with £100k and ask for advice in what shares to buy but they will go to a estate agent and view some homes and buy that

Also let to buy must be big. Where someone in a starter home has paid off the mortgage by say age 45 and they buy a bigger family home and keep the paid off starter home to rent out. The option there of selling the starter home for £150k and putting that into shares seems quite stupid due to transaction and time and stress costs of disposing of the starter home.

Simply put Propertyand bank accounts paying 1% is the savings vehicle choice for the public and they will often opt for Property rather than 1% accounts


PS the additional stamp duty for second homes might help a bit in this respect UE put people off from renting out the lower rings of the property ladder rather than selling but then again maybe not

Graham_Devon

cells wrote: »

They don't know of any other investment's

Think you are doing BTL'ers a bit of a disservice there old chap!