How risk averse are you?

bigadaj

Glen_Clark wrote: »

I don't think they could build enough to meet the demand for housing at below market price. Deciding who gets a council house is as much a recipe for beuracracy and corruption as the planning system.
Wheras if they just stopped interfering in the housing market (boosting demand whilst restricting supply) the free market would bring housing costs back into proportion to the economy like in the rest of Europe.
Then we could start paying off some of our debts, and I would feel safer holding Sterling cash.

An o,d rule of thumb for house building is that costs are split into thirds, first being land cost, second being build cost and the remainder being financing costs, expenses and profits.

So if you look at £150k house being let out at £300 per month the actual return on investment could be around 6%.

This ignores the fact that the majority of the tent would still fall under housing benefit for many so it's recycling government to councils and vice versa, still a lot cheaper than emergency accommodation or paying private landlords though.

Glen_Clark

bigadaj wrote: »

An o,d rule of thumb for house building is that costs are split into thirds, first being land cost, second being build cost and the remainder being financing costs, expenses and profits.

It certainly is an old rule. Building land cost has risen far more than build costs - especially in London. Important to differentiate between land cost and building land cost as the greatest cost is planning permission You can build a good 3 bed detached for about £65k, say £10k for the land at Agricultural land prices, and the rest is the cost of planning permission. If thats not a recipe for corruption I don't know what is..

bigadaj

Glen_Clark wrote: »

It certainly is an old rule. Building land cost has risen far more than build costs - especially in London. Important to differentiate between land cost and building land cost as the greatest cost is planning permission You can build a good 3 bed detached for about £65k, say £10k for the land at Agricultural land prices, and the rest is the cost of planning permission. If thats not a recipe for corruption I don't know what is..

Yes, land cost is with planning permission, there's an order of magnitude difference. London is a special case, but councils should have power over permission, so should be able to get the land at very low cost.

There's far less corruption now than a few decades ago, just too much scrutiny. Increasing population and the dominance of the larger house builders, not forgetting the need for brownfield development where possible, means that private estates are larger and more intensively developed. Council targets for new permissions have also increased, with them stick in the middle between local nimbys and government policy and them trying to avoid the cost of judicial review whilst trying to keep their seats.

BananaRepublic

Glen_Clark wrote: »

But Osborne's HSBC tax, and his obsessive housing market interventions pushing up property prices at the expense of the rest of the economy,

So it's nothing to do with demand far outstripping supply then?

Glen_Clark wrote: »

his obsession with taxing earned income far more than unearned income, suggest to me he is more interested in the old money landed aristocracy - with which he is better connected than Brown, than he is with new money wealth creators we so desperately need.

Take a look at the Labour party, they are a bunch of toffs educated at very expensive schools such as Saint Pauls. It's odd how you can't describe someone in derogatory terms for skin colour, which they did not choose, but you can abuse them if they were born of wealthy parents, which they also did not choose.

You'd do better to criticise the excessive number of lawyers in this and past governments. They have experience of working in a closed profession, and no knowledge of real wealth creation. There's also an awful lot of career politicians, with no knowledge of the outside world.

masonic

BananaRepublic wrote: »

So it's nothing to do with demand far outstripping supply then?

It's everything to do with that. The Government can influence both supply and demand. It is doing everything it can on the demand side of the equation, while seemingly neglecting the supply side.

bowlhead99

Glen_Clark wrote: »

his obsession with taxing earned income far more than unearned income, suggest to me he is more interested in the old money landed aristocracy - with which he is better connected than Brown, than he is with new money wealth creators we so desperately need.

Not sure if you have ever tried to become a new money wealth creator by, for example, starting a business and building it up into something that creates or implements ground breaking technology or employs lots of people.

But the reward for that is a significant return on your "risk capital", in the form of taking the profits of your business as dividends or interest, or capital gains from selling it on to a new owner or owners who wish to keep their money at risk by providing the business with finance.

To encourage investment (which increases the "money multiplier" in the economy), most worldwide governments have some sort of incentives on money that comes from investments ("unearned income" from tax man's point of view) rather than getting paid ordinary "earned" income.

You can bet that Mr Microsoft or Apple or Tesla or whatever new money millionaires are being all entrepreneurial right now, are very happy that unearned income is not taxed as highly as earned income as it incentivises them to do those entrepreneurial things which create wealth.

And generally those whose unearned income is mostly interest on savings rather than interest on risky investments - the increasing demographic who are little old ladies without the ability to get any more "earned income" for the last forty years of their life, or the young people without much savings - will not be getting an income which actually gives a return higher than inflation over the long term so perhaps should not be taxed because they didn't actually get wealthier by physically receiving interest payments.

So, by reducing the tax on unearned income, you help the grey vote by removing their "unfair" savings tax income, and most importantly you help the entrepreneurs' vote, as the latter has potential to have a good stimulative effect when you reward their entrepreneurship with low taxes and they're encouraged to supply capital or innovate to capture the rewards.

In the process, you could say you have the unfortunate side effect of helping out the "landed gentry" vote who already have enough money and assets and property to not really need the income from savings and investments. They still mostly pay tax on their rental income profits at ordinary earned income rates or corporate tax rates on the property business profits though.

You can be deeply cynical and say that the whole tax structure of the economy is being engineered by Osborne to help out a few land barons - and personally I would prefer to see housing cheaper rather than being inflated or artificially sustained - but the general concept of taxing unearned income less vigorously than earned income is not completely terrible, which is why many parts of the world incentivise investing over just getting someone to pay you a wage.

BananaRepublic

masonic wrote: »

It's everything to do with that. The Government can influence both supply and demand. It is doing everything it can on the demand side of the equation, while seemingly neglecting the supply side.

So the government is causing more people to live on their own, and causing levels of immigration never before seen in this country?

BananaRepublic

I am surprised Glen Clark s not railing at Sir Phillip Green, who siphoned off more than a billion pounds from BHS in the form of dividends, depriving it of funds needed to grow and strenghen the business. The dividends were free of tax, being paid to his non UK resident wife. Legal, but smelly.

masonic

BananaRepublic wrote: »

So the government is causing more people to live on their own, and causing levels of immigration never before seen in this country?

The Government has little influence over people's choice to live alone, but I'm surprised you don't believe it has any control over immigration. Perhaps it will gain some more control in due course. Of course, those aren't the only factors affecting demand. There are others. Such as, in the last few months, a rush of BTL investors trying to beat the stamp duty hike, the point of which is clearly beyond my understanding because it seems to me it will ultimately just punish renters who will see the costs passed on.

Also, over the last few years, numerous schemes aimed to make borrowing cheaper and providing cash incentives such that more people are chasing after small amount of housing stock available. These are the schemes to which Glen was referring, I believe.

One could, at a stretch, point out that the London-centric economy means that not only is there a general shortage of housing, but housing that could ostensibly be utilised by those willing to commute to work is not well enough served with transport links. Or you could frame it that other parts of the country have perhaps been neglected in terms of investment in infrastructure and business.

Rather than continue throwing money aimlessly at FTB, perhaps some attention towards actually increasing and managing the available housing stock would be better in the long run? But of course, the majority of households are owner occupied, so anything that slows house price inflation is unlikely to be a vote winner.

Glen_Clark

masonic wrote: »

It's everything to do with that. The Government can influence both supply and demand. It is doing everything it can on the demand side of the equation, while seemingly neglecting the supply side.

Yes but the Government is not neglecting the supply side. They are restricting it with whats been described as the worlds most onerous planning system.