How low will property go?

N1AK

cells wrote: »

The taxes are just too high for my liking. With the taxes transaction costs and initial refurb now in the region of >£50,000 its terribly off putting. If I want more property investments I think REIT in an ISA/Pension paying no taxes and 0.5% stamp duty is going to be better than 40/45% income taxes and >5% transaction.

This is one of the many examples of how the view that stamp duty is great because the wealthy can't dodge it is hopelessly naive. Stamp duty is one of very few taxes I take issue with, simply because it seems to discourage positive behaviors (like moving to a home that better meets your need, or like moving for work/better work).

You can argue that better work should outweigh a bit of tax, but when a modest property in London can have a stamp duty cost of £15k-30k, in addition to all the other costs and inconveniences of moving home, it could easily make a job paying £10-20k pa more unattractive if you didn't strongly desire the change of role.

mwpt

N1AK wrote: »

This is one of the many examples of how the view that stamp duty is great because the wealthy can't dodge it is hopelessly naive. Stamp duty is one of very few taxes I take issue with, simply because it seems to discourage positive behaviors (like moving to a home that better meets your need, or like moving for work/better work).

You can argue that better work should outweigh a bit of tax, but when a modest property in London can have a stamp duty cost of £15k-30k, in addition to all the other costs and inconveniences of moving home, it could easily make a job paying £10-20k pa more unattractive if you didn't strongly desire the change of role.

You and cells are talking about two slightly different things. In cells case, the extra stamp duty incurred for buying anything apart from your primary residence. In your case, you are talking about stamp duty in general. I could get on board with scrapping stamp duty for primary residence buyers. If people want to own a second home, charging stamp duty is fine with me.

chucknorris

mwpt wrote: »

If people want to own a second home, charging stamp duty is fine with me.

There is a way to avoid additional stamp duty on a holiday home, if you buy it on the Isle of Man, but it gets even better, as there is no stamp duty on the IOM.

wotsthat

mwpt wrote: »

You and cells are talking about two slightly different things. In cells case, the extra stamp duty incurred for buying anything apart from your primary residence. In your case, you are talking about stamp duty in general. I could get on board with scrapping stamp duty for primary residence buyers. If people want to own a second home, charging stamp duty is fine with me.

We're so alike. I'm really keen on taxes other people pay too. Given a few minutes thought I bet we could justify this on moral grounds.

mwpt

wotsthat wrote: »

We're so alike. I'm really keen on taxes other people pay too. Given a few minutes thought I bet we could justify this on moral grounds.

Well, taxes have to be collected. It is nice to set them on behaviours that might be considered luxury, such as owning more than one home.

Or on behaviours which are considered to have negative externalities, such as fuel emissions.

westernpromise

Stamp duty is one of the reasons there won't be a crash. The cost of exiting the market and re-entering later are now so enormous that in London you'd need a 10% discount just to stand still. This is mainly because of stamp duty, which in my case would add around 500% to the costs of a sideways house move. This tax appears designed to prevent house moves and it is working well, as the ever-falling number of transactions suggests.

wotsthat

mwpt wrote: »

Well, taxes have to be collected. It is nice to set them on behaviours that might be considered luxury, such as owning more than one home.

Or on behaviours which are considered to have negative externalities, such as fuel emissions.

Bah! I'd rather the government spent less so they didn't have to dream up ever more complex ways to get consumers to pay more.

I've a second home and the people picking up my product from supermarket shelves paid the stamp duty for me.

cells

mwpt wrote: »

You and cells are talking about two slightly different things. In cells case, the extra stamp duty incurred for buying anything apart from your primary residence. In your case, you are talking about stamp duty in general. I could get on board with scrapping stamp duty for primary residence buyers. If people want to own a second home, charging stamp duty is fine with me.

The transaction taxes will mean that the assets are transacted less or put into a different tax structure.

Long term I can see a gradual shift from BTL sole traders paying 40/45% tax and capital gains and stamp duty quite frequently to BTL corporations paying 20% corp tax (said to be going down to 15% or less) and no capital gains tax and no sales taxes as they will buy once and hold forever (or at least multiple times as long as a human landlord who might buy age 50 and sell age 70

Overall in the long run it could mean fewer transactions and less taxes.

nkomp18

So far it's been mostly speculation but slowly the first real data are surfacing:

High-profile London estate agency Foxtons has announced a 42% fall in profits, blaming uncertainty around the EU referendum for the fall.
It made a pre-tax profit of £10.5m in the first half of the year compared with £18.1m during the same period a year earlier.
There had been a "sharp contraction" in the London property market in the second quarter of the year, it said.
Foxton's share price fell by 8% in early trading on Friday.
Since the result of the Brexit vote was announced, it has fallen by about 30%.

Link to BBC article

Of course that's just the beginning

mwpt

wotsthat wrote: »

Bah! I'd rather the government spent less so they didn't have to dream up ever more complex ways to get consumers to pay more.

That would be nice, but unrealistic. In fact, as the population ages and wealth inequality continues to increase, I can only see taxes on wealthier people needing to increase.

Until some form of utopian post scarcity is reached.