Would this wheeze help with house prices?

economic

1.5m for a 4 bed is not the average price for a 4 bed in the whole of london. you can get a 4 bed in a decent area for less then 7-800k

westernpromise

HAMISH_MCTAVISH wrote: »

Crikey.

People seem determined to come up with ever more complicated excuses for not building more houses.

The solution to a housing shortage is not to force people to live in a type of house they don't want to live in - it's simply to build more houses.

I'm not suggesting that, although nor am I persuaded more houses are needed. I am proposing a simple fix that could be enacted overnight and that would free up supply, because lots of older people in houses bigger than they need are put off downsizing by the cost of stamp duty.

My mother paid £19k for her house and it's now worth probably £2 million. If she sold up and bought somewhere for half that she'd pay just about double in stamp duty alone what she originally paid for the whole house. She won't do it. Make that cost free and she might.

westernpromise

AnotherJoe wrote: »

What does the panel think?

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That it would make a trivial difference to the fundamental problem that there aren't enough houses.

Who says there aren't? I don't see people sleeping on the street. The issue is that the wrong people own them because the tax system treats changing your house as a morally vicious act that deserves to be punished. If I swopped my £1.5 million for another - because I need a bigger house, or it's in the wring place, or whatever - I'd pay probably £20k in transaction costs and £100k in stamp duty. That's a 500% tax penalty for moving sideways.

So you get single elderly people living alone in 5 bedrooms because they're not about to pay £120k to move, and anyway the 3-bed house they'd move to is occupied by someone who's not about to pay £50k to move, and so on.

Basically we seem to have fallen hook, line and sinker for the notion that you make housing cheaper by making it more expensive. And when that doesn't work we do it again. The beatings, it seems, will continue until morale improves.

westernpromise

economic wrote: »

1.5m for a 4 bed is not the average price for a 4 bed in the whole of london. you can get a 4 bed in a decent area for less then 7-800k

The proposal I have outline would work in any area where a 4 bedroom house costs more than a 2 bedroom, where the price difference would amount to a worthwhile sum for a pensioner to realise, and where there is exposure to IHT. Where there is none, it could easily be created. This largely describes the entire south east.

economic

completely agree with westernpromise

i would also argue that the current tax system on property encourages people to hoard houses and buy another (why pay huge sums in agent fees and waste the original stamp duty already paid), keeping the original house for investment. even the 3% additional stamp on 2nd homes wont deter this from happening.

Apodemus

Your underlying point is that there are barriers to mobility in the housing market, and I would agree with that.

Ironically, the surge in private renting and the BTL market forms a part of the solution, while transaction taxes on house purchases and disposals form part of the problem. The debatable point is where the balance should be struck.

westernpromise

Yes, to a certain mentality, BTLers can't win. If they buy new houses they're accusing of snapping them up and denying Bambi-eyed FTBs the chance to own, but if they buy old stock, then they're accused of not causing a single house to be added.

The reality is that landlords' economic interests are served by maximising the number of occupants - because this gives better assurance of receiving rent - so they are the likeliest actors to take one large house occupied by one person and turn it into a large number of one- or two-room dwellings occupied by 6 or 8 or 10. The main restraint on this happening is the huge cost of moving / downsizing for that single occupant-seller in the areas where it most needs to occur.

You don't make something cheaper or more available by heaping taxes onto it, a point Osborne never got.

AnotherJoe

westernpromise wrote: »

Who says there aren't? I don't see people sleeping on the street. The issue is that the wrong people own them because the tax system treats changing your house as a morally vicious act that deserves to be punished. If I swopped my £1.5 million for another - because I need a bigger house, or it's in the wring place, or whatever - I'd pay probably £20k in transaction costs and £100k in stamp duty. That's a 500% tax penalty for moving sideways.

So you get single elderly people living alone in 5 bedrooms because they're not about to pay £120k to move, and anyway the 3-bed house they'd move to is occupied by someone who's not about to pay £50k to move, and so on.

Basically we seem to have fallen hook, line and sinker for the notion that you make housing cheaper by making it more expensive. And when that doesn't work we do it again. The beatings, it seems, will continue until morale improves.

I do see people living on the street, but in any case where on earth are you dragging up the figures you use. That it costs someone £120k to sell or 50k in stamp duty to buy for example? The prices of houses that would generate those sort of numbers are a fraction of a fraction of a percent of the houses in this country and utterly irrelevant to addressing housing need for 99% of the population

westernpromise

AnotherJoe wrote: »

I do see people living on the street, but in any case where on earth are you dragging up the figures you use. That it costs someone £120k to sell or 50k in stamp duty to buy for example? The prices of houses that would generate those sort of numbers are a fraction of a fraction of a percent of the houses in this country and utterly irrelevant to addressing housing need for 99% of the population

There will always be people on the street because of drink or drugs. There are not suddenly more because property has got expensive.

The cost of selling a £2 million house and buying a £1.5 million house would be about £120k. You'd pay about £20k in fees on the sale and £94k in stamp duty. That is why my mother and most of her mates won't do it. They are not about to pay £120k, most of it in tax and thus money completely wasted, for the privilege of giving up their homes of 40 or 50 years. They might, however, do it for nothing.

£50k would be the stamp duty on a home costing £1,060,000. Rightmove has 6,410 properties on for sale within 40 miles of London at a price between £900k and £1,000k; nearly 8,000 more between £1,000k and £1,250k. These prices send the useful information that it is exactly in this area that something needs to be done. £1 million is nothing special in the south-east any more.

Cornucopia

The thing about the OP's figures is that they are London figures. You don't even have to go as far as the M25 to find a 4-bed house for less than £400k, never mind £1.5m.

And therein lies the problem with his suggestion. London doesn't have vast numbers of over-sized houses with one or two people living in them. What it does have is a fundamental space constraint.

The London market is cooling off at the moment. I would suggest we wait and see where that lands before re-working the entire system.