Is there an award for economically illiterate ideas?

westernpromise

SouthLondonUser wrote: »

Like I said, this is self-evident. What is not is estimating with any degree of accuracy by how much the activity taxed (house purchase, work, etc) changes as the tax changes.

No, but a fair estimate can be made. Transaction volumes in prime central London have fallen precipitously at a time when prices have not risen. So they're not down because prices have gone too high; they can't be, because they have stopped rising.

These properties aren't for the most part bought by UK peons borrowing a multiple of salary. So it's not UK mortgage reforms restricting borrowing that are having this effect. It's quite widely known that a majority of PCL sales are to foreigners, and not just foreigners from one country. So it's not that all the foreign buyers are Chinese and the Chinese buyers have gone away. Transactions in PCL by everyone are down.

So if it's not higher prices, or mortgage reform, or over-reliance on one type of foreign buyer that's crashed sales volumes, it must be the only other thing that's changed, which is stamp duty. Evidence for this is that PCL prices are in fact down, so that the total buying price now at lower prices and higher SDLT is similar to what it was 2 years ago with higher prices and lower SDLT.

Ergo, there is observational evidence and theory to support the view that extortionate transaction taxes have stifled transactions.

Don't forget that SDLT applies to any purchase, whether the buyers are honest, law-abiding families who buy their one and only family home with their hard-earned money, or whether some dodgy character is engaging in speculation and money laundering. In fact, the 3% additional SDLT does not apply to main homes.

I have no idea what point you are making here. I'm not sure why you equate speculation and money laundering or why you by implication think that only house buyers are speculators. Crashy Time of this parish speculated against property by selling up in 1996, hoping to buy back cheaper later. He's still waiting. He's a short speculator.

I would suggest though that the canonical money-laundering house buyer is a lot less sensitive to SDLT than the average Joe who has had to earn that money. I get involved in money laundering cases a certain amount professionally, and the information I have from those who pursue and prosecute it is that your average money launderer who's stolen £10 million and is left with £5 million after laundering it considers that good value.

antrobus

tara747 wrote: »

.Yes, I regard property and land as an unproductive asset....

Congratulations. You have been nominated for the award for economically illiterate ideas.:)

(Crumbs almighty, how the **** can land be an "unproductive". Where do you think food comes from?)

tara747 wrote: »

...Productivity is taxed by taxing income from work and other forms of economic activity.

Productivityis the economic measure of output per unit of input.

I think you have qualified for another nomination.:)

SouthLondonUser

westernpromise wrote: »

Ergo, there is observational evidence and theory to support the view that extortionate transaction taxes have stifled transactions.

You rightly mentioned foreign buyers in London. Well, how about Brexit risk, even before the referendum? Currency fluctuations? Political environment/situation in the home countries of these foreign buyers?
Your analysis simplifies things too much.

Also, what exactly do you mean by lower stamp duty? If I remember correctly, Osborne's 2014 budget increased stamp duty on main homes worth more than ca. £930k and on second homes. So, if you're buying your main home for less than £ 930k, you're paying a lower, not higher stamp duty. Not to mention the previous slab structure distorted the market and made very little sense. Or are you referring to those poor millionaires who are just about managing?

westernpromise wrote: »

I have no idea what point you are making here. I'm not sure why you equate speculation and money laundering or why you by implication think that only house buyers are speculators.

See above. I'm making the point that the purchase of a main home for less than £930k does not attract a higher stamp duty.

SouthLondonUser

GreatApe wrote: »

We know the transaction tax has gone up

You mean stamp duty? It's gone up for second properties and for properties worth more than ca. £ 930k. It's not gone up for main properties worth less than that.

GreatApe wrote: »

so prices and new build rates will be lower, the amount we can not quantify easily but the direction is clear. So removing or decreasing the transaction tax would likely result in higher prices and higher build rates which is a good thing.

Higher prices are good? For who? No single policy or event benefits everyone: there are always winners and losers.
If you are invested in property, yes, you benefit.
If you own a property and want to upsize, much higher prices prevent you from doing that, but you're not particularly worse off if you already have a property.
If instead you'd like to buy one but are struggling, you most certainly do not benefit from higher prices.

GreatApe

SouthLondonUser wrote: »

You mean stamp duty? It's gone up for second properties and for properties worth more than ca. £ 930k. It's not gone up for main properties worth less than that.

Higher prices are good? For who? No single policy or event benefits everyone: there are always winners and losers.
If you are invested in property, yes, you benefit.
If you own a property and want to upsize, much higher prices prevent you from doing that, but you're not particularly worse off if you already have a property.
If instead you'd like to buy one but are struggling, you most certainly do not benefit from higher prices.

Stamp duty for the same properties have massively gone up.

I purchased a property five years ago for £250k and it had a £2,500 tax. If I sold the property now for £500k the stamp duty would be £30,000

Yes that is the additional homes included but this type of property is and almost always has been and likely always will be a rental property.

So I don't care much for what the rate is for a given price the reality is that higher house prices and taxes have taken many London properties to ridiculous tax levels. Like the example above of the same property going from a 2.5k tax to a £30k tax in just the space of 5 years.

The result is as WP says one to slow sales and limit transactions to try and minimise this huge tax bill. Just today foxtons reported a 24% drop in sales last year and that was with the first 3 months of 2016 on fire. I think a 30% fall in London transactions due to the much higher taxes is likely to be here to stay.

The additional tax has reduced transactions reduced prices a little and reduced new build rates and reduced the ability of Londoners to move closer to work causing more congestion and reduced downsizing.

A flat 2% fee on the total transaction sum would be a much better and fairer system. Or perhaps 1.5% for single hone owners and 3% for multiple hone owners.

aurelieweill

A couple of other nominees, like Marine Le Pen of Front National in France for her concepts of "intelligent protectionism" and "economic nationalism".

Or Anna Marie Morris, the Conservative MP for Newton Abbot, who shows on brexitcentral that she slept through her lessons on the Heckscher Ohlin theory, as she writes: "Absolute free trade with no barriers is based on the economic theory of comparative advantage. If each country does what it is good at and sells it to the others we will all be better off. Globally that would be true, but the fruits of our labour are not shared globally, but nationally. So the financial upside will depend on labour costs, the value of the product and exchange rates. It is because of just these constraints we have not done well out of free trade in the EU."

SouthLondonUser

GreatApe wrote: »

Stamp duty for the same properties have massively gone up.
I purchased a property five years ago for £250k and it had a £2,500 tax. If I sold the property now for £500k the stamp duty would be £30,000

But that's because house prices have gone up massively! It's a completely different concept. One might argue that stamp duty thresholds should rise in line with inflation, but, even so, house prices have gone up way above inflation over the last years, as we all know.

GreatApe wrote: »

Yes that is the additional homes included but this type of property is and almost always has been and likely always will be a rental property.

So what? Something must be done to tackle the housing crisis. Penalising buy-to-let is not a bad place to start, IMHO. Sure, it won't solve the housing crisis by itself, but it's one of the many steps that need to be taken. Competition vs buy-to-let investors is one of the many reasons why so many people struggle to get on the ladder.
Note that being able to invest in buy-to-let with interest-only mortgages and an advantageous tax treatment is not a universal human right! In many, possibly most, developed countries this does not happen, yet this by itself has not caused shortages of properties - in fact, possibly quite the opposite!

GreatApe wrote: »

The additional tax has reduced transactions reduced prices a little and reduced new build rates and reduced the ability of Londoners to move closer to work causing more congestion and reduced downsizing.

Wow, the additional 3% stamp duty has caused all of this? Has it also caused global warming?

GreatApe

SouthLondonUser wrote: »

But that's because house prices have gone up massively! It's a completely different concept. One might argue that stamp duty thresholds should rise in line with inflation, but, even so, house prices have gone up way above inflation over the last years, as we all know.

The stamp duty tax take should not just go up and up and up. It should be a regional tax and it should move with regional house prices

With house prices doubling in London over the last 5 years so should have the bands. Any stamp duty raised should stay in the region

So what? Something must be done to tackle the housing crisis.

There is no housing crisis

westernpromise

SouthLondonUser wrote: »

You rightly mentioned foreign buyers in London. Well, how about Brexit risk, even before the referendum?

How about it? Where's the evidence that any particular risk, as opposed to actual transaction cost, reduced transactions in 2015?

Also, what exactly do you mean by lower stamp duty? If I remember correctly, Osborne's 2014 budget increased stamp duty on main homes worth more than ca. £930k and on second homes. So, if you're buying your main home for less than £ 930k, you're paying a lower, not higher stamp duty.

This is to presuppose both that stamp duty wasn't already too high and that changes have an instant rather than lagging impact. People move infrequently, so if it's too high you don't care until you think about moving and then you notice it and you do. I think that the impact of this stuff simply doesn't register till you do, or try to. The impact of the 3% has not fully played out by any means.

In PCL, or indeed much of the adjacent area, you won't find anything for £930k. W9 isn't PCL, for example, but the average property sale over the last year was £853k on 245-odd sales versus £804k on 1,896 sales in the previous 4 years. This represents a halving of transactions in the last 12 months versus the prior average, and probably is more than a halving from 5 years ago.

Those figures are from Zoopla for W9 and they are interesting in another way. They say the average sale price 5 years ago was £804k, that prices have risen 44% and that the average value today is £929k. Can you see what's happening there? 144% of £804k is not £929k. It's £1,160k. So values have gone up - but off the back of the lower priced sales. The high priced stuff has stopped trading.

By your reasoning, both these prices - £804k and £929k - are below £930k, so these people should be indifferent to stamp duty, or should perhaps even have transacted more, because below £930k they are supposedly better off. Unless, of course, the houses they want to buy trigger an excessive tax penalty. You only have to prevent one level in the market from transacting to prevent all others from doing so, whether that's FTBs, 2TBs. or LTBs.

Furthermore, the 3% penalty is turning to be applicable to far more people than envisaged. If you buy a fixer-upper and live in the old house till the new one can be occupied, you pay the 3% and then you have to try to get it back. If you have a main home in one name and one in your spouse's, and you want to sell and replace either, you pay.

Not to mention the previous slab structure distorted the market and made very little sense. Or are you referring to those poor millionaires who are just about managing?

My mother is on about £30k a year and lives in a house that she paid £19k for in 1971. She cannot afford to sell it and downsize to somewhere smaller - which has to be nearby because of grandchildren, friends, family, etc. - because she'd pay well over a hundred grand in stamp duty just to do so. Whatever a downsize freed up, the state would take £100k of it. She regards that as simply unacceptable. If you imagine that people in expensive houses regard stamp duty as chickenfeed, think again. You don't get to own expensive property by chucking six figure amounts away here and there on a whim.

See above. I'm making the point that the purchase of a main home for less than £930k does not attract a higher stamp duty.

So what was all the stuff about money launderers and speculators?

If you want to kid yourself that a tax of hundreds of percent on a transaction will not disincentivise transactions, I'm sure I can't persuade you otherwise. But presumably you'd then also argue that taxing alcohol and tobacco have no effect on consumption of alcohol and tobacco; and that the price of something doesn't affect demand for it.

SouthLondonUser

GreatApe wrote: »

There is no housing crisis

:rotfl::rotfl::rotfl::rotfl::rotfl:
No, of course there isn't.