Lunatic London Property market starting to turn?

westernpromise

I think the main headwind is that under the old stamp duty system, if you could afford to spend £1.5 million buying a house, that got you £1.429 million of house and you wasted £71k on stamp duty.

Today you can probably still afford to pay £1.5 million for the same house, but that now gets you £1.415 million of house and wastes £85k on stamp duty. What the seller gets for the actual house is thus £15k less than before.

Nobody knows what a house is worth within 1%, but an extra £15k in transaction cost that quite demonstrably buys you absolutely nothing is patently a gratuitous expense that is sure to feed back into house values. Once you get into the higher brackets or the second (or indeed accidental second) home type of purchase it becomes an even more obvious ripoff.

economic

westernpromise wrote: »

I think the main headwind is that under the old stamp duty system, if you could afford to spend £1.5 million buying a house, that got you £1.429 million of house and you wasted £71k on stamp duty.

Today you can probably still afford to pay £1.5 million for the same house, but that now gets you £1.415 million of house and wastes £85k on stamp duty. What the seller gets for the actual house is thus £15k less than before.

Nobody knows what a house is worth within 1%, but an extra £15k in transaction cost that quite demonstrably buys you absolutely nothing is patently a gratuitous expense that is sure to feed back into house values. Once you get into the higher brackets or the second (or indeed accidental second) home type of purchase it becomes an even more obvious ripoff.

but 15k is nothing to someone wanting to buy a 1.4m house. if they want it badly, they will buy it.

Rich2808

And only about 20 flats in SW8 are listed at £400,000 or less - mostly studios and ex local authority 1 beds. Most of those listed as reduced are resales for the new Battersea power station and Nine Elms developments.

Maybe that is part of the reason why there are no many for sale - no first time buyer earning less than £100,000 with a £50k deposit can afford any of them?

economic

Rich2808 wrote: »

And only about 20 flats in SW8 are listed at £400,000 or less - mostly studios and ex local authority 1 beds. Most of those listed as reduced are resales for the new Battersea power station and Nine Elms developments.

Maybe that is part of the reason why there are no many for sale - no first time buyer earning less than £100,000 with a £50k deposit can afford any of them?

they can with help to buy.

Rich2808

economic wrote: »

they can with help to buy.

Only if the developer offers it - and most of those for sale are resales so that's not an option.

GreatApe

economic wrote: »

but 15k is nothing to someone wanting to buy a 1.4m house. if they want it badly, they will buy it.

How does one buy a £1.5 million house (or even higher) and avoid inheritance tax on death?

I dont think I would buy such a house even if I could afford it, its just a huge tax liability down the line. Instead I would buy a similar house in a cheaper area or a cheaper/smaller house in the same area.

Twenty years ago a person could own 2 x terrace homes in hackney and pay nothing in death duties, now if you own the same two terrace homes they cost £2+ million and you would be hit with a £800,000 tax bill

The big head wind in London is now surely inheritance taxes. There will now be plenty of 'forced sellers' who would historically have kept the house but now will need to sell it to pay a tax bill.

Unless the IHT bands increase or exempt main homes this is going to be a permanent problem for London. It will not only impact on forced sales but also likely people who would have bought now no longer will so as to avoid this problem.

GreatApe

Actually I guess you could gift the house and if you live 7 years it would be exempt that would work.

But how many people are MSE and follow and know these rules and regs and taxes. In the past owning an expensive London home was exempt of IHT for all (as the IHT threshold was well above the house price) but not those who are not pro active or simply do not know much about IHT and how it works will be hit with these taxes

Gambler101

1000s and 1000s of flats being built all over London everywhere you look, and many in areas you really wouldnt want to live if you are paying upwards of half a million quid lol This can only lead to a price crash of 30-50% soon IMHO.

economic

GreatApe wrote: »

How does one buy a £1.5 million house (or even higher) and avoid inheritance tax on death?

I dont think I would buy such a house even if I could afford it, its just a huge tax liability down the line. Instead I would buy a similar house in a cheaper area or a cheaper/smaller house in the same area.

Twenty years ago a person could own 2 x terrace homes in hackney and pay nothing in death duties, now if you own the same two terrace homes they cost £2+ million and you would be hit with a £800,000 tax bill

The big head wind in London is now surely inheritance taxes. There will now be plenty of 'forced sellers' who would historically have kept the house but now will need to sell it to pay a tax bill.

Unless the IHT bands increase or exempt main homes this is going to be a permanent problem for London. It will not only impact on forced sales but also likely people who would have bought now no longer will so as to avoid this problem.

i guess it depends on what one wants. people will want to buy if they can afford it where they want to live and how big a home. i guess usually the ones who can afford in nice areas big houses are savvy about taxes and can and will avoid inheritance taxes by putting it under children names or trust etc.

as for me, i own a modest flat in a nice area (highgate). i dont need or want any more then this. for me having a large house has its costs in all sorts of ways and i rather spend that money enjoying my life. whats the point showing off?

Keep_pedalling

GreatApe wrote: »

How does one buy a £1.5 million house (or even higher) and avoid inheritance tax on death?

I dont think I would buy such a house even if I could afford it, its just a huge tax liability down the line. Instead I would buy a similar house in a cheaper area or a cheaper/smaller house in the same area.

Twenty years ago a person could own 2 x terrace homes in hackney and pay nothing in death duties, now if you own the same two terrace homes they cost £2+ million and you would be hit with a £800,000 tax bill

The big head wind in London is now surely inheritance taxes. There will now be plenty of 'forced sellers' who would historically have kept the house but now will need to sell it to pay a tax bill.

Unless the IHT bands increase or exempt main homes this is going to be a permanent problem for London. It will not only impact on forced sales but also likely people who would have bought now no longer will so as to avoid this problem.

So as a beneficiary would you rather inherit an estate that had no IHT applied to it or a much larger one that had to pay tax? Trying to hang on to a family home is really a thing of the past, most children would not want to anyway, and if you have more than one child are you really going to just leave it to one of them?

Spending £1.5M on a home does not really make a lot of difference to my estate's IHT liability as not doing it means I still have that amount in some other asset, unless I give it away.