House prices in much of London are very high, making it difficult or impossible for many to become home owners for the first time in the capital.
This is not a new phenomenon. The nearest I could get to London where I worked as a young man was to buy a home in Didcot and get on the train. Then as now central London was expensive.
However, today prices are even higher relatively in central London. There is little property available on the market. The two observations of course are related.
Today more is being built in central London than in the past. There are many new towers of private sector flats rising on the skyline and along the Thames. Many of those are being bought by overseas buyers, who like the idea of a well appointed home in the centre of one of the world’s greatest cities. I have commented before that it is one of our luxury exports, just like the Germans selling the same rich people powerful and expensive cars they do not really need either. The flats do generate jobs and income for Londoners involved in building, maintaining and servicing the properties.
There is another reason why London property is scarce. Few people who currently own a flat or house want to sell. Even if they no longer use the property very much, they hold on. If they think they might like to move to the country beyond the city and get more house for less money, they often hold back.
One of the reasons is tax. The new high levels of Stamp Duty are a consideration for anyone thinking of moving. If someone owns a London flat as a second home, they are unwilling to sell and pay 28% on the gain they will have made. Why not hold on for a bigger gain later? Why not hold in the hope that the government might return to Labour’s lower levels of CGT sometime?
Tax and regulation damage markets. The housing market in London is currently suffering from an acute shortage of supply of second hand properties. Part of the reason is tax based. Stamp Duty is effectively a tax on London. The government could see if it can help. There is also space for more development in London, as more new homes will also assist.
March 1, 2014
“The flats do generate jobs and income for Londoners involved in building, maintaining and servicing the properties.” It depends what you mean by a “Londoner”, it certainly will not mean they were born there. The days of the loveable cockney charwoman and the scouse brickie are finished. The people you describe are more than likely to have come from Brasil and other exotic parts. Another victory for neo lib economics, the UK economy now gets by through selling flats to foreigners that will be serviced and built mainly by foreigners too.
March 1, 2014
Yep, the charwoman is on housing benefit and the scouse brickie is laid up on invalidity benefit, all paid for by the taxes our host says are collected from buyers and sellers of the property the indigenous population can no longer afford.
Some irony, surely?
March 1, 2014
Immigration problem not a house problem. Your party seems to be unable to to get a grip with immigration despite of the rhetoric. Boles wants to build on every piece of Green belt and skew legislation to oppose it happening, none of your party has the guts to challenge the EU directives which have caused the deliberate devastation through flooding, but are happy to build on such land,
In fact it appears Cameron has condoned Blaire’s inappropriate action to avoid the will of parliament to avoid the rule of law by sending get out of jail free cards to the IRA by continuing to send the letters! Why have we not had an investigation to explore if Blaire committed malfeasance in public office by avoiding the will of parliamentary and rule of law for this the dodgy dossier for invasion on Iraq and the death of Dr Kelly?
March 1, 2014
The London housing market is an excellent example of the effect of tax in reducing liquidity. Someone who had bought a £500,000 house now worth £1m would face total taxes of over £200,000 from their £1m disposal proceeds on selling, assuming the house was subject to cgt. It would be worth hanging on at all costs.
March 2, 2014
Richard1 ,
Both stamp duty and CGT are examples of transaction taxes .
An annual charge for “exclusive use of the commons” paid by everyone on both developed and undeveloped plots in proportion to the rentable value of the location could deter land and property speculation .
Taxes on employment could be reduced . House prices could be prevented from rising beyond the rate of inflation thus reducing the amount of debt people would have to take on to buy them .
The worst thing about CGT at the moment is absence of a taper to account for inflation .
March 2, 2014
Indeed it is absurd there is no allowance for inflation in cgt. Cgt is now too high, we see this in the diminished cash take from cgt in spite of the huge rise in the rate. The laffer curve in action.
March 1, 2014
I teach someone whose father works in a humble job in London and they travel there from Peterborough!
You are so right: the taxation system gets into everything. If only the government would reform it: get rid of the thousands and thousands of pages of Mr Brown’s legacy for a start.
March 1, 2014
I have asked questions on this before, and to date, have not received a satisfactory answers.
Q: Why does the Government need to Stamp Duty tax, when people buy a property ?
Q: What costs are there to Government, when someone moves home ?
Q: Where does the money go, when this tax is collected ?
Q: How is this tax used ?
Q: Is the tax this tax proportional to its need ? ie getting rid of a bad tax would help stimulate investment and growth. eg the window tax.
If you are going to tax people, there has to be some justification. Government cannot simply take from people in new and interesting ways and hope that they will not complain. Government only needs to take from people that which it need to perform its basic and core functions. eg defence of the realm.
The more money a Government has, the greater the scope for waste, corruption and needless spending. Ever larger departments and associated costs.
Governments simply cannot be trusted. They cannot control, let alone reduce spending. Perhaps it is time for a rethink on how, and why, we are taxed and, who gets to say how much and what for.
March 1, 2014
Why do we need a UK government ?
WHY ? WHY ? WHY ?
What is the point ?
March 2, 2014
Q: What costs are there to Government, when someone moves home ?
Well the land registry needs to be updated and any records that have a person’s address also need to be updated (NHS, local council, HMRC, etc).
March 3, 2014
Any you pay over high land reg fees for that on top of the tax. In yet effect another tax on moving plus the 20% VAT on top of legal charges and agents fees.
March 2, 2014
I think we both know the answers to the questions you pose Mark.
The State needs more and more of our money to spend on itself.
Even with the existing levels of tax they are overspending to the tune of £120 billion per year.
There is huge overspending and waste but to bring about the radical change needed you would find yourself battling against many well organised vested interest groups who will fight any attempt to reduce their position power or income.
The salariat is a name given to all those living very comfortably off the largesse of the State and they need all our current taxes plus a load more to satisfy their never ending desire for more.
March 1, 2014
Stamp duty (a turnover tax) at 5%+ and capital gains (on gains that are not even real gains after inflation) at 28% are absurdly high taxes. If you have a property worth £1M but with perhaps £200K of CGT tax to pay on any sale then you buy something else you will only be able to afford something worth perhaps £750K after all the taxes and costs so why bother to move and give 250K to HMG to waste on greencrap, pointless wars, or the EU.
What is needed is more buildings, fewer people or some real alternatives to London. Relax planning, get rid of the green tosh building regulations, build some new towns just outside London improve the tubes with RER paris types of faster tubes lines. There is no real shortage of land and we can go up or even down. Just get government and local authorities out of the way.
Level the fiscal playing field between renting and buying, it is currently in favour of renting for most – due to high stamp duty rates in London.
March 2, 2014
Stamp duty (a turnover tax) at 5%+
Only on properties worth over £1 million.
If you have a property worth £1M but with perhaps £200K of CGT tax to pay on any sale
You only have to pay CGT if this property isn’t your main property, such as a second home or a BTL property.
Relax planning, get rid of the green tosh building regulations, build some new towns just outside London improve the tubes with RER paris types of faster tubes lines.
Where exactly are you going to build these new towns? Most of the land around London has already been turned into towns.
March 2, 2014
One minute Uni, you are complaining on here about housing costs and the lack of affordable property to rent, yet in your post above, you are against any new towns being built.
Odd logic especially as you also say on here that you are against any controls on the EU free movement of people which is creating a large part of the increase in demand for housing.
March 1, 2014
I see you studiously avoid the issue of immigration. The population is being increased by over 200,000 per annum, just by immigration, putting extra demand on housing, health, transport and education. Along with most of your party’s other pre-election pledges, bringing immigration down to less than 100,000 per annum has been a spectacular failure. (Unless of course you are a Conservative MEP who ludicrously insisted on yesterday’s Daily Politics that and increase in immigration of 60,000 showed that your party’s policy was working!)
March 1, 2014
Immigrant families are having more children than indigenous population.
March 1, 2014
Well of course the pledge was only for “net” immigration, which was wrong from the start, and it was going to be cut to “tens of thousands”.
Now I think most people would have assumed that meant perhaps only thirty thousand or just possibly as high as seventy thousand, some arguably reasonable number of tens of thousands, not just anything less than one hundred thousand as in the latest version.
Last March when people were asked in an opinion poll what annual limit they would like to see placed on the number of immigrants, that is to say the level of gross immigration, the median response was about 70,000 a year.
So the government has adopted a target for net immigration which is higher than that median response of about 70,000 for gross immigration, and then failed to meet even that target.
The opinion poll may be found here:
http://www.conservativehome.com/thetorydiary/2013/03/there-is-no-left-and-right-expect-in-political-imagination.html
Respondents were asked to choose one of a range of options for the maximum number of immigrants to be allowed each year; about 19% opted for no immigration at all, while about 6% opted for unlimited immigration, the median response being about 70,000 a year – that is to say, half of the respondents would think that 70,000 a year was too high while half would think that it was too low.
March 1, 2014
And this is our best Tory MP, Brian.
March 2, 2014
Jennifer A: “And this is our best Tory MP, Brian.”
Ha, Yes.
March 2, 2014
London today has a lower population than it did before the war. Immigration is not the key issue in the housing crisis.
Reform of the planning laws would be needed even if no one migrated here.
To be provocative; much (but not all) of the green belt round London should be built on. While it is officially farm land it actually consists of weedy fields feeding hobby horses.
March 2, 2014
I presume you mean the hostoric city of London David, the square mile . The wider London boroughs are much more densely populated than ever before.
March 2, 2014
The population problem is more acute in london than other regions…although Boris (and John Redwood by this account ) would seem to have their heads frmly in the sand (presumably because they are scared of being called a racist). The great driver for housing shortage is too many people..to gloss over this fact is just plain wrong and treating people like fools.
Mr Redwood might like to reflect on the fact that the roots of the German Nazi party had it’s roots in socialism and marxism although all the Guardian readers would prefer to forget this. We look to Conservative voices to speak out
http://www.standard.co.uk/news/london/population-growth-in-london-double-the-rate-in-rest-of-uk-8889100.html
Annual population increase of 1.3% doesnt sound much but it will result in a doubling of population in a generation or two.
March 1, 2014
The most pressing need with ‘stamp duty’ is to amend it’s ‘cliff-edge’ nature.
eg. buy at between 125K and 250K 1% stamp duty on the whole purchase price.
Buy over 250K, stamp duty at 3% on the whole purchase price.
This distorts the market. Making homes of approx 260k/270k /280k almost unsellable. Which in turn encourages sellers to raise the price more, in order to take the property away from the ‘uncomfortable’ 3% area. Few (if any) sellers will drop thousands from the price just to get back to 1% stamp duty, paid by the buyer.
March 1, 2014
Indeed best avoided by cancelling stamp duty completely and capital gains for a trial period. That would give a nice pre-election boost to activity. Then relax planning and OTT building regulations so they can build some more units more cheaply and more quickly.
But if not that at least have a smooth formula for stamp duty as a smooth function of the consideration. Or is that beyond them at HMG?
March 1, 2014
Wait until Labour and the Lib Dums introduce their beloved mansion tax which will no doubt result in a mass exodus of home owners in London and the home counties. Pensioners and families on modest incomes who are property rich but money poor, many already struggling to pay their exorbitant council tax bills as it is, will have no choice but to give up their homes to escape this punitive tax.
This will suit the green eyed lefties and their class warfare agenda. No doubt they will then take great delight in offering these vacated homes courtesy of the tax payer to the millions of extra immigrants they will be encouraging to come to live in an already overcrowded England .
God help England when Labour and the Lib Dums get back in power but then we will also have the so called ‘Tory’ party to thank for that as well when they hand England over to them on a plate in 2015 whether it votes for them or not because they refuse to address either the English Question or the West Lothian Question.
March 1, 2014
Although the modest “carry cost” of London (and UK) properties in contrast to, for example, those of NYC allegedly acts not to disincentivise foreign buyers of London properties. So actually increasing taxes linked to ownership (and if linked to absenteeism by owners need not then affect indigenous Londoners) might ease the present situation.
It seems, however, that London properties have become a commodity in which to store wealth relatively safely for the world’s rich and well-off and so we can look forward to a depopulated inner city with UK-based workers living elsewhere and travelling in via HST2 or whatever.
March 1, 2014
JoolsB
So called Mansion Tax (within 5 miles of the centre of London it could be a family home)
‘Property rich money poor……..’
They have already thought of that.
They have suggested that they will put a charge on your property if you cannot pay at the time it is due (and you have no other funds or income), and collect it when you die, or when you sell it to downsize or go into a nursing home.
Then they say some of those Companies who operate equity release are crooks.
No such a penalty for those who are renting.
John
Would this Mansion tax idea still be due if you owned a home worth £2,000,000 with a £1,000,000 mortgage.
Reply Yes!
March 2, 2014
Reply=Reply
So it is not a tax on wealth or assets then, its a tax on your ability to borrow.
About time this was exposed properly for what it is.
Simply another means to raise money from those who have been prudent/successful in work, which is to be paid out of their disposable income.
What next a tax on leaving the Country when you go on foreign holidays.
Oh almost forgot, we already have that if you fly.
Do the people that dream up these ideas not realise that they are killing the goose (the tax paying workers) that lays the golden eggs that they keep on using up.
March 1, 2014
God help me now! What the hell has changed? Even the public finances have began to drift again, remind me again when little George Osborne will be working on a balanced budget? FFS they even tried to drag us into another war in the Middle East. When are the scales going to drop off your eyes and you realise that you have had a continuity nu lab govt since 2010?
March 2, 2014
Pensioners and families on modest incomes who are property rich but money poor, many already struggling to pay their exorbitant council tax bills as it is, will have no choice but to give up their homes to escape this punitive tax.
Funny how so many people consider that it’s acceptable to use the bedroom tax to force the poor out of their homes but when a mansion tax does the same thing it’s immoral for some reason.
March 2, 2014
Uni
Funny too that you forget to mention that it was your favoured Labour party who first introduced the so called bedroom tax.
March 2, 2014
A mansion tax is of course wrong and just pandering to peoples worst tendencies .
A location value tax i.e. annual charge for “exclusive use of the commons” paid by everyone on developed and undeveloped plots in proportion to the rentable value of the location would introduce a negative feedback which would prevent house prices rising uncontrollably .
The banks wouldn’t like it because it would reduce peoples indebtedness .
Once people understood it they probably would like it because it would enable employment taxes to be reduced .
Time to shift taxation from employment onto natural monopolies like land .
We already do the same with taxation of farmland and a state royalty on mineral extraction so extending it to surface rights would not be that big a step .
March 1, 2014
It is perhaps interesting to look at how much an average person living in London might earn in their lifetimes after tax and NI perhaps in the region of only £1M. Yet a tiny house might well cost more than that or rent on it for a lifetime might be more like £2M.
Some tiny one bed flats over shops on busy roads can be well over £500K. Then they have their pensions to save for, and 60+ odd years of food, drink, council tax, children, children’s education, transport, holidays, clothes, medicines, leisure, repairs, insurance, furniture, fuel & power …..
London property is largely driven by people who have acquired their wealth abroad, rich non doms or who have inherited money and have probably not paid much UK taxes in general.
We need to reduce taxes for UK workers and simply build more homes. Why do pig homes, cows, sheep, wetlands, birds and absurdly EU subsidised sugar beat always have priority over human homes in the UK? There is plenty of land, we can build up and down. Even in London and the south east population density is not actually that high compared to many other places.
Fewer people, more houses or expensive houses and over crowding in them, it is up to the government to choose.
March 2, 2014
Or up to MP’s to choose? Most of them own prime London property, what do you think they will choose?
March 1, 2014
Well a few things to say…
1 Private rental tenants are now larger in number than social tenants, paying attention to their problems is going to be very important for anyone wanting to win elections.
2 The mortgaged classes are overall heavily subsidised by the rest of society. When you take account of the manipulated interest rates, and all of the manipulation like help to buy, and providing access to the best schools, the rest of society is massively subsiding the mortgaged classes. Stamp duty is but a small pin prick in comparison.
3 So we have two housing segments the so called social housing, and the mortgaged housing, both subsidised by the rest of society. Who are the people funding this generosity? Well obviously lots of it goes on the national debt to be paid whenever, but lots is being funded now by private rental tenants and savers. That’s right we are taking money from savers and private tenants to subsidise the rest of the country and their mortgages and social housing. This is unfair and unjust.
4 I would prefer the kind of property you choose, be it social housing, private rental, or mortgaged, to be tax and subsidy neutral. We should be giving subsidy to needy people in whatever kind of housing they are in, and that’s it no other state manipulation of the markets please.
5 House prices in the whole of the UK are completely out of line with similar countries, they are far too high. Yes London is even sillier. The ongoing political class manipulation of the markets is not doing the country any favours. There would have been at least one correction by now if the government had not manipulated the markets yet again.
6 I really think you ought to study the housing in other countries like Germany. Private tenants have ready access to security of tenure. Houses are built that people want not manipulated by planned to have tiny rooms and no parking. Much more of a balance. Young professionals can afford to buy.
7 Lots of the state manipulation of housing is acting against the very workforce mobility which we need to be an efficient productive country. This really needs to be considered a whole lot more.
So no I would be furious if stamp duty was lowered. Or any other manipulation like that. If anyone deserves a tax perk its private rental tenants, and savers, or those allocated rubbish schools by the state.
Is the government going to continue running the national debt ever higher just to manipulate house prices ever higher so that our own youngsters cannot buy them?
Why don’t we bring in emergency planning rules to allow proper sized houses with parking to be built to some agreed designed with a much smoother planning regime?
And WHY DON’T WE CONTROL IMMIGRATION PROPERLY SO THAT THE STRESS ON THE COUNTRIES FACILITIES IS NOT SO BAD?
March 1, 2014
Yep
Stamp duty is a tax that restricts house owner movement and thus slows down the market.
Even when you trade down you pay tax on the lower priced property (in the South east)
You may as well stay in a larger house, use up all of your savings, then ask for help from the taxpayer if you are on a low income or low pension.
Want to purchase any sort of reasonable family house of 3 bedrooms within 20-30 miles of London and its well over £300- £400,,000 and in some areas way over £500,000, and you pay stamp duty tax of 3-5% on the total value.
Almost the average total years earnings for some.
You could of course rent and get housing benefit IF YOU QUALIFY from the taxpayer as an alternative, and then move around as you please with no tax penalty, but then you have little security of tenancy.
Is the capital going to eventually going to be a city of two extremes.
One for the super rich who have plenty of money, and one for the low earners who are subsidised with housing benefits, with all those in the middle eventually squeezed out.
Is that good for London’s prospects.
Why is stamp duty structured in such a way that you pay the highest rate on the total value instead of it being banded.
Why indeed is the stamp duty so high in the first place, when we want to surely encourage freedom of movement for people (within the Country) to coin such a phrase.
March 1, 2014
“Why is the stamp duty so high in the first place, when we want to surely encourage freedom of movement for people (within the Country) to coin such a phrase.”
Because governments like pissing money away on pointless wars, themselves, their pensions, their staff, their empires, their propaganda, HS2, the disfunctional NHS, religious green energy nonsense, the EU, pointless regulations enforcement of and endless other waste all over the place, there subsidised restaurants and bars, their expenses, their creche, their fact finding trips, their trees in the atrium, paying the state sector 50% more than the plebs …………
March 1, 2014
Actually, there are quite pleasant parts of London in the East and South, which are no more expensive than parts of the SE. We agreed to sel a 3 bedroom house with garden and shoffice/garage + roof room for £275k before Christmas. The solicitors are still farting about demanding certificates for double glazing 12 years old, wanting to know when the new boiler was serviced, and planning permission + regs for a conservatory which never and still doesn’t need it etc. We are now thinking of saying we will keep it and rent. This is in a comfortable, safe part of London with excellent restuarants and shopping, on the District Line and soon to be on Crosslink and not the intervening dump.
March 1, 2014
What these policies do is slowly but surely strangle and destroy the middle classes so that you have a rich elite which is serviced by a large lower class scrabbling around to survive, with just wild dreams to sustain their future…
zorro
March 2, 2014
Want to purchase any sort of reasonable family house of 3 bedrooms within 20-30 miles of London and its well over £300- £400,,000 and in some areas way over £500,000, and you pay stamp duty tax of 3-5% on the total value.
Stamp duty is only 5% on houses worth over £1 million. It’s 4% for houses worth £500,000 to £1 million.
Why indeed is the stamp duty so high in the first place, when we want to surely encourage freedom of movement for people (within the Country) to coin such a phrase.
In most parts of the UK stamp duty isn’t a problem for ordinary people. It’s only a problem in London where they keep trying to raise house prices and then sell these houses to foreign millionaires.
March 2, 2014
Uni
“In most parts of the UK stamp duty is not a problem….”
Really, tell that to every one who is purchasing a property over the £125,000 threshold and has to pay that tax out of saved income, or who has added it to their mortgage and will pay for it 3 times over.
It is simply a tax on aspiration, which reduces some incentive to trade up or down.
March 1, 2014
Capital Gains tax may well be reduced , however if the capital is required then the money to keep property running would exceed any reduction in CGT.
The older person may not feel a need to hold on if their children’s future is shaped in some way.
I do not know Didcot therefore I do not know whether it is deprived in any way.
By comparison in the north my first house was a three bedroomed detached and I travelled to work in the coronary care unit of my local hospital in a Austin Healey open- topped Sprite.This did not stretch us in any way and we were soon buying a large detached house.
In the 80’s much went wrong and I found myself without anywhere to live and every asset I had , including insurance policies wiped away from me and to my horror found myself in position where I had to pay debts which I had not incurred. Whilst the rest of the country were enjoying good times, I watched as firms went down one by one.
March 1, 2014
Have you politicians not realised yet that houses in London are not just places to live, they are an investment opportunity. The annual return on capital is probably the best you will get for any UK investment.
While the politicians haven’t worked this out yet the investing community has. Unfortunately ‘investment’ opportunities are scare so the price rises and that confirms the view that this is the place to pile in the money.
How do you stop it? Should you stop it? Would a special capital gains tax on property work?
March 1, 2014
Erm I think a lot of MPs do realise the money to be made by speculating in property just check how many got caught up in the expenses scandal over it
March 1, 2014
I recall watching a TV debate before or during the first mayoral campaign in May 2000, when Livingstone said it would be necessary to build some huge number of new homes in London to cope with some expected huge increase in its population.
Hang on, I thought, why are you so confidently expecting the population of London to increase by that huge number, when our birth rate has been gradually dropping towards the death rate so that it has now come close to just replacement level, and the population of London itself has been trending downwards for decades?
March 1, 2014
Sadly London is a foreign place to me ; it is seriously overpriced in more ways than one and prohibits the ordinary person even to contemplate visiting let alone buying . It is very true that in property value terms only the rich are in a position to own and rent ; those who face the daily commute to earn a living there are faced with extremely high travel costs and other support costs . The effect of all this has gravitated to other places within fairly easy reach of London , eg Oxford, Henley on Thames , Amersham , Marlow , Beaconsfield have all become extremely expensive in property and support costs together with the surrounding countryside ; the list goes on . There has to be a solution because the short and long term consequences cannot be good ; in the past one of your responders suggested imposing the same tax regime to foreigners as to locals , I think there is merit in this ; equally those foreigners who wish to invest in property ought to pay an up-front 20% tax of the value . The playing field has to be levelled out sooner rather than later .
March 1, 2014
With the Tory and Labour policy of mass immigration we are now in a position where the indigenous population (working class) can no longer afford to live in London.
Only if you are an immigrant with 4 kids and can bag a flat in Kensington or a Somali refugee who has been given an EU passport by the Dutch can you relocate at taxpayers expense to the capital.
We the working taxpayer are excluded from more expensive properties because we have to work to pay for them.
If the coffee shops in London had to pay a living wage and the foreign staff didn’t get in work benefits, then prices would plunge.
I hope you are preparing to write a book or something when in opposition John. There is precious little for MP’s to do when in government let alone opposition.
Half a million foreigners inward last year again I see.
March 2, 2014
If the coffee shops in London had to pay a living wage and the foreign staff didn’t get in work benefits, then prices would plunge.
Given that wages for the low paid have been falling in real terms yet property prices in London haven’t decreased it’s unlikely that reducing the overall pay of workers will result in lower house prices.
March 2, 2014
You have misunderstood the post Uni
Ian is not talking about reduced wages quite the opposite.
More haste etc….
March 1, 2014
If you are a foreign investor, London property is a good “round trip” deal (buying, owning and selling). GPG says “Roundtrip transaction costs are generally very low in the UK. Total roundtrip transaction costs range from 3.88% to 12.26%”. (Less than half of France or Italy.)
If you should find a foreign owner of a London mansion, who got anywhere near paying 28% capital gains; or, anywhere near the flat rate 20% income tax on rental income; tell them they are doing it wrong.
March 1, 2014
“(buying, owning and selling)”
…but not necessarily dwelling which is why many central London properties are not only uninhabited but also dilapidated: the price is in the Post Code.
According to the FT, “Farmland prices rise sharply as investor demand grows” and “Overseas investors have begun to add to the competition among buyers”.
Plenty of commission for Estate agents, then.
March 2, 2014
Quite simply if this problem of foreign ownership in London were to be resolved if would reduce prices and increase the availability of lower cost housing. We should also not ignore the British buy to let owners who hide their income and profits in foreign companies.
March 2, 2014
In Malaysia locals get to buy land and houses much more cheaply than foreigners can. I am sure this is a common regulatory position in many countries.
March 1, 2014
“The housing market in London is currently suffering from an acute shortage of supply of second hand properties. ”
More like a surfeit of demand.
Last year the useless British political establishment added to our population a city the size of Southampton. I realise the political establishment can choose to be more blind than blind man when they don’t want to confront difficult issues, and in cowardice always seek to shove the problem into the next Parliament, but it must dawn on a few MP’s that this catastrophic situation cannot continue much more.
March 1, 2014
Based on these factors:
- an open door to poor uneducated and unskilled immigrants
- an obligation to provide them with free housing
- healthcare & education free of charge
- a plethora of handouts and entitlements
It’s no surprise there is a huge demand for housing from benefit tourists.
When you give away something of value, don’t be surprised if demand exceeds supply.
It’s not rocket science.
March 1, 2014
Indeed, yet whenever you watch these programmes on TV….What do they say?…..Oh, they’ve got a job and they are paying taxes….Oh really?….When almost the first £10,000 in earnings is income tax free?….Pull the other one, these low earners will never ever pay their way in society. They will always be tax/benefit consumers. Yes, of course, there will be low earners….but it doesn’t mean that we have to import millions of them while still paying benefits to indigenous British. Get them back to work and off benefits rather than importing a wholenew class of people.
zorro
March 1, 2014
You hit the nail on the head re. CGT on second homes or investement rentals. The problem is exacerbated by Mr Brown’s decision to remove the inflation allowance from ‘gains’ and then the coalition increasing the rate. They claimed that the allowance or taper was too difficult to operate. This is completely intrue. All that was neccessary was to have a table of reducing values related to inflation, subtract two figues and multiply by the gain.
I would dearly like to sell an inexpensive property held by my family since 1960 and 200 miles away from my home, but the tax, duty and sales would leave me with insufficient cash to buy another one near to where I live now. A house in my town, where the council has brought in licensing and planning restrictions, making it very difficult to find responsible tenants, also cannot be sold, as the taxable gain is around 3 times the increase in real value. The tax also ignores the fact that the house was a slum when bought and has been modernised 3 times owing to the incredible rate of delapidation of rentals. Similarly, I cannot move from my present address, as it is classed as a second home. It is often people who have to work abroad or lose their home through divorce that find themselves hit by CGT, while the person in the original home, who may be better off financially, avoids the tax . Whichever way people try to provide for themselves , there is always someone in government devising ways to screw it up.
March 1, 2014
Apologies about typos and spelling. It only happens before posting and, despite checking , can be seen immediately upon re -reading with different arrangement on the screen.
March 1, 2014
The other main reason property is so expensive is of course our communist planning laws, which should be repealed.
March 1, 2014
Off-topic, this is worth reading:
http://blogs.spectator.co.uk/culturehousedaily/2014/02/the-millions-in-eu-funding-the-bbc-tried-to-hide/
“The millions in EU funding the BBC tried to hide”
I was particularly struck by:
“With trademark arrogance, Patten is currently refusing to appear in front of the House of Commons European Scrutiny Committee to answer questions about the BBC’s coverage of Europe. He has rebuffed three invitations to do so knowing that, under parliamentary rules, his status as a member of the Lords means he cannot be forced to appear in front of an MPs’ committee.”
So that’s it then, apparently lifetime immunity from all Commons inquiries is one of the valuable perks that comes with the position of unelected legislator-for-life.
March 1, 2014
Why can’t Patten be told to waive his immunity or resign?
Certainly in future no-one should be permitted any similar role in a public body without they agree such a waiver in the event of taking a peerage.
March 4, 2014
How about just removing him as a Lord.
March 2, 2014
Indeed outrageous contempt of licence payers/viewers/owners according to the Director General – by the BBC.
Cameron’s appointment of Lord Patten, to the dreadful BBC, coming after his Cast Iron ratting (& thus throwing of the last sitting duck election) says all you need to know about Cameron. To be fair he even says it himself with “no Greater Switzerland” and his heart and soul lie in the EU. He cannot even bring himself to say what powers he want back.
I just heard the leader of the greens, Natalie Bennett just now, criticising Cameron on over his renewable religion and saying he needed to fire Owen Paterson. Cameron’s green policy is surely the same unscientific, religious lunacy as Natalie Bennett’s is it not?
Could we leave energy and electricity generation to sensible engineers and physicists please.
March 1, 2014
There are a number of things that could help to reduce housing speculation in London. These mainly should be aimed at moving tax on future profits into current taxes.
1) Introduce two or three higher council tax bands.
2) Make the single person council tax reduction a fixed value across all bands equivalent to the band C or D allowance.
3) Reduce the periods for which there is council tax allowance for non-occupancy and increase the charges on empty property.
4) Camp down on CGT avoidance by overseas owners.
5) Ensure that income from rents is properly taxed and not avoided by hiding ownership in (often foriegn) companies.
March 1, 2014
How about increasing taxes on foreign owned homes so we really do get some benefit? We should extract a higher price for providing rich foreigners with their secure bolt-holes.
March 1, 2014
On a security officer’s wage in 1997 I was able to by a terraced house on my own in Shirley.
Now it would take four of me to be able to do the same. That people hold on to London homes in the expectation of crazy price hikes is proof that things are different to when we were young – and that even the most modest of houses exact a higher rate of stamp duty.
Housing is not an export any more than our utilities are but that you could say so explains a lot about why our country is in such a mess.
And no mention of the ‘i’ word in a post on the subject of escalating London house prices ?
March 1, 2014
John, you say there is a shortage of supply, maybe, but there must be vast amounts of accommodation still available, given the latest immigration figures. They aren’t all sleeping rough. Also, how many of the immigrants from the EU in this last set of figures, have gone straight onto benefits. Is there any wonder IDS cut benefits to the English, knowing, due to govt policies, seemingly the whole of Europe can arrive here and get a free life.
Sorry to have veered off slightly, but the two are connected. Keep letting them in, Keep concreting !! – -(and get more floods).
March 2, 2014
Also, how many of the immigrants from the EU in this last set of figures, have gone straight onto benefits.
Oddly the DWP doesn’t record how many EU immigrants claim benefits within 3 months of arriving in the UK. Though they do know that only 2% of all EU immigrants are claiming benefits.
March 1, 2014
The IFS did some analysis of the sources of tax revenue earlier this year. Re stamp duty it discovered that 30% of stamp duty was raised from just 1% of transactions (on houses over £1 million); Westminster plus Chelsea and Kensington accounted for 14% of stamp duty on residential properties; just 10 local authorities, 9 in London plus 1 in Surrey, accounted for 29%;London as a whole accounted for 41% of the total. Enough said?
March 1, 2014
‘….return to Labour’s lower levels of CGT….’
That says it all really. How disappointed we were in 2010. The sinking feeling of betrayal and never ending socialism with no end in sight. Higher taxes instead of real spending reductions. The difficult decisions avoided and the easier options ‘managed’. Conservative voters being slapped in the face instead of protected and encouraged by the party they had given their votes to. Your Party will pay heavily for such spinelessness and deviation.
March 1, 2014
Given that UK resident owners of multiple properties nominate which one is to be considered their primary residence, and thus exempt from CGT after a relatively short period, I would have thought that there is little difficulty in arranging matters legally so the sale of a London property does not incur CGT. Foreign owners whose ownership is via an offshore vehicle are similarly able to avoid CGT liability.
That of course does not apply to landlords who own multiple London properties. CGT acts as a ratchet on their portfolios. One way to loosen the ratchet would be to grant landlords a temporary reduced rate of CGT on sales to UK resident owner occupiers: that would allow them to accept a lower offer than from an overseas buyer or landlord while getting the same proceeds from the sale.
Perhaps we need to move to a market for London that operates like that in Jersey, only allowing a small number of properties in a market open to foreign purchasers and requiring a housing licence for occupation of other properties by foreigners. The supply would be restricted to a subset of property already owned by foreigners (effectively forcing the next sale to a UK citizen for property not included, and lowering the price). The cost of a time restricted housing licence for foreigners would still allow them a London bolthole, but ensure that they paid a proper contribution to the economy. The licence cost would be a lower fee to cover administrative costs for foreigners who make a direct contribution to the economy by working here and establishing tax domicile.
March 1, 2014
supply, supply, supply shortages blah, blah.
And not one murmur of below market, taxpayer subsidized interest rates fueling a demand frenzy.
The standard of debate is poor.
March 2, 2014
Gary: “And not one murmur of below market, taxpayer subsidized interest rates fueling a demand frenzy.”
Because the government is counting on the housing market generating the 3% growth that has been (independently – snigger ) forecast before the next election.
March 1, 2014
Mr. Redwood
I live in your constituency and my place of employment is in West London.
My wife and I rent a very modest home in Winnersh that costs £1095 per month. This is 55% of my take home pay.
We have lived in the UK for just over seven years and currently have less than £2000 in savings even though we live a rather austere and debt free lifestyle.
We have no hope of ever raising a deposit to purchase a home.
As we are not ‘spring chickens’ and concerned about our old age my wife and I began a conversation about this dilemma about 18 months ago that cumulated, a week ago, in my going into a meeting with the directors of the company I work for to discuss a solution – They have acknowledged the housing cost issue and agreed that I can work ‘remotely’ from anywhere in the world that I choose where the cost of living is a lot lower so as to facilitate us saving a deposit and buying a home for our old age. So now we have to decide…Thailand…Sri Lanka..Anything is better than making a BTL landlord richer because the economy is so distorted that a working man cannot buy a home
March 1, 2014
There is no doubt the very large amount of ‘condominium’ building across London – and especially up and down the Thames as far up river as where I live, Kingston, are investment properties fuelling an investment boom here akin to condo booms in other cities around the world. Those flats in the Shard perhaps the high water mark (still unsold AFAIK..)
For ‘normal’ folks in my experience – the trend for a long while has been to build & extend what you have rather than to move, as transaction costs (now but not exclusively primarily stamp duty since Labour’s changes) have ballooned over the last decade – as have house prices. Do the maths yourself – anyone living in London in a typical Victorian semi- or terrace can build a loft or rear extension – even basements in some parts – more cheaply than moving up to the next sized home. This has fuelled a massive boom in building works up and down many streets, which only let up briefly in 2007-8 in my experience – rather than a boom in transactions & moving.
The tax is distorting the market. Otherwise folks would be moving up or out in the century-old fashion rather than digging basements!
March 2, 2014
The coalition could do the following.
1) Stop selling properties to foreigners who don’t use these properties. A limit on how many properties they can own or a requirement that they spend so many days in the UK each year will fix this problem.
2) Regarding stamp duty even in London the majority of properties are only affected by the lower levels so it’s unlikely to be a major problem.
Regarding CGT perhaps only the buyer should have to pay it, to discourage people from buying more than one property. Alternatively it could be waved for sellers who sell properties to people who plan to use it as their main house.
March 2, 2014
Great idea. The buyer of a £345k house has to pay £83k extra CGT and Stamp Duty. Result- No sale. Meanwhile any new BTL buyer must realise that he or she will be taxed at 28% on the increase in price if it happens and earn a return of 4-5% if lucky in London. What better to discourage investment. And how do people who cannot save for a mortgage, at 5% if they are lucky, find somewhere to live?
March 2, 2014
Oh dear, it’s the return of John Basil Fawlty Redwood again with his’ don’t mention the war’/immigration stance .
March 3, 2014
The problem is not just immigration. After all Spain and Ireland have had high immigration and had a house price crash.
The problem is that we let more people into the country than we let houses be build.
If it were a legal requirement that that every time an immigrant gets a NI number the local council had to give planning permission for a new house then we would have enough houses.
Alternatively we could reduce immigration but no one seems able to. Of course if the NIMBIES were anti immigration then probably we would be able to reduce the number of immigrants.
March 3, 2014
If more residential property is provided in London, especially for wealthy people, there will be more demand for transport. Hopefully, taxis and the tube will be acceptable, but you never quite know with the wealthy. I hope that this is being planned for.
You know my views on Stamp Duty – get rid of it completely. It is an iniquitous transfer tax, imposed where no wealth is created. Much better to charge VAT (a low rate) on house building and house modifications, and add two new Council tax bands at the top end. Council tax is legitimately levied because property value is statistically correlated with income. People who are asset rich and income poor can downsize their property.
March 3, 2014
More people would also be willing to sell if their property was going to go down in value. Sadly the moral hazard is as alive as ever in the housing market. Congratulations you’ve got yourself an above average pay rise in a time of stagnate wage inflation – oh sorry you can no longer afford the property you could have afforded six months ago.
March 4, 2014
Owner occupation of the housing stock reached around 70% over two decades ago then stayed at about the same level for about a decade before beginning a steady decline to today’s 64%.
Any adherent to the principle of the property owning democracy must surely find that depressing but it’s the effect on morale I find most dispiriting