Reeves plan to tax houses over 500k PART TWO

You don't own an asset of 500K if it is mortgaged. The bank owns it.

There's actually something of a debate to be had as to whether you actually own a house if it is mortgaged. Certainly you are not free to do what you want with it, as some people might regard as a key definition of ownership.

Of course people with mortgages don't like this viewpoint very much, as a lot of them place personal achievement/value on "owning their own house" even though to a degree they are just renting from the bank, with a few more options on what they are allowed to do to a place than the average renter.

Yep. Winners and losers.

But to me far preferable to end an insane period where people are finding living increasingly unaffordable that continue with the current madness.

At some time there is going to be pain and people up to their eyeballs in property are going to have to take it.

That or we continue to pour money into housing and have to put up with the economic ruin that it is creating for the whole country.

To be fair, prices are already dropping in real terms (see another high inflation report today) but they need to go further. We need young people to be able to work, buy decent quality homes and have families and a decent standard of life.

Work has to pay enough for people to have a decent standard of living. What we don't need is expensive housing monopolised by the rich.

'People up to their eyeballs in property are going to have to take it'!
Please define what 'up to their eyeballs in property' actually means?
We were young people who worked hard to buy a decent home for our family, who lived in shitholes and garages and sofas to try to save enough money to buy, whilst doing overtime and night shifts on ITU. After 15 years and several do uppers we now own a house valued at 800k (3 bed bit expensive area) Are we 'up to our eyeballs' or 'super rich'. No, we slogged with DH working 2 jobs and me doing mounds of overtime caring for really sick kids

'People up to their eyeballs in property are going to have to take it'!
Please define what 'up to their eyeballs in property' actually means?
We were young people who worked hard to buy a decent home for our family, who lived in shitholes and garages and sofas to try to save enough money to buy, whilst doing overtime and night shifts on ITU. After 15 years and several do uppers we now own a house valued at 800k (3 bed bit expensive area) Are we 'up to our eyeballs' or 'super rich'. No, we slogged with DH working 2 jobs and me doing mounds of overtime caring for really sick kids

They're all 1/2 bedroom apartments - how is that suitable for families?
*caveat, clearly I have not reviewed all 21 690 of them. But a glance gives one the picture.

Yep. Winners and losers.

But to me far preferable to end an insane period where people are finding living increasingly unaffordable that continue with the current madness.

At some time there is going to be pain and people up to their eyeballs in property are going to have to take it.

That or we continue to pour money into housing and have to put up with the economic ruin that it is creating for the whole country.

To be fair, prices are already dropping in real terms (see another high inflation report today) but they need to go further. We need young people to be able to work, buy decent quality homes and have families and a decent standard of life.

Work has to pay enough for people to have a decent standard of living. What we don't need is expensive housing monopolised by the rich.

There are currently 21,690 properties listed on Rightmove in London under £500k

https://www.rightmove.co.uk/property-for-sale/find.html?searchLocation=London&useLocationIdentifier=true&locationIdentifier=REGION%5E87490&radius=0.0&maxPrice=500000&_includeSSTC=on

If house prices fall some people will go into negative equity and not be able to move, creating stagnation in housing market. For other it will shift their mortgage LTV thresholds and they end up paying more

What I would suggest is that if people can't afford houses and houses are in supply, house prices will fall to a level where they can afford them.

Which is preferable to the current situation where the price is artificially high.

I would do the following:

• Borrow to build masses of flats in areas with concentration of employment. IKEA style flats of reasonable quality suitable for a family (so decent insulation, size etc) and at no profit. Not via housebuilders but state (Planning permissions don't matter given profits to be made). Because it's a capital project markets wouldn't be freaked out. Anyone could rent such flat at a very reduced rate but on condition of not owning any other property. Obv no subletting. So people can move where jobs are and raise families and NMW is sufficient to have a reasonable quality of life.
• I'd increase personal allowance from 12.5k to something more, e.g. 18-20k, need to work on numbers
• I'd reform PIP so it's not based on how I feel it impacts me but based on formal diagnosis supported by objective medical tests. And no, ADHD doesn't qualify, medication is available. Those with perm disabilities don't need reviews ever
• I'd reform UC to make all benefits time limited and linked to previous earnings up to a certain cap.
• I'd remove all cliff edge taxation
• I'd work on change of culture to celebrate success and admire high achievers

You don't have an asset of £500k then, and if you can't afford to keep it then it would be unwise to acquire one. For much the same reason I don't own a Ferrari.

What do you suggest - that people working in the south east live under a bridge?

You don't have an asset of £500k then, and if you can't afford to keep it then it would be unwise to acquire one. For much the same reason I don't own a Ferrari.

What do you suggest - that people working in the south east live under a bridge?

Ridiculous!

If you 'own' a house worth £500k this may well mean for many that they owe the bank a larger percent than they actually own with equity. For millennials this is the most likely scenario. They may well also have little/no pension and very little savings or even be in debt. Their net worth could be as low as £50-£100 k which is significantly below the national average in the UK and yet you pretend that they must be rich because on paper they own a relatively expensive house. I really think we need to focus on educating the population about finances, the economy and how to actually calculate net worth and who is actually rich.

Also the biggest issue regarding affordability in most parts of the country is for houses worth less than £500k and this would actually encourage house price growth for these houses as people would obviously shy away from the more expensive houses knowing that they will be heavily penalised with tax for the rest of their life!

Better services can also be achieved by cutting the welfare bill and reallocating this month. I notice you don't even mention this though.

@lkjhgfdsa

Surely spreading the cost over that timescale would be easier for most people than coming up with a lump sum of £20k stamp duty?

no. Is it much much more financially astute to pay an upfront one off stamp duty than pay far more over a lifetime. It’s the same as buying a car in cash compared to monthly leasing. The former is far more financially astute to do and will cost you far less overall. This new property tax is Reeves way to keep us all paying for a lifetime guaranteed

I can’t quite understand why someone is deemed as “rich” if they buy a £600k house next year (with a hefty mortgage and huge other debts). But their neighbour isn’t classed as “rich” because although their house is also worth £600k they don’t have any/little debt as bought years ago. If anything, the latter have more disposable income and are “richer” by asset wealth so surely they should be the ones taxed more if anyone has to be!

That's fine if you do have an asset of £500k . How many of us living in properties have an asset of £500k? Our mortgage lender owns the vast majority of the house.

If they bought a house for £495k they would pay no stamp duty and none of this new tax. The cliff edge is clearly unfair and penalises certain areas whilst almost completely exempting others. Why should someone that can afford a house worth £495k 9@6 anything?

Also, I ask again, who is this new tax better for? The current government will lose out on almost £20k of tax in the very short term so how will this money be replaced. The state needs money NOW not in 38 years. In the long term the household pays more and will be worse off They won't be able to just clear the tax like they can now and truly feel like they completely own their home. There will be a cliff edge in the housing market and people will be constantly worried that the threshold will creep.

I don't live in London but I recognise that millions of people were born and raised there and have their support network there. This is super relevant when it comes to expensive matters like childcare and caring for our elderly where having family and friends nearby can significantly reduce the burden on the state. We also need people to live in London as it is the powerhouse of our economy and provides a significant proportion of our GDP. It is in all our interests it thrives. It is absolutely not comparable to you wanting to live in a mansion.

It's obvious you live in a cheap area of the UK as you seem completely unable to comprehend what a £500k would look like in some areas. I wonder what people's reaction would be if we automatically taxed the most expensive 50% of properties in each region?

I used to live in a cheaper area and have many friends and family still there. Lots of them have a detached house worth nowhere near £500k and have fancy cars and nice holidays. They also have large pensions. Their net worth is higher than many people that live in the more expensive place I live now. It would do absolutely no favours to anyone if people flooded the cheaper areas. It would cause huge affordability issues in this area for those born and raised there and would kill current economic hubs.

But if they are buying a £600k house, they will be saving £20k by not paying stamp duty. It would take 38 years before they had paid more under the new system.

If they moved house again in that time to another £600k house, then they would not be paying another £20k in stamp duty, and it would take 75 years before they were paying more money.

If someone has £500K of assets they are "rich" by any measure of the word.

They're absolutely not. They're quite likely a couple living in a cramped terrace in Brighton, or a young family with a three bed semi in Surrey, paying an eye-watering percentage of their income to a mortgage.

Usual story.

Everyone : We want better services - the rich should pay !

Government : OK we will do this.

Everyone : No way ! By "rich" I meant everyone richer than me !

Then we get into the hypocrasy of flag waving. Apparently when austerity is done by the Tories it is "evil Tory austerity". Then when Labour get in it's fine.

If someone has £500K of assets they are "rich" by any measure of the word.

I think an asset tax on property of £500K and over would be a good thing and would help bring property prices down. Maybe it would be better to implement on top of council tax on properties band E or above. That way all the documentation for it is currently in place and it would be easy to implement and gain money quickly.