About people benefitting from property price rises?

[boschy]

I have been thinking - on the back of the benefits cap thread, so please forgive if this is not the done thing!

To me, it seems that there is a difference between property speculation - ie buying cheap properties, doing a quick job and selling them on or renting them out at as high a rate as possible in order to rake in the dosh - and DIY?

I'll explain - we are on our 3rd property. Bought a flat cheap, sold it 7 years later for 3 times the purchase price. Bought a house cheap, sold it 8 years later for 3 times the purchase price. (Both times I had a dream that the eventual price we got would be that amount iyswim!) Location - S London - and the times - the 90s - undoubtedly helped in both those cases.

HOWEVER in all three cases, we lived in conditions that I think many would find unacceptable - total rewire, reroofing, replastering, new kitchen/bathroom, damp, no floorboards downstairs in the 2nd house for 3 years, building dust and dirt and debris etc etc. We did all the work ourselves, or knew people who would help out with mates rates when we really couldnt do the work. Both the first 2 properties were finished just a couple of months before we sold. Been in the current house 13 years, brought up 2 DC in 'challenging' conditions - our house now is still a major challenge and years to go before it is what most would call 'acceptable', let alone what estate agents would call 'desirable'.

So we have benefitted along the way from rising property markets - but also from sheer bloody hard work. When we sell this house - should we profit from the effort we have put in, and the market changes as well? if not, why not? and if just from the effort, how would you quantify that? and who would be the arbitrator?

because they havent made a profit.

But many will have, when they sell. Which is cool with me as long as they acknowledge that it is in part luck!

You would have to apply that logic to everything if it increased then. Art jewellery etc. You also risk it falling in price so who would compensate the losers?

do you mean when their estate sells the property? when they are dead (in which case inheritance tax will apply beyond the threshold)?

or a BTL landlord selling (in which case i thought they did pay cap gains)?

Gains on property are subject to capital gains tax, it's only your own home that is not subject to capital gains tax on the basis that it is your home, not an investment asset bought with the hope of making a profit on the eventual sale thereof. As soon as you sell your home you presumably need to buy another to live in or you need the proceeds to pay for rent or care home fees etc.

taxation rules are set by MPs and are not required to be sensible or fair.

But the idea is that if you buy properties as investments, the net gain is taxable; if you buy a house to live in, any gain is incidental to its main purpose of being your home, so you don't.

Inheritance tax is due anyway, though. This takes a bigger bite out of the estates of people who were lucky enough to buy homes is areas that later became more fashionable, than it does out of the estates of people who bought homes in areas that didn't. Asset price inflation due to fashion are in no way due to the efforts of homeowners so IMO this is quite reasonable.

God Forbid anyone should ever make money out of anything...that seems to be the theme for today!

coral toes - i run my own company so am v interested in making money. i disagree with the logic that the average homeowner benefits on rising prices (unless downsizing).

i dont begrudge anyone making money but they need to be real profits not fantasy ones.

Ah, my folks would be downsizing...that's for sure!

i have factored in losing 50k at some point in the next few years on my next house. still buying it though!

What on earth is wrong with profiting from a rise in demand and therefore price?! Thats basic business. How is it a fantasy profit when realised in cash??

is this a house that you live in?

Alvin Hall is amazing. i love him.

coraltoes - is this a house that you live in? the one you sold?

I certainly don't have any illusions about making any money from property, having bought my first flat at the end of 2007 I'd be sorely disappointed if I had! The next place is a right fixer upper, that hopefully will see us out. I don't care what it is worth in the future as long as we can stay in it. Not relishing a building site with a newborn, but needs must! Fingers crossed etc etc...

my next one is 'Minto Towers'. except we have been keeping our flat ready for viewings for ages..so i am really looking forward to living in mess & have renamed the new house 'the Shit Pit'.

coral toes - come talk about profit phlleeese

Sorry, was bathing dd! What house do you mean?i live in a house...yes. I also have an investment property.

If you live in the house as a home and renovate it you don't pay tax on the profit. I did this a few times years ago not for the faint hearted but looking back we enjoyed it. have rented and renovated too and sometimes moved in and other times just sold them. If you have only one property at a time it is income tax

We are 51. I bought my first flat in 1982 at 22. It was £32,000 in Putney with two bedrooms and a garage. I sold it in 1987 for £92,000. When I bought it, it hadn't been decorated for 22 years, had no central heating and the kitchen was running with silverfish. I took out a mortgage of three times my income (then 8,000). The first few years were a very hard slog and I had to rent out a room.

I bought my first small terraced house in Putney for £122,500, again it was a bit of a disaster area but structurally sound. I had a mortgage for £60,000 and and was earning a good salary by then. In 1994 I sold it for £147,000 and probably made a big fat zero on it bearing in mind what I had spent on it.

In 1994 DH and I bought a large newly redeveloped house in Putney - the builders had gone bankrupt, the area was blighted because of the redevelopment along Putney embankment. Our friends thought we had gone bonkers to pay £340,000 for it - at the time we had a mortgage of £150,000 and the chips were down when I gave up work about a year later. Today that bonkers house is worth between 2.8m and 3.2m. It could do with being done up from top to bottom again but if spent 100k I think we would get the top of that range.

ok it becomes clear! of course the investment property makes a profit on rising prices. this is not fantasy profit.

but that is not the same as an average home owner gaining equity on rising prices, feeling like they have made some money when that are going to put the equity into another (generally larger) house which will have also gone up in price. the latter is fantasy profit.

noddyholder - its is your home...just a building site as well as your home

presumably you wouldn't be in the same position as if you hadn't done the work as your property wouldn't be worth as much in it's unrenovated state?
Part of your gain is the market, but surely some of your gain (and I use that word to mean purely the increase in value, it may not be an actual gain if you take off the costs involved) is due to the improvements to the house?

I also don't see why you would be in the same position at the end of the day, why would your improved H3 (which is bigger etc) only be worth the same as your improved H1?
Or are you not paying off your mortgage?
If your aren't paying it off, then why should you be in a better position? You are basically just renting your (albeit bigger) house from the bank.