To think if you own a £2 million house you are rich?

[lesley33]

I guess I am just surprised at those who think you can own a £2 million house and not be rich. Only 0.5% of sales in 2010/11 were for houses worth £2 million or more. Link below. So if you own a house worth this you are in a small minority of the population.

Yes I know its possible to be asset rich and cash poor (although you could always sell your house?) But AIBU to think anyone who has a house that is worth £2 million or more in the UK is rich?

www.propertywire.com/news/europe/uk-property-tax-prime-201202236204.html

The Op said "own" which I took to mean without mortgage.

Also a home not a farm, which again is very different.

The repayments on a 2million mortgage would be around 10k a month. If you can afford that then you are rich.

Well, on paper yes. There may be some people who bought that house when it was worth 2.5m though and took a 2m mortgage, then had a swift decline in income. They would not be rich but in negative equity struggling to pay a monster mortgage. I agree they are hugely in the minority but that must apply to someone surely? Well, that's what I like to think anyway. Makes me feel better about my modest little shack .

I think you can own a house worth £2M+ and not be rich.

What about people who bought a £2M house with a ginormo mortgage?

And also lots of middle-aged/elderly people who bought their houses in the 50s/60s/70s/80s bought at modest prices but prices have escalated to £2M plus, but the owners have modest incomes. And when they die, there is already a tax called inheritance tax, for assets over £325,000, so the majority of assets held in the house will be subject to 40% at some point in any case.

What about other assets? Shares, for example. Should anyone that holds shares be made to pay tax? How about that jewellery or art collection? Should someone come round from HMRC and take an inventory before sending a bill?

I actually meant with or without mortgage. If you have a house worh £2 million and a large mortgage, you obviously have a large income to service that mortgage.

Lesley, you could sell it, yes. Pop it on the market, get the money...how simple! Doesn't work that way though.

you chooe how to spend your 'outgoings' private health care and education will, of course take a massive chunk, but they have the luxury of spending their money on that

Yes lesley33 maybe you do have a large income to service that mortgage.

If you're spending all you're earning, how are you any different, than somebody who owns a 500k house and breaks even every month too?

It's a good point Cognito and one that I agree with.

Why should you have to downsize? Whose business is it how much your houses is worth?

Lets say you did downsize and pay a smaller mortgage? What of it. Are you saying the extra money should go to the treasury?

I agree that most people who own 2 million quid houses are wealthy -- however, property can be an illiquid asset. There are tons of people who can not sell their highly valued property because no one will pay what it is worth. This is one reason I am afraid to pay alot for an estate in a far flung location because who will buy it from me. Central London you tend to have a large number of potential buyers at all price ranges.

Damn - How you choose to spend your income is your choice. People can be rich but have enormous commitments in terms of mortgage, private education, etc that means they have little income once they have paid those. They are still rich though.

When you buy an expensive house, you have already paid tax. With or without mortgage, it's purchased with income that has been taxed. You also pay a great big fat slug of stamp duty: a £2M house would cost £100,000 in stamp duty.

Quite DamnBamboo - obviously, 11k a month would be a HUGE amount of income to have. However, if you are paying 10k a month on your mortgage then you are no richer really than someone with a modest £1,500 a month income paying £500 on their mortgage.

A house of £2 mil is still a long way away from the average price of a UK house regardless of how it is obtained.

And Damn - This thread isn't about the proposed mansion tax - that is a separate issue. All I am saying is I think if you have a £2 million house, whether owned outright or on a mortgage, you are rich.

YABU - if you said that someone who paid £2m for a house they are rich, but if you bought a house for a fraction of that, then stayed put while the area became gentrified and house prices have rocketed, it doesn't mean for one minute that you have any spare cash to pay for a new tax just because your property is worth a lot, unless you remortgage to release the equity.

Alternatively, people in posh parts of London who find their property is worth a lot while their income doesn't allow a lot of spare cash for an extra tax, may well sell up and move out. Because that's what we want isn't it, for London to become less diverse?

When you buy an expensive house, you have already paid tax. With or without mortgage, it's purchased with income that has been taxed. You also pay a great big fat slug of stamp duty: a £2M house would cost £100,000 in stamp duty.

You are making the assumption the people who buy £2m houses pay income tax and stamp duty - the reason they are going after mansion tax is precisely because these are the people who can and do avoid it.

So I suppose the OP should say; 2 million is a lot of money, either cash or assets and therefore if you are the lucky owner of said cash or asset, you are rich.

In which case YANBU.

If all the people who live in £2m houses are forced to sell them, there won't be enough buyers for all those houses. This will then push down the price of the houses, below £2m, meaning they won't have to sell, after all.

If there's something wrong with my logic, I'm sure someone will let me know.

I don't agree. If you bought a house when it had a stratospheric price tag, then yes you are probably rich. But you need to look at the price that someone actually paid for their house, for the crazy economics if house prices mean that it's not uncommon for people to be living in houses whose current assessed value is way, way above what they could actually afford if they were buying now.

But yes, I agree they could be classed as rich, but can't see a mansion tax can be workable.

If you're spending all you're earning, how are you any different, than somebody who owns a 500k house and breaks even every month too?

Of course it's different - nobody needs to live in a mansion, and spending on luxuries is very different from spending on necessities.

Having said that, I do think that a mansion tax would be unfair on people in negative equity or on those who were trying to downsize but couldn't. I would support a higher council tax band for these properties though.