House prices

[Socialmediamakespeopleunhealthilycompetitive]

In the mid 80s there were 3 bedroom family houses in ok areas of outer London for £50k, around 2.8 times a decent officeworkers salary. The same houses are now around £450k & ten times the same workers 2024 salary. I realise interest rates, even after recently hikes are somewhat lower. Since the late 90s I have wondered when people will demand government action on this, amd actually see lower housing costs as a good thing. When the above house was £200k ca. 2003, and 6 times a decent salary, I thought action might happen. Is the point at which action is taken the point at which the transactional costs of middle class young or middle-aged people buying their own home even wirh an inheritance become prohibitive? Do people doing jobs they don't like or which damage their health to pay enormous mortgages in expensive locations, London, Oxford, Cambridge, Dublin etc ever think about the opportunity cost of sitting on equity which could be invested to earn income if they relocated to a cheaper area? How on earth have modest, poorly insulated houses including those in rough areas been allowed to get to this astronomical level? Why is it politically unacceptable for a party leader to say they want to engineer lower house prices, perhaps even say 75 orn80£ lower (still leaves the million pound househat 200k)?

until as a country we start building enough homes to create an oversupply then prices will not come down significantly
With all of the vested interest in this it is unlikely to happen and it would not help the economy with negative equity etc

Yes, the same people who had access to these 50k houses in the 80s are now expecting their own kids and grandkids to buy them for half a million. One guess as to which generation they are... 🙄🙄🙄🙄

Did you mean to sound so smug?

People have the right to choose to live where they want, but the government should not subsidise people living in unsuitable properties.

It's good to see that the winter fuel payment has now been stopped, because this was another subsidy propping pensioners up in unsuitable houses.

Presumably the Land Value Tax would be payable by the freeholder, not the leaseholder? That’s an excellent idea.

Absolutely!!

Maybe look around a bit and you will see that it isn't only the UK where this is happening. I couldn't find a house here (NZ) for some of the cheaper prices I have seen in the UK.

Sometimes life gets in the way. Friends were planning to downsize, then their son’s marriage abruptly ended, he moved back in with them (ex got marital home) and he has the children two or three nights a week. So they need the extra rooms. 🤷‍♀️

No, LVT is a specific economic concept that works in a specific way. A government is free to impose whatever tax it wants but it isn't LVT if it starts factoring in the value of the building built on the land.

What is 'fair' and 'equitable' is completely subjective. If you have worked hard and invested your money in property when you could have frittered it away then is it fair that you then get taxed so heavily for this? These people have arguably made themselves more financially secure and less likely to be a burden on the state and yet you want to tax them further for simply owning an expensive property?

There are also pretty extensive unintended consequences to suddenly imposing huge tax increases on property owners. Many people that aren't homeowners have a stake in the property market through their pension funds. An LVT would place a huge burden on these funds.

So someone renting a hugely expensive house from a landlord could potentially pay peanuts in your model? They are benefitting from all the services that are provided by the local government so why on earth can't they be expected to pay their way? Meanwhile someone with much less money who has chosen to invest in a home has to pay LVT which will be the bulk of their bill?

This is what I mean about what is 'fair' and 'equitable'. Renters are not automatically poorer than homeowners. People should be encouraged to invest their money into buying and improving their homes rather than to spend money on holidays and cars that will not retain their value and ultimately increase the likelihood that if these people fall into more difficult financial times they will be more likely to lose their rented home and need to rely on the state.

If you have worked hard and invested your money in property when you could have frittered it away then is it fair that you then get taxed so heavily for this?

Always the moralising around home ownership & renting? worked hard vs feckless, etc I haven’t worked any harder then plenty of others who are still renting just because my house went up in value…

A communist home owner, an interesting concept.
Why should the government get all your estate when you die? What's the point of working hard, saving and being frugal? You may as well blow the lot on holidays and eating out.

It's not moralising. It's a fact that we all have decisions to make about how we spend our limited money. These decisions can have long term implications. The government encourages people to invest in their pensions not because they want you to have a really fabulous old age but because they want to reduce the chance that you will be old and destitute and therefore need more publicly funded services to support you. Buying a house isn't really too different than this.

It isn't the case that homeowners or people with large pensions are morally superior to those without these things. It's more that they shouldn't be penalised for doing the sensible thing that ultimately helps the rest of us as it relieves a burden from the State. You may not have worked harder than someone of the same age and income that chose to rent but ultimately you are now more securely housed and less likely to need government assistance.

@Dangermouse43
Haven't you heard that Australia has a housing crisis too, and NZ.
The COL in Australia is really high too.
Also consider that Australia is suffering very badly due to climate change and large parts of it are already inhospitable due to heat/drought.

You're right. LVT is a specific concept so I'll just call it DLVT - Developed Land Value Tax.

Buying a home is great. Investing in property is a very specialised action. Most investors probably wouldn't even "invest" in a single property because it is so illiquid. Many homeowners did little or nothing to acquire their wealth. Some inherited (didn't work hard) and some benefited from out of control house price growth (again, didn't work hard). Taxing based on value is a very progressive tax regime.

I agree that a sudden change would be unnecessarily harsh. It should be promoted and phased in over a set period, say 5 years.

As with any change there will be winners and losers. We're trying to affect house prices in this topic and bring in a more equitable system. You're focused on the losers and not thinking of the winners such as young FTB's who would benefit from lower prices.

They were! We bought a 3 bed house in zone 5 (West London) in 1986 for £54k.
In 1983 you could buy a studio flat in Z5 in SE London for £17k, I know because I went to view one.

It isn't the case that homeowners or people with large pensions are morally superior to those without these things. It's more that they shouldn't be penalised for doing the sensible thing that ultimately helps the rest of us as it relieves a burden from the State. You may not have worked harder than someone of the same age and income that chose to rent but ultimately you are now more securely housed and less likely to need government assistance.

Am I? Why would I not need the NHS more? Or Attendance Allowance? Pension Credit? Universal credit? What if I have more dc?

They would only pay peanuts if the landlord was charging peanuts. That's not likely on a hugely expensive house.

Poll tax will generally cover the local government element, so people paying their way. DVLT would generally replace the proceeds of Stamp Duty. The government would have to choose the ratios and rates. It's above my pay grade!

People should NOT be encouraged to invest in single (or a few) property. It's generally a bad investment and not very productive. Buy a home. Then choose more sensible investments or take the risk of investing in property when we're trying to impact that per the thread.

Taxing based on value is a very progressive tax regime.

Absolutely

People seem to really struggle with the idea that using tax to encourage behaviour that the government wants, or discourage behaviour that it doesn’t want, isn’t the same as FORCING them to do anything. It’s just saying, we aren’t stopping you from doing this if you really want to but we’d rather you didn’t so it will cost you more. You still have a choice, you aren’t compelled.

You can look at all sorts of reasons, but in the end it's a simple as supply & demand with people (banks) coughing up the money.

What about where people have already paid stamp duty - would they be expected to also pay a yearly tax on top? I have mixed views on this because I saw an article in the DM about an elderly couple not wanting to downsize because they would have to pay stamp duty on their new house when they never paid it before. I kinda thought well thems the breaks. They felt it was okay for others to pay that tax but not themselves.

The price crash at the end of the 1980s was horrific. So many people ended up in negative equity and then lost their homes because they couldn't pay their mortgages due to rising interest rates. One of my friends reckons she still owes the bank £50k from when it happened to her. They were homeless with 3 kids, 2 with additional needs, and in temporary accommodation for years.

The house I had then was valued at £87.5k approx 1987, and I sold it for £49k in 1993. It didn't matter, because my mortgage was around half that and I was relocating and not trading up, but for those who had to sell it was awful. It led to homelessness, suicides and all sorts of general misery.

And when interest rates went up by 2% on Black Wednesday, there were people at work in tears about how they were going to pay their mortgages (fixed rates weren't really much of a thing then).

Yep. I'd be a loser having paid stamp duty on 7 purchases over my lifetime and with little expectation of future purchases (maybe one or two). I wouldn't advocate making the system really complicated trying to balance that out in some way. Every time tax gets more complicated people find a way of gaming it.

When you go to buy a house you have a budget. And that budget takes into account the money you have to set aside for stamp duty. People competing with you to buy that house have a similar budget. In a world without stamp duty you would have had a similar sized budget, but you wouldn’t have had to set as much aside for stamp duty. Neither would the couple you are ‘competing’ against. So you would have paid a much higher amount for your house. You would still have paid as much, just all to the seller, not some to the seller and some to HMRC.

This sounds bad for HMRC but this is where a higher regular tax comes in, either Council tax or land value tax. HMRC gets the same money, and we are getting rid of one of the barriers to moving house (which is also incidentally an incredibly good thing for growing the economy cause people are more inclined to move house to get a new job etc etc).