Reeves plan to tax houses over 500k PART TWO

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I am not the OP from the OP!

They will have already paid stamp duty when they bought the house.

Most people would have to borrow more to be able to pay it though. And as I said would be paying more on interest (£111/ month for £20k at 4.5%) than they would be paying in this tax (£45/month).

Your argument only works if people are not borrowing to pay for their house.

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?

@lkjhgfdsa no people should buy a home at a price that is within their means. They don’t have to borrow more. And if they do, they have the flexibility to overpay when they can to reduce the term and interest payment. That gives homeowners control over their own finances. We shouldn’t be wanting government to have control over our own finances. An annual tax to live until I die- no thank you.

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.

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

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.

the bit where you said ADHD "there's medication available"....my son ended up with severe heart problems due to being given "medicine" youre advocating...youre not a doctor so hush

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

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.

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.

'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

This is the choice if you want to live in London, there are 1,885 properties with 3 bedrooms or more.

But anyway this has nothing to do with. Tax now. I don't think anybody is arguing that London isn't a ridiculously expensive place to live.

You're comparably rich compared to the rest of the UK.

And like it or not, the most likely reason that you have amassed that amount of property wealth is because successive governments have failed to control property price rises in the interests of the country as a whole, and tax property appropriately.

As I said before, everyone wants more and better services. And everyone seems to think it should be someone richer than them who pays for it. And everyone has a story why. Because they have worked hard. And scrimped and saved while doing all sorts of vital work. And they just don't deserved to be taxed. Even though they might have more wealth than a very significant fraction of the population.

If you paid £800k for your house you paid £30k in stamp duty. Assuming you have a mortgage then you will be paying around £170/month interest on £30k that you would not have needed to borrow if there were no stamp duty. With the proposed tax you would be paying £135/month and you would own £30k more of your house.

Not only that but on every transaction as you worked your way up the property ladder you will have paid stamp duty every time. Any of those under £500k would, under this proposal, incur no tax at all which would have made it easier for you then and reduced your overall borrowing. Of those properties over £500k you would only have paid the annual tax for the time you lived in them which would be a tiny fraction of the amount of stamp duty you would have paid.

All you have to do now though, if you don't want to pay this tax, is not move. If you stay where you are this tax will not apply to you.

If you are the kind of people that move house every so often you will be a winner because every time you move you won't have to pay stamp duty. If you move to another £800k house and then stay there for over 20 years. Then you will be paying more.

I completely disagree. Just because something is expensive it doesn't mean that it is overpriced. The elements required to build a house are expensive. Land, skilled labour and materials. Developers are struggling to build houses and make any profit at all. The idea that you will solve the housing crisis through somehow artificially lowering house prices through an ill conceived and punitive tax is real madness.

The thing that gets me though is regardless of our different opinions, this kind of radical change absolutely should have been part of the manifesto for a party that is only a year into office. The country should get a say about whether they think this policy is sensible and something that we want. It is incredibly undemocratic to start introducing this kind of unprecedented tax. Labour knew our finances were shot as a country. They knew they needed to raise more money. Why on earth didn't they declare all these excellent policies a year ago? I bet my bottom dollar they wouldn't have been elected.

I don't know why you are making this argument as someone that is a proponent of this tax? You are basically admitting that the tax is essentially a wealth tax on people that probably aren't wealthy at all and don't even really fully own the asset that the government is taxing them on.

By your logic why don't we apply this replacement stamp duty tax on renters of expensive houses then?

How is it punitive though? Seriously!

Remind me how this will actually earn the government more money in the short or medium term? Remind me where the pot of money is to cover all the receipts we would ordinarily gain on stamp duty for the years immediately after the introduction of this policy? Is Reeves seriously proposing we borrow more money to essentially give a large proportion an exemption from stamp duty?

The chap who proposed the idea said it had been calculated to make the same amount of money as stamp duty. It is not intended to make more.

Because it's essentially punishing people for daring to own a house worth a certain value. The underlying assumption is that people that 'own' houses worth £500k are somehow inherently wealthier than those that own a house worth £499k when we know this isn't the case. It ignores regional variance, needs of family units and those that aren't geographically mobile. It is designed to disproportionately certain areas and regions.

If overall the vast majority of people will be better off then the government will either lose money or they will place a disproportionate burden on those that have a house that is valued over the threshold. We need to get used to sharing the burden as a country. Everyone paying a bit is far better than pretending that you can place extremely high taxes and this will be enough. We know from experience that this doesn't work. Look at the non dom tax etc.

So what's the point then?

Also how can it raise the same amount if a large proportion of people won't pay stamp duty under the new system and those buying houses worth over £500k will be paying peanuts over many decades to even pay the equivalent of what they would have paid in stamp duty. Do they really think loads of people are going to rush to buy multi million pounds houses and incur this ongoing tax? Surely people will just wait it out and hope it is repealed like it was in Australia.

But how is that worse than stamp duty? That is also a tax based on the value of the house you are buying but it starts at a much lower level.

Both go up in increments. The 0.54 % is for houses between £500k and £1million. I don't know what the higher bands are. I guess ultimately the money will be made up because as people buy houses and shift onto the new system they will be paying regularly so each house above threshold will be generating that income forever whoever lives there instead of unpredictable irregular lump sums.

The only way this will be net for the Treasury (and I doubt they will do anything this drastic just for net, it will have to be significant revenue generating), is that everyone moves on to a property tax, with some gradual rebate of stamp duty paid in say the last 5 years only. The onward report is just an opinion and what becomes policy often looks different.

this will encourage downsizers, and keep the housing market more fluid, whilst keeping the country on a leash by forcing us to pay an annual tax just to live.

Well no, that was my point.
Someone that owns £150k property outright is wealthier than me, and not paying £2k each month to a lender.

It is incorrect to think of everyone living in £500k houses as wealthy. That is the price for a normal family home where I live.