The FT has reported this morning that:
The number of UK first-time homebuyers who step on to the housing ladder mortgage-free has tripled since the financial crisis, largely thanks to wealthy parents stumping up the entire cost of a home.
Some 19,000 people bought their first homes outright in the past year, according to research by Hamptons, the estate agent, illustrating the growing reliance on outside help in enabling people to become homeowners.
That's good for them, although the data takes some believing, especially when it is claimed that:
One-fifth of those buying outright in the past year were able to do so because of an inheritance, while two-thirds received help from parents, but 14 per cent of cash buyers had saved enough themselves to buy without a mortgage.
That 14% who have saved the whole price of a house before ever buying one without the benefit of an inheritance takes some considerable believing. How, I wonder?
But there are more significant issues here. As the report also notes:
Overall home ownership rates have been on the decline for more than a decade, dropping from 71 per cent in 2003 to 62 per cent in 2013-14. This year, the proportion of people aged 25-34 who owned their home hit a 29-year low of 36 per cent.
In otherwise the increase in cash buyers is out of a declining pool. So overall in a declining market access is getting harder, and as the report indicates, those paying cash also pay more (much more in London). This simple fact is that what this means is that access to housing for most is declining considerable, the wealth and social divides in society are increasing and subsidy schemes that support house prices actually reinforce this trend, at considerable cost to the taxpayer and with benefit to the cash investor who wants the price to stay high.
The time for real reform has come: this is gross inequality at play and only more, better and accessible housing on secure tenancies or at lower price can deliver that. This needs building of course, and council ownership, but it also means taxing land and considering taxing gains on house price increases too, even if that means foregoing the unjust stamp duty.
But who will have the courage to say it?
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For house prices to rise there must be demand higher than supply. Do you think it is second homes, buy to invest/rent, increased population or something else?
All those things
And an influx of foreign capital thinking it is a safe haven
Residential land is too lightly taxed, so all the public investment which goes into making local areas attractive for living goes into house prices.
I wonder if the 14% outright cash purchase might be partly explained by Asian cultural traditions. I once shared a house with a friend (Asian background). He explained that there was a tradition of the WHOLE family (not just parents) getting together to stump up cash seeing the purchase as an asset for the extended family. This, of course, could create tensions of behind beholden and having to toe family lines!
As I’ve said before, the housing bubble is SO inflated that it needs to crash big(ish) style if we want to deal with wealth transference/inequality/rentier syphoning. At present the poorest are taking the hit for this-I think the hit needs to be taken somewhere else but as you say, who has the courage to say it. Labour should be shouting this through loud-hailers and should have done in the last election-more cringing before the Overton Window?
Interesting idea
Taxing the increased gains in tandem with income cuts? Given how you don’t need to be a big landlord to hit the 40p rate seems a bit much. Plus if its anything like the french model it effectively becomes a levy on the middle class as it stays at about 2% at the top level. For example sounds reason 1-3% tax on wealth (as Switzerland does ) but if the ‘income’ tax on such income is high unlike switzerland its a double wammy. A real example say it apply 2% on 400k (house in london?) seems not much but in fact would be 8K which would even on a salary of 80k (among the higher but not banker/football star) that would be the same as hiking income tax 10% . The domestic reason people have gone into property is lack of return in savings (I would have thought) Now look at the stamp duty change, the fine print says they will look into exempting the landlords with 15 properties more or corporate. So in my view the left need to join hand in hand with the smaller landlords or if the tories have their way it will become corporate run and no doubt the tomfoolery we have from multinationals.
I would not levy a wealth tax on less than £1 million
And we do not need savings as an economy
Your economics is from the 1930s, and all the wrong sort then
What are the retirees to do with their savings then? To actually exist what are they to do? Go back to work? Surely in this world technology everyone should be moving closer to a age of leisure? The thing is is even if levied 2 million (rich but hardly super rich) it would disproportionately effect those just above that figure. That would mean someone with roughly 10 £200k properties would have to find 20k-40k on top of the income tax which a good chunk would be at 40p/60p and the rental yield with no voids would be no more than 200k, forgetting there is maintenance as well. Where as the bigger landlords would indeed pay more but if it stayed at the 1-2% (like france)they would weather the increased tax comparatively well. I currently live in southampton where I am student and there is a landlord called student no fee and he has 200+ properties so a wealth tax of 1-2% on him would set him back about 500 – £1 mil a year which he would easily be able to cover. But if it kicked in at say even £1 mil a £2 porfolio landlord with a handful of properties have to find around 10K on a portfolio yield of £160k. For example the 40p is disproportionately more for those effected than those who pay 45p matter how high the earnings. Wealth taxation I agree sounds good but if its applied half heartily those who simultaneously earn (in this receive rent) and worth a lot hardly notice the increased but lower down would. A better policy would banning ownership more than a said amount of property with the excess ‘Having’ to be social rents?
I died of boredom before the last sentence
I agree with that last sentence
“What are the retirees to do with their savings then?” Sam, you have a lot to learn if you think that it’s OK to use your savings to exploit other people. Pensions need to be properly funded through a state system, like we once had – SERPS.
But it’s not necessary to have a wealth tax to fix the housing crisis, at least not the conventional type. Can you see the logic in treating landlords as a protected business so far as tax is concerned. Why don’t landlords have to pay business rates on the homes they rent out? Business Rates are very high. A full land value tax on income generating land would be efficient and fair.
So kibbutz for us, no privacy for the young who need to be able to argue in private, be themselves. Land value tax. Land value tax.
Andy wightman keeping his eye on the land reform bill Scotland, it is at stage one. Will it be watered down.
Demand is increased month on month by this awfully confused government.
There is a crash of some sort coming but just before it does many very rich will profit, the Conservatives are making this possible.
The answer is easy, increase supply to satisfy demand and prices will come down.
You’ll then hit the next rung of buyers which would like to be part of the demand stats but are nowhere near financially able.
We need to encourage smaller plots to be built, that’s also how you get more homes to the market as the large guys must then build to compete. At the moment it’s an exercise of drip feeding the market by the largest house builders and this is keeping the prices high.
“but it also means taxing land…”
Richard, I’m sure you were against this in a comment in a previous thread (which referred to Henry George and the Single Land Tax, IIRC).
Or is it just the concept of the Single Tax itself, as opposed to a mix of taxes, that you disagree with?
What would be your view as to simply adding more upper bands to Council Tax valuations?
Thanks.
I support LVT
As one of many taxes
The single tax idea has helped to kill support for LVT here. Georgists tend to be libertarian, ‘religious’ adherents. Henry George had a very important idea, but it is not a panacea.
Agree with that
Council Tax was always a stupid regressive tax and the lack of revaluations has brought it into even more disrepute. You would need full revaluations to add upper bands. Whilst you are spending the money you might as well replace with LVT and value just the land, which is much simpler. And then you must revalue regularly.
John McDonnell will ensure that the next Labour government implements LVT. He’s a member of the Labour Land Campaign http://www.labourland.org.
problem is Carol if we LVT from a post bubble (35 years of it) we’ve still got absurdly high house prices and the non-committal wealth transference/inequality-stabilising it from NOW is good but not enough- the housing as asset set have to take a hit, can’t see any other way.
Just a tiny bit disrespectful to say you died of ‘boredom’ I was just saying unless real action is taken all this tax the rich argument just effects those who are richer not the very rich and indirectly cause more inequality. As for exploiting people if only the state bothered to build more houses they would finder harder to ‘exploit’. As for exploitation here in Southampton the YMCA charges £220 Per week for a self contained flat hows that for exploitation? That is more than PRS flats here!!. Until the autumn statement social housing people could charge whatever they wanted but that is not the case for the PRS. So when it comes to the housing benefit bill most goes to social housing.