House prices rose 7.3% this year, average now almost £250k

[HACO]

As a recent FTB'er we took out a large mortgage, because frankly that's the only way you could buy a property. It's within the realms of what the bank deem as affordable, and i've got at least another 35-40 years of potentially working, so in reality it's quite insignificant.

A huge drop in the house price as a result of taxing property wealth instead would plunge us into negative equity. Should the government cover that shortfall? You claim if it's to be for the greater good then so be it. But you'll have hundreds of thousands of FTB'ers who have purchased a property in at least the last 5 years who will now find their property worth significantly less than the balance they owe on it.

That's not for the greater good, that's just having a narrative to suit you because you've not been able to get on the housing ladder. The "i'm alright Jack" attitude works both ways.

Nobody is entitled to risk-free asset appreciation. If you would benefit from price increases (which owners do), then it's only fair that they should also suffer from price crashes. That's what an investment is.

Buying assets on leverage is risky. You're gambling and sometimes it doesn't pay off. Why should the government bail you out? Homeowners usually feel entitled to privatise the gains and socialise the losses.

 

[Semple]

And what's the problem? Unless you desperately need to move in the next 3-4years you're fine. Sure, you paid over the odds for something but that always should have been a consideration. At the end of the day you will have a mortgage to pay that you can afford until the end of it's term (right?), and you will have a safe and secure roof over your head. If you're about to reply and tell me "what happens if I lose my job" well then guess what - approx 40% of the population rent and if they lose their job they are out on the ear within two months notice. So that's no argument for propping up the housing market in my view.

You're assuming it'll recover to the same price that we purchased at in 3-4 years time. What if the drop never recovers, should I and many other FTB'ers who are the same age as you suffer with massive negative equity? I like that you think i paid "over the odds for something", is that your view of a market price? I don't need to argue about an issue of losing a job, i agree that's an acceptable consequence you have to make when purchasing a home. If you fail to keep up with your repayments then you risk the house being repossessed.

My point is why should i suffer (after working hard to save a deposit) a massive drop in the value of my home, just so you can get onto the property ladder. I can have just as much of a salty attitude about homes falling into negative equity, as you can have a salty attitude about not being able to afford to get onto the ladder.

 

[Semple]

Nobody is entitled to risk-free asset appreciation. If you would benefit from price increases (which owners do), then it's only fair that they should also suffer from price crashes. That's what an investment is.

Buying assets on leverage is risky. You're gambling and sometimes it doesn't pay off. Why should the government bail you out? Homeowners usually feel entitled to privatise the gains and socialise the losses.

Who said it was an investment?

If i'm being completely honest I'll be very surprised if my home increases in any similar value at the rate it has done in the prior 8 years to when i purchased it.

You'll have mass gentrification of pretty much every person but the elite.

Once an area turns desirable, house prices do increase, but they will eventually plateau, and you'll just see general increases in line with everything else in the country.

 

[HACO]

Who said it was an investment?

If i'm being completely honest I'll be very surprised if my home increases in any similar value at the rate it has done in the prior 8 years to when i purchased it.

You'll have mass gentrification of pretty much every person but the elite.

Once an area turns desirable, house prices do increase, but they will eventually plateau, and you'll just see general increases in line with everything else in the country.

The "general increases inline with everything else in the country" has been 10 times higher than inflation rate, i.e. an investment.

‍I'm with you, housing shouldn't be an investment. But it is. Because you buy it and it appreciates, that's an investment. So like any investment, if it's allowed to go up in value, it should be allowed to fall in value. Expecting government to bail out investments when they don't work out is privatising the gains and socialising the losses.

 

[Scam]

My point is why should i suffer (after working hard to save a deposit) a massive drop in the value of my home

Losing your job (or being unable to pay the mortgage) aside, can you tell me why it would be such a disaster for you to go into negative equity? Like I said, you'll still be paying off your loan, you'll still be putting your hard-earned into an 'asset', and more importantly you'll still have a safe and secure roof over your head. I fully agree going into negative equity is not a wonderful prospect, but it's not the end of the world like a lot of people seem to think.

 

[glenimp617]

Losing your job (or being unable to pay the mortgage) aside, can you tell me why it would be such a disaster for you to go into negative equity? Like I said, you'll still be paying off your loan, you'll still be putting your hard-earned into an 'asset', and more importantly you'll still have a safe and secure roof over your head. I fully agree going into negative equity is not a wonderful prospect, but it's not the end of the world like a lot of people seem to think.

People tend to view it like stocks and shares. It only becomes a problem when selling or remortgaging due to LTV ratio. If you intend to live in there for years, then yeah it's not much of a problem.

 

[Orangeade]

Losing your job (or being unable to pay the mortgage) aside, can you tell me why it would be such a disaster for you to go into negative equity? Like I said, you'll still be paying off your loan, you'll still be putting your hard-earned into an 'asset', and more importantly you'll still have a safe and secure roof over your head. I fully agree going into negative equity is not a wonderful prospect, but it's not the end of the world like a lot of people seem to think.

I would guess there is a correlation between negative equity events and wider problems which could be job losses.

Also if you're paying interest on a 500k mortgage it's a lot more over 30 years then having only needed a 400k mortgage.

A lot more

 

[glenimp617]

Who said it was an investment?

If i'm being completely honest I'll be very surprised if my home increases in any similar value at the rate it has done in the prior 8 years to when i purchased it.

You'll have mass gentrification of pretty much every person but the elite.

Once an area turns desirable, house prices do increase, but they will eventually plateau, and you'll just see general increases in line with everything else in the country.

Our first house purchased in 2001 increased in value by 150% over 7 years

The house we're in now, has risen 10% in 13 years

 

[touch]

People tend to view it like stocks and shares.

Most people investing in stocks/shares are aware that value can go down as well as up. It seems like he wants the benefit of house price increases but doesn't want to accept the risk of prices going down?

 

[Scam]

People tend to view it like stocks and shares.

I know you're agreeing with me, but in short this is exactly the problem with our housing market. People view property as an investment, just one that goes up and up constantly.

 

[neocon]

I know you're agreeing with me, but in short this is exactly the problem with our housing market. People view property as an investment, just one that goes up and up constantly.

Say I own a million pound house and now I can't pay this wealth tax, what should I do? I need to live somewhere on this island.

 

[shiver]

Say I own a million pound house and now I can't pay this wealth tax, what should I do?

Accept that you are obviously not worthy of living there, sell up and buy somewhere more suiting of your stature, obviously! /s

 

[touch]

Say I own a million pound house and now I can't pay this wealth tax, what should I do? I need to live somewhere on this island.

The same thing you'd do now if you live in your million pound house and can't pay your council tax?

 

[neocon]

The same thing you'd do now if you live in your million pound house and can't pay your council tax?

So I cash out at the top of the curve , bank £1 million and move into a flat say , something cheaper. But I'll be selling my house to someone who can afford the wealth tax for £1 million. This won't benefit you though will it?

 

[touch]

So I cash out at the top of the curve , bank £1 million and move into a flat say , something cheaper. But I'll be selling my house to someone who can afford the wealth tax for £1 million. This won't benefit you though will it?

It will benefit me because the tax will have gone from around £200 per month council tax to around £400 property tax. So it benefits everyone except the owner of the £1M house.

 

[matt100]

Losing your job (or being unable to pay the mortgage) aside, can you tell me why it would be such a disaster for you to go into negative equity? Like I said, you'll still be paying off your loan, you'll still be putting your hard-earned into an 'asset', and more importantly you'll still have a safe and secure roof over your head. I fully agree going into negative equity is not a wonderful prospect, but it's not the end of the world like a lot of people seem to think.

You lose the ability to move which for many isn't a problem obviously but for many it also is if you want to have/grow a family or if you want to downsize etc.

Plus you lose the ability to remortgage which means you go onto SVR which the market is primed to make unappealing and likely costs a lot more.

Obviously if you're right at the limit and SVR means you can't afford the house firstly the banks haven't done a good enough job at an affordability check and you likely shouldn't have bought the house in the first place but the for example for folks like me it just means my mortgage goes up and I have less disaposable income to save for the future/spend on things that stimulate the economy etc.

So the winners in many cases are the banks who are nobodies favourite... an unintended consequence for sure.

 

[Scam]

So I cash out at the top of the curve , bank £1 million and move into a flat say , something cheaper. But I'll be selling my house to someone who can afford the wealth tax for £1 million. This won't benefit you though will it?

It will, because the more people that can't afford to live in their £1m houses anymore, the more put them up for sale, and the more prices will have to drop due to 'over' supply. Price drops at the 'top' end will trickle down and thus you are now understanding why this is a good thing overall

You lose the ability to move which for many isn't a problem obviously but for many it also is if you want to have/grow a family or if you want to downsize etc.

Those problems already exist at the bottom of the ladder. I'd argue there are more young families struggling to buy anything bigger than a 2 bed flat at the moment, then there would be of people that would get caught in negative equity, plus can't afford the mortgage, plus need to move etc. It's a very narrow set of requirements you're putting forward.

So the winners in many cases are the banks who are nobodies favourite... an unintended consequence for sure.

The banks always win. They win when prices go up because it means people take out bigger mortgages and owe them for a longer period of time. I think 2007 proved that they are untouchable.

 

[neocon]

It will benefit me because the tax will have gone from around £200 per month council tax to around £400 property tax. So it benefits everyone except the owner of the £1M house.

And where are the people downsizing going to live? An increased demand in a different place in the market.

As someone already pointed out, it just punishes people with mortgages. Wealthy people don't have mortgages and would be able sell and potentially take their money elsewhere. It might slow things down but I doubt it's going to help people at the bottom of the pyramid.

 

[glenimp617]

Found this on a quick google. Interested to hear if this is accurate for most people on here.
We pay 13% although we'd love to move in the next few years.

Pretty sure "they" say 35% of gross is a good target.



"Again, there is no one size fits all solution here as the answer depends heavily on your unique situation.

In our opinion, a monthly percentage between 25%-35% or your monthly income should work for most people, though there is significant room for variance.

One important thing to remember here is: just because a bank approves a mortgage does not mean you can actually afford it. Make sure you do your due diligence when calculating your expenses and don’t take the first mortgage you can secure."



The ’35 Rule’
A good rule of thumb here is the 35 rule—that is, you should allocate no more than 35% of your gross income to monthly mortgage payments. So if your gross pre-tax income per month is £4,000, then you should shoot for a monthly payment of around £1,400 per month.

 

[touch]

As someone already pointed out, it just punishes people with mortgages. Wealthy people don't have mortgages and would be able sell and potentially take their money elsewhere. It might slow things down but I doubt it's going to help people at the bottom of the pyramid.

It would have negligible impact on most people with mortgages. Average house price in England is £256,000 which gives an annual property tax of £1228. Some people would end up paying more, some less depending on how the current council tax bands fall on your property. The real impact might be that house prices don't rise as fast but that's not going to manifest itself in monthly outgoings and force people to sell up.
The people who end up paying more would be people with very expensive properties or portfolios of multiple properties.