What affect would taxing second homes have on the economy

[413x]

I didn't at first but I remember it checking out.



Have you adjusted for age?



What you're missing is that the poor are getting richer too.



Housing pressure is created by increasing population. The UK's population was 49 million in 1951 and an estimated 69 million today. That's a 40% increase. Absent immigration the population is now naturally declining, so this is a problem that will resolve itself over the next century or so.

Age adjusted.
It's impossible for home ownership to keep up of prices are acceleration above earnings

It's going to be an interesting one when the population starts to decline and has an effect.
I believe in the west they think it will take a while as we will need and attract immigrants.
But further into the future who knows. At that time tech will have progressed so far it life will either be amazing with robot slaves for everyone and even further, can't even fathom.
Or we'll carry on as we are and get a mega elite utopia for a few super rich vs slums for everyone else.

But that's too far away for me to worry about!

Not sure if the poor are getting richer too. But the divide is growing. And inflation is always there.

 

[Slam62]

Do you think that this is what people think?

Maybe that do if they're as thick as two short planks.

Lol, really, even in the eighties people would say 'my house earned more than me today'

It's always been a game of fiddle the rules so people can borrow more, now it's just that government have got actively involved and just when you think they're going to leave it alone they come up with another scheme.

 

[413x]

Do you think that this is what people think?

Maybe that do if they're as thick as two short planks.

I know a few. The few I know are quite intelligent, kind who have gone to uni, but are working on a low salary.
My Gf is actually a bit like this 'what's the point in saving etc, world will probably be gone to **** by then'

If you feel you can't win the game. See everyone else getting richer I can completely see why you'd want to give up.

 

[Lopéz]

I know a few. The few I know are quite intelligent, kind who have gone to uni, but are working on a low salary.
My Gf is actually a bit like this 'what's the point in saving etc, world will probably be gone to **** by then'

If you feel you can't win the game. See everyone else getting richer I can completely see why you'd want to give up.

Some people need to get a grip.

Concentrate on what you can control instead of whining about how unfair everything is.

 

[tlrBeta]

Some of these graphs, finger pointing and so on is just getting silly.

I tell you one thing, I would love to buy a huge house in Cornwall (ideally Polzeath). However, I can't afford it - I get paid well, we and my wife both work. Do I think its the governments (whichever that may be) fault? No.

My parents didn't get hand outs, my mother in law worked 3 jobs at one point to give them what they wanted. Did they moan about it? No. My parents are close to retiring (1 already has). My Dad worked from the age of 16, planned wisely, never out of work, they have done very well. Yes they have property which is now of good value. Why would you expect him to pay more NI, when for the last X years they have been.

Some people need to get a grip.

Concentrate on what you can control instead of whining about how unfair everything is.

Well said

 

[NotAGolf]

Wow, quite the response!

I was not suggesting the moves in my OP were wise and/or feasible. Merely asking the question to learn a bit more about the cause and effect that such actions might take. I admitted in my op that I'm pretty clueless in this area (and still am tbh).

One thing that still doesn't make sense to me is why (as a couple of people have suggested) would a house price crash cause lots of people to default on their mortgage? If other things come into play like intereste rate rises or mass redunandacies then sure, but if it was just a 20% drop in house prices, why would that cause people to default? I understand that a 20% drop would put a lot of people in negative equity and thus be unable to move, but their mortgage payments would still be the same. I guess once their current mortgage deal ends they could be moved onto a higher interest rate that they're unable to get out of due to the negative equity?

 

[tlrBeta]

Wow, quite the response!

I guess once their current mortgage deal ends they could be moved onto a higher interest rate that they're unable to get out of due to the negative equity?

Correct - some might flick to a lower rate tracker, but most hover around c4-5% right now if you don't move at the end of a fixed term

 

[413x]

Wow, quite the response!

I was not suggesting the moves in my OP were wise and/or feasible. Merely asking the question to learn a bit more about the cause and effect that such actions might take. I admitted in my op that I'm pretty clueless in this area (and still am tbh).

One thing that still doesn't make sense to me is why (as a couple of people have suggested) would a house price crash cause lots of people to default on their mortgage? If other things come into play like intereste rate rises or mass redunandacies then sure, but if it was just a 20% drop in house prices, why would that cause people to default? I understand that a 20% drop would put a lot of people in negative equity and thus be unable to move, but their mortgage payments would still be the same. I guess once their current mortgage deal ends they could be moved onto a higher interest rate that they're unable to get out of due to the negative equity?

It wouldn't be the end of the world but its a bit of a crippler.
It could be hundreds more. Relationship breakdowns with joint mortgages would be difficult.

It wouldn't be pleasant. Especially for those who just signed up on 5 percent. They could be in debt by 50k.

That's quite a burden if you've 'planned wisely'.

Ideally house prices wouldn't go up. In an ideal World it would match inflation. But that's impossible with our model.

You should obviously budget for SVR but most don't. The bank will kind of. With the 4-5x, earnings thing.

All that money would also be taken out of the economy, well, allocated differently. What people would be spending on restaurants etc would go to the bank.

 

[Tuppy_Glossop]

The Guardian graphic in #121 is useless without also plotting over 65s who own with a mortgage and under 64s who own outright. And why are they ignoring 64 and 65 year-olds?

 

[Psycho Sonny]

People are acting as if this is a UK problem created by the government.

Obviously people who have never visited other more prosperous nations where all the wealth isn't accumulated in one dump called London.

House prices in ever major city in America are outrageous. So is Canada. These are the two wealthiest nations in the Americas.

What are house prices like in the major cities in Switzerland? Norway? Singapore? Japan? Australia? Iceland? France? Italy?

Pointless debate. This is a fact of life. It's pretty easy to afford a home of you are on top of your finances and have financial intelligence and discipline from a young age.

Dare I say even a minimum wage worker could afford to buy in London if they stayed with their parents from working age til 25 and invested their money in index trackers rather than leasing Audi's and buying a new iPhone every 6 months.

 

[Psycho Sonny]

Wow, quite the response!

I was not suggesting the moves in my OP were wise and/or feasible. Merely asking the question to learn a bit more about the cause and effect that such actions might take. I admitted in my op that I'm pretty clueless in this area (and still am tbh).

One thing that still doesn't make sense to me is why (as a couple of people have suggested) would a house price crash cause lots of people to default on their mortgage? If other things come into play like intereste rate rises or mass redunandacies then sure, but if it was just a 20% drop in house prices, why would that cause people to default? I understand that a 20% drop would put a lot of people in negative equity and thus be unable to move, but their mortgage payments would still be the same. I guess once their current mortgage deal ends they could be moved onto a higher interest rate that they're unable to get out of due to the negative equity?

Mortgage payments are never the same for the lifetime of a mortgage.

If you fixed for 2 years and come renewal you are now in debt and have a LTV of 110% you will not be given a new deal but go onto the standard variable.

That is considerably more expensive possibly even nearly double what you were paying before.

So some people's mortgage payments would literally double if that happened

 

[Quartz]

It's impossible for home ownership to keep up of prices are acceleration above earnings

That's not quite what I was after. Let's try again. In 1960, 70, 80, 90, 2000, 10, and 20, what proportion of 25 year-old UK citizens owned (including mortgage) their own homes? What proportion rented? How about 30 years old? 35? 40? I'm excluding non-citizens because there's been a massive influx of immigrants who would initially rent and thereby distort the statistics.

Dare I say even a minimum wage worker could afford to buy in London

I don't know about London, but up here it's very feasible. There are plenty of properties available for £50k or less. Even two bed flats. A 45k mortgage at 3% is £1350 a year in interest - £26 a week - so very affordable for even a singleton on the minimum wage of £17,400 (assuming a 40 hour week). And if there are two of you earning, you're going to clear that mortgage very quickly.

 

[413x]

That's not quite what I was after. Let's try again. In 1960, 70, 80, 90, 2000, 10, and 20, what proportion of 25 year-old UK citizens owned (including mortgage) their own homes? What proportion rented? How about 30 years old? 35? 40? I'm excluding non-citizens because there's been a massive influx of immigrants who would initially rent and thereby distort the statistics.



I don't know about London, but up here it's very feasible. There are plenty of properties available for £50k or less. Even two bed flats. A 45k mortgage at 3% is £1350 a year in interest - £26 a week - so very affordable for even a singleton on the minimum wage of £17,400 (assuming a 40 hour week). And if there are two of you earning, you're going to clear that mortgage very quickly.

I know what you're after. I'm surprised you can't see it without needing a source on this one as it's pretty well documented.

This is from an ifs report for example

 

[Psycho Sonny]

I know what you're after. I'm surprised you can't see it without needing a source on this one as it's pretty well documented.

This is from an ifs report for example

People are buying a lot more things these days. That's why home ownership is down.

Back in the 50's or 60's not many folk had fridges never mind freezers. TV's weren't that common either.

Now you have a TV in every room, tablets, laptops, mobile phones. The idiot on my road with his parents house as free lodgings has already wrote off an Audi S3 so far. Now he's got some fancy cupra r sport hatchback thing.

If only that money was invested and being seen as savings instead of living it up

https://www.thesun.co.uk/fabulous/16084790/girl-retire-35-save-million-dollars/

If everyone took a page out of her book. Anyone and I mean anyone could easily afford to buy a home.

 

[Scam]

Lol, really, even in the eighties people would say 'my house earned more than me today'

Surely that's because that's when the boom started. Right-to-Buy and all that...

I tell you one thing, I would love to buy a huge house in Cornwall (ideally Polzeath). However, I can't afford it - I get paid well, we and my wife both work. Do I think its the governments (whichever that may be) fault? No.

Not their fault, but they're actively making it harder for you to achieve that dream by taxing you more whilst allowing retirees in Polzeath sitting on their £1m houses to pay zilcho.

My parents didn't get hand outs, my mother in law worked 3 jobs at one point to give them what they wanted. Did they moan about it? No. My parents are close to retiring (1 already has). My Dad worked from the age of 16, planned wisely, never out of work, they have done very well. Yes they have property which is now of good value. Why would you expect him to pay more NI, when for the last X years they have been.

The usual sob story about "I worked hard for XYZ". Classic boomer argument, conveniently forgetting all of the statistics presented to them about prices to earnings ratio, average age of FTBs, average debt, average length of time to save said deposit. Even the last one.. lol. Most FTBs in the 90s, how long did they save for their deposit? Couldn't have been long when the average age of FTBs was 24 or some such nonsense. The argument of "we ate beans on toast and never went on holiday"... yeah mate Easy to do when it's for 2yrs. Try it for 10yrs as a FTB now!

What are house prices like in the major cities in Switzerland? Norway? Singapore? Japan? Australia? Iceland? France? Italy?

80% of people in Singapore rent public housing. No-ones pretending this is a UK-only problem. It is, as you quite rightly point out, a problem everywhere between the "haves" and "have-nots".

People are buying a lot more things these days. That's why home ownership is down.

See my point above. Easy as a boomer to buy nothing and not go on holiday for 1-2 years. Try it for 10-15-odd to get the deposit you need for a flat in the South East. You're just trolling anyway. Go find the house price to earnings graph for me, I cba.

 

[tlrBeta]

.

Not their fault, but they're actively making it harder for you to achieve that dream by taxing you more whilst allowing retirees in Polzeath sitting on their £1m houses to pay zilcho.

Actively making it harder, never heard anything so ridiculous.

The usual sob story about "I worked hard for XYZ". Classic boomer argument, conveniently forgetting all of the statistics presented to them about prices to earnings ratio, average age of FTBs, average debt, average length of time to save said deposit. Even the last one.. lol. Most FTBs in the 90s, how long did they save for their deposit? Couldn't have been long when the average age of FTBs was 24 or some such nonsense. The argument of "we ate beans on toast and never went on holiday"... yeah mate Easy to do when it's for 2yrs. Try it for 10yrs as a FTB now!

You sound like a person with the "usual sob story" about entitlement and how unfair the world is, instead of going to do it themselves, better themselves. Next you will be telling me Amazon and Google don't pay their fair share in tax.

 

[mrbazmondo]

People are buying a lot more things these days. That's why home ownership is down.

Back in the 50's or 60's not many folk had fridges never mind freezers. TV's weren't that common either.

Now you have a TV in every room, tablets, laptops, mobile phones. The idiot on my road with his parents house as free lodgings has already wrote off an Audi S3 so far. Now he's got some fancy cupra r sport hatchback thing.

If only that money was invested and being seen as savings instead of living it up

https://www.thesun.co.uk/fabulous/16084790/girl-retire-35-save-million-dollars/

If everyone took a page out of her book. Anyone and I mean anyone could easily afford to buy a home.

If everyone took a page out of her book, wages and prices would go up to compensate for the fact that not many people are working any more, then $1M wouldn't go very far and we'd all have to get jobs again.

Tech in the past wasn't as good, and cost a lot more relatively.

House prices have gone up massively relative to wages in response to the interest rate being so low for so long. This has benefitted anyone that got on the housing ladder prior to around 2000. I bought my first house in 2003, and it was twice the price the previous owners paid in 2000. If interest rates ever go up again its going to screw over anyone that's bought recently when their fixed term mortgage ends a few years later.

 

[413x]

This is a genuine question I'm particularly interested in.

If home ownership continues declining and companies like Google etc keep gaining dominance what do you think is going to happen?

My view would be people get poorer and poorer asset wise. And thus a bigger and bigger burden falls on few people.

More you raise things like NI more. You just pass the burden down.

Let's go extreme and say we get to 20 percent of people owning thier own home at death.

Who picks up the bill for end of life care?
How do we pay for it? To me this pyramid scheme is starting to fall apart.
If everyone is paying landlords rent.. Isn't that end of life care money just paying off the landlords?

Do we just go 'tough luck, fend for yourself?'

 

[Geodude97AD]

What would happen if the UK government were to announce that they're going to introduce a huge tax on second homes (holiday homes, BTL or other). A tax so big that having a second home becomes completely unviable. Let's say this were to come into force immediately, but on a sliding scale so the final tax value doesn't kick in for 5 years.

The government would also force lenders to offer mortgages of up to 100% LTV, meaning that anyone who currently rents should be able to get a mortgage instead.

Mortgage repayments are a fair bit less rent, and the flood of second homes coming onto the market would likely reduce house prices (possible crash?), meaning that most people would have lower mortgage repayments and thus more disposable income no?

As you may have noticed by now, economics and the housing market aren't my strong points - I'm just thinking out loud. I'm sure there are plenty of people who would lose out if this were to occur (e.g those with 2nd homes, people that want to rent, people that will end up in negative equity if the housing market crashes etc), but I imagine these would be in a minority.

Thoughts?

The entitled would have a major hissy fit as their handy money making number would be gone, the younger adults would hardly notice and those with inflated mortgages would be complaining to the Daily Mail about big TVs, super vaping, drunk younger neighbours with nice cars they can't afford, how so unfair!

 

[Quartz]

I'm surprised you can't see it without needing a source on this one as it's pretty well documented.

It's called 'not putting the right words into Google'.