It's about time over-inflated house prices were corrected!!

[tp6626]

This thread is for all those people frustrated by the over-inflated prices of houses, and the apparent difficulty or virtual impossibility of ever getting onto the property ladder. It is intended to act as a protest group, gauging interest in the topic during the lead up the the election in May.

This rant is mainly in relation to the UK property market, but views from around the world would also be very welcome. :)

If this article (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.) infuriates you, then you had the same reaction I did when I read it.

The rate of property price growth has been ridiculous, outperforming inflation immensely. Outperforming quite a lot of things, to be honest, and becoming a very attractive investment opportunity. However, when something looks too good to be true, it generally is (and will always come to an end). That is the ultimate goal of this group - to promote awareness and behaviours / actions that could help to bring an end to this grossly unfair situation.

There is something fundamentally wrong at the heart of the property market. This has been the case for at least 8 years, and probably began back in 1997 when Teflon-Tony and New Labour took office. It is something which is allowing the older, richer generation to sit at the top of an effective pyramid scheme, sapping money from the younger, poorer generation (us). For whatever reason, the property market has been allowed to become an attractive investment opportunity, with little thought for the effect on the younger generation.

Information about any market is difficult if not impossible to discern day-to-day. Conclusions cannot be discerned daily.

This means that most property related headlines are based on one piece of data, paired with an explanatory, biased(bullshit), story. So don't listen to the papers!!

Just look at any house, and ask yourself, what is there to it? Is it really worth what it's currently listed at? Really??? Some land, a few bricks & mortar, piping, electrics... £120,000... Really???

So anyway, simplest way of telling what is going on with the property market, is to observe those whose business it is to put their money where their mouth is. Roughly translated, this means mortgage lenders. Their rates directly indicate their confidence or uncertainty in the future property market. Their rates are directly linked to their exposure to risk. At the moment, they stipulate large deposit requirements to cover themselves from sudden drops in property values. At the same time,
they charge higher interest rates because the risk is higher and they're out there to make money.

What is most important to always keep in mind, is that the media, the Government, and those involved in property investment have a vested interest in talking up the market. They want this bubble to continue the way it has been, because they are generally the ones at the top of the tree raking in the cash at our expense.

So, what can be done about this? Well, here are a few ideas:

a) If you are considering buying (I was), or are in the process of buying, then postpone until at least a month after the election in May. I am fairly certain another price crash is on its way, and the election is a very good impetus for this. Therefore the look of the property market should be very different after May than it is now.

b) Do not take any notice of anyone who says that prices are on their way back up, or are a good investment right now. In fact, go out of your way to challenge or correct anyone who says so.

c) DO NOT BE TEMPTED by any seemingly good mortgage deals of late if you are about to buy. Imagine your horror if you buy a £100k house with 10% deposit and 6.00% interest rate for 5 years, and then by September the house is valued at £70k, you're £20k in negative equity, and 10% deposit mortgages are now being offered with 3% interest rates. You'd be gutted wouldn't you?

d) At the election, use your vote on the local candidate who you think is most likely to bring about positive change in this area.

e) Write to your local MP and candidate MP's, expressing your outrage at the situation and demanding that they take action to sort it out. That's what they're supposed to be there for. (Note: if this group gets off the ground, I will be happy to write and post a template letter to make this easier for people).

g) Share your stories / observations / ideas here.

So, register your interest by joining the discussion, and lets see what happens come May!

[themuzicman]

I don't know about in the UK, but in the US, congress pushed legislation requiring banks to write what they KNOW are bad loans (based upon "neighborhoods" or some such thing), which only served to create a housing bubble by increasing demand from those who shouldn't have mortgages (or at least ones of that size) until those bad loans came home to roost last year, creating the credit crisis (essentially, banks have too many foreclosures, and their capital is tied up in them and not liquid assets) and causing the market value crash.

Thus, I lost 40% of the value in my home, and I am fortunate enough to still have more equity than my mortgage is worth, but I'm in year 10 or 11 of a 15 year mortgage, too.

So, while I'm on the other side, yeah, I'm ticked about creating the bubble, too.

[Monte314]

I own my house outright. I'd like to hear a convincing argument that I should favor government tinkering to arbitrarily limit its market value.

[tp6626]

I own my house outright. I'd like to hear a convincing argument that I should favor government tinkering to arbitrarily limit its market value.
(In the UK at least - I can't speak for the US situation), it has been Government tinkering that has been artificially raising properties' arbitrary market value.

For instance, the Government has actively encouraged the ownership of 2nd (or more) homes by people able to afford it, in favour to standard investments. It has been at the point where people going into banks enquiring about savings & investments, were directed straight to buy-to-let mortgages, whereby the rental income covers the full mortgage amount, and their initial investment covers the deposit. There are extremely good tax breaks on doing this. This has acted to shorten supply of properties, pushing up the average price.

The Government have also allowed an environment in which credit is too easy to acquire by people who can't really afford it by previous standards. So, because they have access to increased funds, they are willing and able to pay increased amounts for the homes they really want to buy.

So, the Government has directly created an environment of high demand and low supply, to the point where the average house price is somewhere in the region of 7-9 times average annual income of one person. Traditionally this metric has stood at between 3 - 3.5x.

It is in effect making the rich richer, at the expense of those (generally younger generation) who are forced to rent from the influx of new buy-to-let investors. And all the time they are renting, they are saving less and less as a house deposit, as the house prices go up and up.

It has been a vicious circle, which has resulted in it now being typical for 'children' to stay living with parents into their late 20's, and not be able to buy a house until their mid to late 30's.

My parents bought their first house when they were 22. My mother didn't work, and my father earned about a half of what I earned at his age (corrected for inflation).

There's definitely something amiss.

Properties are fundamentally overvalued, however painful it may be to consider that when you own your home outright. Just consider it a home, rather than X amount of cash. If you're never planning to sell, then the monetary value doesn't come into it. If you are planning to sell to move house, the a nose-diving market doesn't matter so much because the new home should have also reduced in price.

The only problem comes if you were intending to sell up fully for cash, and find accommodation some other way. In that case, then yes you'd be better selling up before any correction.

But it doesn't change the idea that homes are overvalued.

Just compare them against whatever else you could buy for the same amount of money. 20 odd cars, maybe, 4 or 5 properties in another country, a modestly performing small business...

[ArtistTyrant]

eh, want to reduce government tinkering in private enterprise eh? vote BNP ^_^

[tp6626]

BNP are not an option for me. They don't understand what Britain as a country is, and has historically been for the past millennia or two.

I'm not so keen on Labour or Tory's either though. And not much confidence in Liberals.

What to do. Independent??

At this point, just shaking things up a bit by getting Labour out would please me. I have a feeling it's going to be an election night like the one in 1997. I stayed up all night watching that with my parents then, and I was only 13.

Such an optimistic time... and look how it turned out. :(



Britain is a nation of immigrants, and always has been. It has relied on them over the ages, and I believe it's success is down to its cultural diversity.

The funny thing to watch is when a descendent of the last generation of immigrants happens to be interviewed on the news on the subject, and is up in arms about the latest immigrants who have "come over here taking our jobs".

[Thinker]

This is an interesting subject and one which I have been involved in both from an advisory context and from an industry (economics) perspective. I can only make comment from an Australian perspective and whilst there are different dynamics operating within different international markets some of my comments should be common to most real estate markets.

It is interesting to note that the US, Canadian, UK, some European and some other markets all followed similar price increases through the 1960's to today. There has to be some commonalities in the markets for that dynamic to work.

Firstly as an advisor, I was always perplexed by client's drive to purchase a (geared) second property (after their residence). Whenever I do the numbers on my own home, the returns are just not there when compared with shares. I might add that my own property is in the top quartile of returns for properties in Australia over the last 15 years. There are plenty of indicators around showing returns on property. The most common indicator used here in Australia is the median house price...and this can be carved out right down to individual suburbs and even streets in some cases. There are many problems with focusing on the median house price and as an example, it does not take into account the sums of money spent on renovation. This skues the index upwards and indicates that properties give better returns than they actually do.

If you actually sit down and add up all of the hidden costs of owning a property (as your residence), it makes sense not to own one. I have had the opportunity of doing this for many clients over the years and the results were illuminating. When you add in all of the hidden time in managing, repairing and maintaining the property.....it is a dud investment.

The real value in owning your own property is in the discipline of enforced saving. Inflation and gearing are the sweeteners.

From an investment perspective, the normal wisdom is to spread your investments to reduce risk. Why, if you hold a house worth $350K and no other investments, would you then go and buy another house? This is significantly adding to your risk? Also, the normal way to purchase a second property is to borrow a substantial sum. Gearing is way out there in terms of adding substantial risk to your portfolio. Why not gear against a share portfolio?

You have to have a roof over your head for your lifetime. This means essentially that your lifetime accommodation is a liability from the day you are born. You have to pay for it.
The value of this debt (liability) at any point in time is the discounted value of accommodation for say 80 years.

I am not surprised by the change in the metric of average income to house price.
It was mentioned below that it has gone from 3-3.5 to 7-9. The last time it was 3.5 in Australia, interest rates were 18%, and it was not unusual to have only one person in a household work full time. Since then, interest rates have reduced to (say) 5-6% and the norm is for two people in a household to work. The driver is the way banks calculate your ability to borrow.

Another dynamic that may be unusual to Australia (and NZ) is that we are not building enough houses. We don't have enough people engaged in the building trades to build houses at the rate that we create households. Australia is short around 20,000 houses per year (in supply terms) and this has been so for around 10 years. Our house prices are way above those in the UK and US....we didn't have any crash.

An important thing to realise is that the real value in real estate is the value of the land. The building is an "expense" and will depreciate and needs to be maintained.

So....my advice is...go and rent and invest the money you saved in other investments. You will be much better off. If you want to buy your own house.....that is a lifestyle decision and it will ultimately determine how poor you are.

[Webbster]

I think the same think is happening here in Canada but not to such a ridiculous degree. But this is largely due to the fact that in Canada there is room for the cities to sprawl out, so as long as you're willing to commute, a cheaper home will be available.

eh, want to reduce government tinkering in private enterprise eh? vote BNP ^_^

How exactly is a racist fascist party going to solve the problem?

[Mader]

Back in the old horse and buggy days, men tried to have a house, already paid off, before they married. And this was possible, even if the man didn't build the house himself.

House prices, and house prices compared to average income, have skyrocketed in many parts of the US. In the early 1960's my parents bought their first house, 3 bedroom, 1 bath Victorian, for $10,000. Dad had a blue collar job, Mom stayed home, and they paid off the house in 3 years. Next house they bought was $23,000, around 1970, 4 bedrooms and 2 baths, again, paid off in 3 years. It was a very good neighborhood.

About 15 years ago I bought my first house, 3 bedroom, 1 bath, almost 1/2 acre lot, $68,000. 5 years ago I sold that house for $248,000. Yes, we added a den and redid the kitchen, but not $180,000 worth! 3 years ago, the new owners of the home put it on the market, with virtually no new work (even the same paint on the walls) and were asking $345,000. When I bought that house for $68,000, it could have been paid off in less than 10 years on my income. When I sold it for $248,000 that would have required an income of over $100,000. We didn't talk about property taxes, either (they are high here).

So, yes, houses are still overpriced. The average income in the US is around $50,000, how can anyone afford to buy a house, raise children, and eat.

[tp6626]

So, yes, houses are still overpriced. The average income in the US is around $50,000, how can anyone afford to buy a house, raise children, and eat.
Well in the UK, they simply can't.

I believe it's generating multi-faceted social issues for the short term and mid term future. The culture in the UK now is for children to stay living with parents well into their 20's. A lot of my friends who are 25-26 are only just beginning to move our of parents. In the 80's this would have been thought weird.

Young adults today generally still do have rather childish & immature attitudes compared to those of the past, I believe. I think not getting that responsibility at 16-20 is going to have massive consequences.

Settling relationship-wise is probably delayed a lot, and the arrival of children is getting later too, often well into the 30's.

There are so many intangible downsides to this trend, that I think the sooner it is sorted out, the better.

[Mogura]

I own my house outright. I'd like to hear a convincing argument that I should favor government tinkering to arbitrarily limit its market value.

Correct me if I'm wrong, but aren't property taxes assessed according to the market value of a property (higher market value = higher taxes)?

[pip]

Well in the UK, they simply can't.

I believe it's generating multi-faceted social issues for the short term and mid term future. The culture in the UK now is for children to stay living with parents well into their 20's. A lot of my friends who are 25-26 are only just beginning to move our of parents. In the 80's this would have been thought weird.

Young adults today generally still do have rather childish & immature attitudes compared to those of the past, I believe. I think not getting that responsibility at 16-20 is going to have massive consequences.

Settling relationship-wise is probably delayed a lot, and the arrival of children is getting later too, often well into the 30's.

There are so many intangible downsides to this trend, that I think the sooner it is sorted out, the better.

This subject makes me angry.
Incredible Hulk angry.
And there's not a thing I can do about it. Nothing.

I'm 31 and I live with my folks because even if I save every penny I earn (yes, that means not eating etc...) I still have not a hope in hell of ever being able to afford a place of my own as the 'goalposts' keep moving ever further away.
I outright refuse to rent property because it's a vile waste of what little money I have and I will absolutely not give it to someone to line thier own pockets in return for effectively nothing at the end of x period of time.

And the worst thing of all...
This situation is still thought of as 'weird' and 'unhealthy', as I have no end of snide comments about my situation which apparently is somehow my fault.

:furious:

[thod]

I own my house outright. I'd like to hear a convincing argument that I should favor government tinkering to arbitrarily limit its market value.

The UK is different to the US in that you do not have a free market in real estate. You cannot buy a piece of agricultural land and build a home on it. Everything requires planning permission and this acts a throttle to prevent the supply of housing rising. The UK's population is rising, mainly due to immigration but they do not build the housing to keep up with it. The mechanism is simple enough, the local planning committee, which usually consists of elderly property owners, consider a request to build. Each of them has the same thought, "if we allow more housing to be built here, then demand will decrease and hence the value of my property will decrease."

The average price is only $270,000 nationwide for all residential classes but you would not get a 1 bedroom apartment for that in London and the South East. The price of a piece of land rises several hundred fold if planning permission can be obtained. The actual build cost is not so important.

There is certainly a case for ensuring that housing is affordable because it is not an optional purchase which one can refuse to make, much like food. A nation which uses its planning laws to prevent a whole generation from obtaining housing is not acting for the good of the people, only the good of the current owners. If prices continue to rise, there will be no possibility of earning to buy. All property will then move via the mechanism of inheritance, thus crystallizing society, where the rich and the poor remain in their relative positions.

[tp6626]

All property will then move via the mechanism of inheritance, thus crystallizing society, where the rich and the poor remain in their relative positions.
Even inheritance is limited in the UK.

Inheritance tax ensures that the government take a good cut of any assets at death. It applies to everyone except the royals, and those wealthy enough to practice tax-avoidance and get away with it.

I think inheritance tax is somewhere in the region of 70% of everything over an upper bound, but don't quote me on that. So I think that if my parents died, their fully paid up house would be placed on the market, and me and my 3 brothers would receive only a small amount of what it's worth. I don't think we could keep the house, without buying out the tax-mans 'share'.

Another mechanism at work in the UK limiting inheritance is one whereby invalided people requiring admittance into a nursing home, if they have assets over a certain (small) amount, say a house, have to sell off the house to pay for the medical care costs. People without those assets in the first place are given it for free.

So, someone who's worked hard all their life, paid off all their taxes and national insurance, and paid off their mortgage in full, could lose most of it if they need to go into a care home.

The way round it is for assets to be gifted away at least 7 years before death. But that's an odd subject to broach with people, and I doubt hardly gets done.

[thod]

Inheritance tax ensures that the government take a good cut of any assets at death. It applies to everyone except the royals, and those wealthy enough to practice tax-avoidance and get away with it.

From HM revenue site:
Since October 2007, married couples and registered civil partners can effectively increase the threshold on their estate when the second partner dies - to as much as £650,000

So it only kicks in on estates over $1 million. At this level you would avoid it by setting up a trust fund or some such. The rate is at 40%.

Another mechanism at work in the UK limiting inheritance is one whereby invalided people requiring admittance into a nursing home, if they have assets over a certain (small) amount, say a house, have to sell off the house to pay for the medical care costs. People without those assets in the first place are given it for free.

We have two people, one with rich parents and one without. If the elderly were to use their own assets to pay, neither would pay and neither inherit. If both were to pay for the care through taxation one would gain an inheritance, the other would gain nothing. Thus the man with poor parents is funding the inheritance of the other. I have strong objections to funding another man's inheritance.

The way round it is for assets to be gifted away at least 7 years before death. But that's an odd subject to broach with people, and I doubt hardly gets done.

It's done all the time, but not for tax reasons alone. As a parent ages their infirmities are not of the body alone. They become incapable of managing their own financial affairs and prey to conmen. To avoid this they transfer everything to a responsible child who acts in their interest.

[Nova]

I've given up all thought of buying property for the timebeing.

I moved to London a couple of years ago and although I could afford a deposit, I suspect I would have a very hard time getting a mortgage in today's climate...

[MrFlaneur]

Very good points regards the UK housing market. I pay £440 rent a month for what is essentially a windy shed, on near minimum wage, thats near 50% of my income - poverty by another name. As far as im aware, my "babyboomer" land-lord has another 8 properties!! and he isn't anything special.

I agree wholeheartedly that our generation has been let down. Weve been reduced to nothing more than wage-slave jobbing itinerants. Cant wait for the election.

I think the main problems were stated about 15 years ago and now we are seeeing the reality of those projections - Lot and lots of single households due to family breakdowns and the like. Necessarily supply drys up and new properties arent build for lack of land due to the fact of being a petty little island and having pedantic planning regulations. What you stated about the banks is true also. Bigger mortgages = more profit, more profit equals more cash for the treasury to tuck into
and piss up the wall. Why do banks allow mortgages 5X income?....because the government gave them the green light. Its a colossal scam. I believe democracy as we know it in this country is dead. The governmet doesnt believe in us as citizens only as compliant consumers. But now everythings gone tits up. I think they call it hubris.

Economically, I think this country is living on borrowed time. I read in the times recently that the home office is planning to deal with mass city riots. The end is extremely fucking nigh!! Cant wait!

---------- Post added 02-19-2010 at 08:48 AM ----------

Another point that pisses me off is council tennants.

Spawn a disgusting brood of rat kids, visit the council offices and insist that they give you a 3 Bedroom house worth £150k. Live there for 5 years on the dole while the property is maintained regardless of expense by the council and then use the "right to buy" for £25k. £125k has just been gifted to the scum of the earth for spawning unwanted kids in the world. Its like reverse evolution. Scum prosper while the rest get churned up by the machine.

This country is venal.

Dont get me started on the topic of immigration of cave people. 3 million since 1997 at the last count.

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[tp6626]

Any UK members interested in this topic, PM me and I'll send you some links to various things (groups / petitions) that you can join / sign that, although they're not huge actions, can't hurt none the less.

I did include them in the OP (without thinking), but they were edited out later for breaking forum rules regarding promotion of 'causes'.

So as I said, PM me if you're interested, and that'll keep the 'cause' out of this thread and the forum.

[Mader]

Your inheritance tax is outrageous, but there was a move to reinstate ours.

My point, if I work hard to improve my life, my land, my home, my business, and I cannot give that to my family when I die, why would I make the effort to be successful? A primary motivation for improvement is to leave something better for our children.

[thod]

why would I make the effort to be successful?

Suppose two men are born, one inherits a house the other does not. The first keeps all his income and thus has lots of spare cash to enjoy and invest, the latter must pay the bulk of his income on a mortgage. There is no equality of opportunity there, no level playing field, one was born with a huge advantage. In fact one was born a free man, the other a bonded slave.

The richer one gets richer simply because he has spare money to invest whereas the other must work simply to pay his bills. We see this all the time where the rich get relatively richer and the poor simply tread water. Your position in life is not determined by your skills, but by an accident of birth. A talented poor man will not achieve his station simply because everything is owned, and not by him. If I owned everything, I would never sell you anything only rent it to you, take it or leave it, you are obliged to take it.

The idea of inheritance tax is to help create a more level playing field. Where the assets of the country are not fixed in some feudal hierarchy but become available to the hard working poor man. As with any tax, those who pay will object. If the tax was not collected this way, it must be collected in another. If it were placed on income tax, then you tax the very people trying to get ahead. I can see little reason for income tax to exist but not asset tax, very convenient for the asset rich. So who is that objects to inheritance tax, certainly not those who must pay it, they are dead. The only ones alive to object are the inheritors who are going to receive a free gift. They will receive a large gift or a smaller one if they pay tax. Either way it is something for nothing, reflecting no virtue or characteristic of themselves. If you are a talented and ambitious person, your path to success is blocked because others are obtaining for free what you strive for.

Like everyone you want to be successful because it will improve your life. You want the things money buys or the status. If you live as a miser saving you money to pass down, then you are doing nothing more than attempting to distort the system. You cannot have a fair and meritocratic system whilst at the same time allowing undeserved advantages.

[tp6626]

I must admit I agree with Thod to some extent. Inheritance is not generally a good thing in maintaining social equality.

I think what annoys me is that it is the Government take the money and choose how to spend it.

I would be far more in favour of some sort of forced will scheme, whereby the person decides in their will what charitable causes the assets / cash go to. In that way, at least the person will feel their life has had more meaning than simply working to ultimately feed the Government who may do something totally against the desires / philosophy of the person who created the money in the first place.

Of course, there is really nothing stopping proactive people doing this already. Bill Gates and Warren Buffet are excellent examples, in that they are gradually giving away the majority of their net worth to charitable foundations.

That is what I think should be the ultimate goal or reason why you would ever want to make a small fortune in the first place.

[hubcap]

Suppose two men are born, one inherits a house the other does not. The first keeps all his income and thus has lots of spare cash to enjoy and invest, the latter must pay the bulk of his income on a mortgage. There is no equality of opportunity there, no level playing field, one was born with a huge advantage. In fact one was born a free man, the other a bonded slave.
Please demonstrate to me where it is mandated: "THERE MUST BE EQUALITY OF OPPORTUNITY".

Even if you have perfectly equal opportunity you will never get equal results. Plenty of rich people end up poor and poor people end up rich with the current system. So why should you penalize success by confiscation of wealth by the government?

The bottom-line is that one group uses inheritance taxes and class envy as political leverage and to increase the governments income. There is no idealogical B.S. about equality of opportunity in the halls of Congress.

[Warrior]

Suppose two men are born, one inherits a house the other does not. The first keeps all his income and thus has lots of spare cash to enjoy and invest, the latter must pay the bulk of his income on a mortgage.



Why must the latter do this? Some people save money and pay cash for their house. Others may have a mortgage, but pay it off early. Many others do not spend the bulk of their income on their mortgage. Still others never own a house and rent their entire life, thus avoiding maintenance costs and property taxes they would otherwise pay. There are many options.

My brother inherited our grandparent's house when they died. He's never paid a mortgage payment in his life. He also lives barely above the poverty level. Inheriting a house did him no favors.

[Aronnax]

My brother inherited our grandparent's house when they died. He's never paid a mortgage payment in his life. He also lives barely above the poverty level. Inheriting a house did him no favors.

It did him the favor of getting him barely above the poverty line. If he's barely above the poverty line with no mortgage/rent he'd definitely be below it with rent.

[Warrior]

It did him the favor of getting him barely above the poverty line. If he's barely above the poverty line with no mortgage/rent he'd definitely be below it with rent.

Maybe I can agree, although he's never paid rent either. Ten years of living from friend's couch to friend's couch.

[thod]

Please demonstrate to me where it is mandated: "THERE MUST BE EQUALITY OF OPPORTUNITY".There is no such divine law, nor did I suggest such. For much of history we had a feudal system where no matter what your talents, no matter what you did, your station in life was fixed. Born a peasant, died a peasant. The problem is that this produces inefficient societies in that it prevents positions being filled by the best man for the job. An example from the past is when the lords were also the generals, lousy generals, but only they were allowed to occupy these positions. Such nepotism still exists in many countries and they are much weaker for it. Humans do have an innate sense of fairness. They cannot see why someone should be paid more per hour than them for doing the same job nor why a colleague should be promoted above them due to his family.

Even if you have perfectly equal opportunity you will never get equal results. This was never suggested.

Plenty of rich people end up poor and poor people end up rich with the current system.The single most accurate indicator of where you will end up in life is to look at your father's status. You delude yourself with the American dream. Most poor people end up poor, most rich people remain rich. Pointing out the exceptions to the rule does not change the rule. If we were to deny equality of opportunity, as you suggest, it would be guaranteed and all poor people would remain poor.

So why should you penalize success by confiscation of wealth by the government? Yet without that equality of opportunity there could be no success. Any success would come about because of advantage. You may be a better chess player than me, but you will not win if forced to begin the game a queen down.

You cannot argue the for complete elimination of confiscation of wealth since the state requires money to perform any function at all. The size of the state is irrelevant, it still needs at least some money. Someone has to pay and that means us. Suppose you work a year and make $100k, you pay a proportion to the state in taxes. Another man receives a $100k inheritance from a dead relative. Exactly what is the difference? In both cases, both men have received the same income. I can see no reason to tax it differently based on it source. The concept of inheritance was invented by the rich to avoid income tax. It is the transaction that is taxed. When you earn your wages you pay income tax. You may then use the balance to pay a plumber. The plumber must pay tax on what you gave him, even though you have already paid tax on the original sum. Money is never allowed to change hands without income tax, except in the case of inheritance. Somebody has to pay the tax, if it does not come from one source, it must be imposed on another.

The bottom-line is that one group uses inheritance taxes and class envy as political leverage and to increase the governments income. There is no idealogical B.S. about equality of opportunity in the halls of Congress. I can't help but feel you simply don't accept somebody has to pay. How about we impose 100% inheritance tax and use the money to eliminate income tax. Reduce state spending to whatever that brings in. Now we have a more meritocratic system. Everything you earn, you keep. There are no taxes to prevent the poor, wannabe rich, man from becoming rich. There are plenty of assets up for sale as the government sells them off for a revenue stream. Thus you can use your new found cash flow to purchase the assets you desire.

Exactly why is passing assets, untaxed, to the undeserving a good thing? A talented father with a useless son knows all too well that his son will never make it alone. Thus he has to set up a system that allows that son to retain his privileges unearned and unwarranted. Yet to do so is to create a block on other, more worthy men. That father knows that the only way his useless son can retain his position is if he can set up a system to keep the more worthy down.

My brother inherited our grandparent's house when they died. He's never paid a mortgage payment in his life. He also lives barely above the poverty level. Inheriting a house did him no favors.
Maybe I can agree, although he's never paid rent either. Ten years of living from friend's couch to friend's couch.

So he has gone from being a hobo to a property owner, yet you say that it has done him no favours? Perhaps he should sell it and go back to his itinerant lifestyle. Then you could say "Oh being given $500k did him no favours". I wish people would do none of these favours for me.

[hubcap]

I acknowledge that some level of taxation is necessary in order to pay for government. How much is necessary is an entirely different debate as is what type of taxes should be levied in order to pay for government.

Philosophically taxation is confiscation of private property. One of the foundations of the government of the United States is the recognition of an individual's right to own and possess private property. When you lay illegitimate claim to the property of an individual you begin to erode the foundation of our entire Constitution.

You are suggesting that taxes should be levied in such a way as to direct the outcome of individual's lives by "levelling the playing field". You are simply attempting to perform social engineering by abrogating an individual's right to own private property. Your attempts at social engineering are based on your view of what is "fair".

As far as I am concerned the government has no legitimate right to the private property of an individual upon his death. The wealth of that individual has already been taxed, in some cases more than once. Social engineering is not a legitimate function of the government of the United States. You will not find the authority in the Constitution for social engineering.

[thod]

I acknowledge that some level of taxation is necessary in order to pay for government. How much is necessary is an entirely different debate as is what type of taxes should be levied in order to pay for government.

Philosophically taxation is confiscation of private property. One of the foundations of the government of the United States is the recognition of an individual's right to own and possess private property. When you lay illegitimate claim to the property of an individual you begin to erode the foundation of our entire Constitution.You start by saying you recognise the need to fund the state. If this were done by voluntary contribution alone, many people would choose to freeload. The only way the funds can be raised is by compulsion. Compulsion means taking property, by force if needed. You do not have any absolute right to ownership of anything. The state, in the form of it's courts and juries, may strip you of everything you own. The claim of the state to your property is not, as you say, illegitimate. It is quite legal, and proper, to ensure you pay your fair share, to avoid you freeloading.

You are suggesting that taxes should be levied in such a way as to direct the outcome of individual's lives by "levelling the playing field". You are simply attempting to perform social engineering by abrogating an individual's right to own private property. Your attempts at social engineering are based on your view of what is "fair".All laws are social engineering. If you wish to live amongst us, then you must comply with the rules we have devised to live together peacefully. If you do not wish this, then we shall run you out of town. Who will you turn to to prevent this? Those very people that have made the laws and those who uphold them.

There is, and never was, any suggestion of removing an individuals right to own private property. Most countries have taxes yet still have private property.

As far as I am concerned the government has no legitimate right to the private property of an individual upon his death. The wealth of that individual has already been taxed, in some cases more than once. Social engineering is not a legitimate function of the government of the United States. You will not find the authority in the Constitution for social engineering.If I give you a million dollars, as a gift, that is treated as income and subject to income tax. That million dollars is my residual after taxation. So although I have already paid tax on it, you must too. This does not change if I give it to you through wages, dividends etc. What is being taxed is your income, not my income, not your relatives income, but your income. So if you must pay income tax when I give you a million, why is it so different when a dead relative gives you income. None at all.

I think you will find the constitution does allow for the government to raise revenues.
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;If congress chooses to impose a 99% inheritance tax, it is constitutional.

You seem very selective in what you choose to believe. There is another famous US document that beginsWe hold these truths to be self-evident, that all men are created equal Apparently you think that this is a bad thing, that some should be born lords and other peasants. The same document saysThat whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Thus if the people wish a communist state, they may institute a communist state, the people have the final say and they could ban private property if they so desired.

[plotthickens]

Fascinating replies. My thanks to the posters, this has been a great insight into different markets.

My opinion is: too many freakin' people.

[Mogura]

Not that governments are sincerely interested in helping out Taxpayer Joe, but here goes: Proceeds from a residential property in which the owner does not live for 330 days per year sold or exchanged within 30 years of initial purchase would be taxed at a rate of 70%.

What I would like to see is an end to property speculation, house flipping, etc. which drives up housing prices irrationally and creates housing market bubbles....

[hubcap]

You start by saying you recognise the need to fund the state. If this were done by voluntary contribution alone, many people would choose to freeload. The only way the funds can be raised is by compulsion. Compulsion means taking property, by force if needed. You do not have any absolute right to ownership of anything. The state, in the form of it's courts and juries, may strip you of everything you own. The claim of the state to your property is not, as you say, illegitimate. It is quite legal, and proper, to ensure you pay your fair share, to avoid you freeloading.
I would suggest you read John Locke in order to gain a better understanding of the purpose of government as he had a great influence on the Founders of the United States. Perhaps reading Thomas Jefferson's writings would offer you some insight into the principles upon which the government of the United States was founded.

Government has no other end, but the preservation of property. - John Locke

Man... hath by nature a power.... to preserve his property - that is, his life, liberty, and estate - against the injuries and attempts of other men. - John Locke

All laws are social engineering. If you wish to live amongst us, then you must comply with the rules we have devised to live together peacefully. If you do not wish this, then we shall run you out of town. Who will you turn to to prevent this? Those very people that have made the laws and those who uphold them.
In the first instance you couldn't be more wrong. Laws are intended to protect individual liberties. The law that makes murder illegal is intended to protect the right each individual has to life. The laws that make theft and fraud illegal are intended to protect the right to own property.
The end of law is not to abolish or restrain, but to preserve and enlarge freedom. - John Locke
There is, and never was, any suggestion of removing an individuals right to own private property. Most countries have taxes yet still have private property.
No, your suggestion is to confiscate private property upon one's death thereby accomplishing the same thing. If I choose to give my property to my heirs upon my death the government has no legitimate claim to my property nor to override my wishes on how I want to dispose of my property.
If I give you a million dollars, as a gift, that is treated as income and subject to income tax. That million dollars is my residual after taxation. So although I have already paid tax on it, you must too. This does not change if I give it to you through wages, dividends etc. What is being taxed is your income, not my income, not your relatives income, but your income. So if you must pay income tax when I give you a million, why is it so different when a dead relative gives you income. None at all.
Because gift is taxed does not make the tax legitimate. Because it is legal to tax a gift does not make it legitimate, it simply makes it legal.
I think you will find the constitution does allow for the government to raise revenues.
If congress chooses to impose a 99% inheritance tax, it is constitutional.
Where have I suggested the government doesn't have constitutional authority to raise revenues? As far as what is constitutional - only the Supreme Court can say what is constitutional. Congress frequently passes legislation that is unconstitutional.

You seem very selective in what you choose to believe. There is another famous US document that begins: We hold these truths to be self-evident, that all men are created equal.......Apparently you think that this is a bad thing, that some should be born lords and other peasants. The same document says Thus if the people wish a communist state, they may institute a communist state, the people have the final say and they could ban private property if they so desired.
It seems that you are very selective in your reading:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.
The legitimate function of the government of the United States as instituted by the Founding Fathers was to "secure these rights". The people may not institute a communist state, nor do the people have the final say and they cannot ban private property. You seem to be working under the misconception that the United States is a democracy..........which it clearly is not. Democracy is nothing more than "mob rule" and the Constitution was written and adopted because it prevented that very thing. It prevented the majority from abrogating the rights of the minority.

Government is the servant, not the master.

[Warrior]

So he has gone from being a hobo to a property owner, yet you say that it has done him no favours? Perhaps he should sell it and go back to his itinerant lifestyle. Then you could say "Oh being given $500k did him no favours". I wish people would do none of these favours for me.

He also now has a $30K and growing property tax bill that he can't pay. He really is worse of financially now. I have advised him to sell it, but he will not do so. However, the bigger point is that inheriting something is not always a blessing to someone.

[Aronnax]

He also now has a $30K and growing property tax bill that he can't pay. He really is worse of financially now. I have advised him to sell it, but he will not do so. However, the bigger point is that inheriting something is not always a blessing to someone.

If he was smart he would have added a separate entrance and sublet the master bedroom. It'd cover the property tax and generate a small, steady income.

A blessing that isn't taken full advantage of is still a blessing.

[thod]

By declaration, bill, and constitution shall the rule of three be known. For the Jefferson did make it thus and he saw that it was good.

[hubcap]

By declaration, bill, and constitution shall the rule of three be known. For the Jefferson did make it thus and he saw that it was good.
Sarcasm isn't really a very convincing response when debating issues of substance.

[tp6626]

Government has no other end, but the preservation of property. - John Locke

Man... hath by nature a power.... to preserve his property - that is, his life, liberty, and estate - against the injuries and attempts of other men. - John Locke
All very nice quotes, but I'm not sure really what they have to do with your constitution, other than that someone may once have said that some works by the same author may have "influenced" Jefferson in some way. Operative words being "may have", not, "therefore you can definitely assume the same meaning in the constitution" because of it. That's trying to twist it to make it say what you want it to.

Even in light of that quote though, it still doesn't say anywhere that the aim is to maintain the value of peoples properties (it just says that they should be able to retain property). I'm not even sure if he's talking about preserving property in one persons ownership, or just generally the government preserving and maintaining property / land in a habitable condition (i.e. space, infrastructure, amenities etc...).

I bet Jefferson would be spinning in his grave seeing the inequality in the US today.

I still don't understand though, how you can argue that it is good or fair that the richer generation to buy up the supply of houses, forcing the poorer generation to continue to rent, as the rich get richer and the poor get poorer.

Because that's what's happening in the UK.

[hubcap]

All very nice quotes, but I'm not sure really what they have to do with your constitution, other than that someone may once have said that some works by the same author may have "influenced" Jefferson in some way. Operative words being "may have", not, "therefore you can definitely assume the same meaning in the constitution" because of it. That's trying to twist it to make it say what you want it to.
You don't have to take my word for it. Familiarize yourself with the writings of the Founders of the United States. Read the Declaration of Independence. As I have already pointed out in my earlier post, the Declaration of Independence points out the reason the Founders believed governments were instituted among men:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men,
In order to SECURE INDIVIDUAL RIGHTS.

Even in light of that quote though, it still doesn't say anywhere that the aim is to maintain the value of peoples properties (it just says that they should be able to retain property). I'm not even sure if he's talking about preserving property in one persons ownership, or just generally the government preserving and maintaining property / land in a habitable condition (i.e. space, infrastructure, amenities etc...).
If you deprive someone of their wealth you are by definition depriving them of their legitimate ownership of property.

If you will familiarize yourself with the writings of the Founders as well as John Locke, Thomas Paine and a few others, you will have no doubt what he's talking about.

John Locke - (29 August 1632 – 28 October 1704), widely known as the Father of Liberalism, was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered the first of the British empiricists, he is equally important to social contract theory. His work had a great impact upon the development of epistemology and political philosophy. His writings influenced Voltaire and Rousseau, many Scottish Enlightenment thinkers, as well as the American revolutionaries. His contributions to classical republicanism and liberal theory are reflected in the American Declaration of Independence.
I bet Jefferson would be spinning in his grave seeing the inequality in the US today.
I am quite certain you are mistaken. Jefferson wasn't concerned about inequality of wealth. He was concerned about liberty. I bet Jefferson would be spinning in his grave seeing the encroachments on liberty made by the federal government.
I still don't understand though, how you can argue that it is good or fair that the richer generation to buy up the supply of houses, forcing the poorer generation to continue to rent, as the rich get richer and the poor get poorer.
Life is not fair, nor is there any reason for me to believe that some new law is going to make it fair. People don't get what they deserve, they get what they get. If poor people can't afford to buy a house why should they buy a house? What is wrong with renting? Home ownership isn't a right.

The recent mis-guided attempts by our government to enable unqualified people to purchase homes has been an unmitigated disaster and the citizens of the United States will be paying for it for decades to come.

I am not suggesting that we ignore the challenges faced by poor people, but we shouldn't attempt to raise them up by bringing others down.

[tp6626]

Life is not fair, nor is there any reason for me to believe that some new law is going to make it fair. People don't get what they deserve, they get what they get. If poor people can't afford to buy a house why should they buy a house? What is wrong with renting? Home ownership isn't a right.I would say that one of the primary roles of the government is for it to provide homes for its people. A home is not the same as a house. Once it has provided one house, as someones home, I believe there should be measures / laws in force which prioritise the next person getting the next house, rather than the first person gets another house ad infinitum.

How is that fair?

[hubcap]

I would say that one of the primary roles of the government is for it to provide homes for its people.
Please elaborate on the reasoning you have used to arrive at this conclusion.

[pip]

Government serves the people.
People need somewhere to live.
Therefore the Government in the interests of serving its people should provide them with a place to live so they can be comfortable, healthy and productive as opposed to homeless, bitter, resentful, unwell and non-productive.

You don't own your own property by any chance do you?

[hubcap]

Government serves the people.
People need somewhere to live.
Therefore the Government in the interests of serving its people should provide them with a place to live so they can be comfortable, healthy and productive as opposed to homeless, bitter, resentful, unwell and non-productive.
Your reasoning is circular.

You don't own your own property by any chance do you?
Nope, I'm one of the guys with a 30 year mortgage.

[pip]

In what way is that circular?

The government as stated by its own mandate serves its people.
And in order to do so, it needs to house them otherwise they cannot be productive citizens and in turn support the government.

It is simple cause and effect.
A needs to happen to allow B to happen, which then allows you to have more of A, which then gives you more B etc etc.
It's really not a difficult concept to grasp.

[tp6626]

Please elaborate on the reasoning you have used to arrive at this conclusion.
Shelter, is a pretty basic human need. One that the government should make available to its people. I'm not saying freely available for everyone, I'm just saying reasonably available, so that the majority of people can afford to buy their own shelter.

I think this was, and has always been one of the original intentions of government. At least our UK government anyway.

Only in recent times (last 15-20 years), has this changed.

What we have now is a constricted supply of property where buy-to-let landlords can kind of psuedo-own properties, and syphon off rent from the people living in them. So they are winning on two fronts there 1. They're getting a regular rental income which easily covers the mortgage and will eventually buy the asset for them 2. They're getting the capital gained as the houses price increases.

This is not an isolated thing, it is a massively problem. The number of buy-to-let home loans rose from 29,000 in 1998 to 850,000 in 2006, (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.) and it was predicted to double again by 2011 (hence the bubble would have continued as 1.6million houses are removed from normal supply). There are only about 25million households in the UK.

That jump from 1998 to 2006 represents a 40-fold increase in people buying their 2nd (or more) home(s). It caused house price inflation (a metric 'cunningly' left out of the UK's standard gauge of inflation) to sky-rocket, and lots of people who happened to be in the right place at the right time, to make lots of money at the expense of the younger generation who were at the wrong place at the wrong time.

You think stealing from your children is a good way to set them up for the future?

The government controls inflation (in the UK the BOE has strict targets to keep it below 2.0%). If house price inflation had been included in this metric all along, then none of this would have happened, and house prices would now be at a far more sustainable levels, and I dare say much of the economic troubles we are now all suffering, would not be quite so bad.

(I can't speak for what's happened in the US, because there are different dynamics at play there, but this is pretty much exactly what the UK has experienced since 1997).

[thod]

I think there is some confusion over the word property when used by Locke. It did not mean real estate nor was it confined to other tangibles. Rather it meant the whole set of circumstances in which an individual had an interest. Thus the freedom to act was also property.

The problem that the those who quote Locke, and the whole libertarian movement, has it that is a based on a restricted model. It attempts to define moral actions in the context of that model, the so called "infinite bounty of nature". As an intellectual exercise, that is fine, the problem comes when you assume that the simplified model is the real world.

Now that you have mastered the principles in the simple model, it is time to go beyond libertarian thinking, and become more sophisticated. You see, there is not an "infinite bounty" out there. Every action you perform impacts others and vice versa. When I lay claim to a piece of land, as my right, I am placing an obligation on you not to use that land. I do not compensate you in way for that obligation. Since the ownership of the land was established prior to your birth, you cannot be party to the agreement that established that ownership and thus are not bound by the agreement. We live in a world of limited resources and contention for them is the rule. Someone claiming a portion of your land is not showing violence to you. You are showing violence to him by excluding him.

[hubcap]

In what way is that circular?
The government is "the people". You are probably familiar with: government of the people, by the people, for the people.

So your reasoning fundamentally states: The people are responsbile for providing the people with housing.

The flaw in your logic (as far as I am concerned ;)) is that like many others you view the government as some benevolent 3rd party that is supposed to do all these wonderful things. The government is actually just an extension "of the people".

In my opinion the problem with your view is that you are expecting the "government" to provide something. The fact of the matter is that government doesn't make anything to provide. Government simply collects money from the taxpayers and re-distributes that money to others via the bureaucracy, while charging a fee. The end result is less $$ spent on the goods or services than was taken in by the government so you end up with a net loss of $$.

The other problem is that you are basically expecting the government to take money away from people to give to other people who may not have as much money. So in essence the "government" is deciding that those people don't deserve the fruits of their labor as much as someone else deserves them.

[tp6626]

The government is "the people". You are probably familiar with: government of the people, by the people, for the people.

So your reasoning fundamentally states: The people are responsbile for providing the people with housing. Nope, that doesn't work at all.

That is what should be happening, but when the circle splits down into various social strata, then his reasoning is not circular in the way you are proposing. It's a valid point.

The flaw in your logic (as far as I am concerned ;)) is that like many others you view the government as some benevolent 3rd party that is supposed to do all these wonderful things. The government is actually just an extension "of the people". Nope, it's just a misrepresentation of the people at the moment. If it would just stopdoing these 'anti-wonderful things' that would do me.

In my opinion the problem with your view is that you are expecting the "government" to provide something. The fact of the matter is that government doesn't make anything to provide. Government simply collects money from the taxpayers and re-distributes that money to others via the bureaucracy, while charging a fee. The end result is less $$ spent on the goods or services than was taken in by the government so you end up with a net loss of $$. Again, there is nothing wrong with my view. There is something wrong with the way the government is ignoring house price inflation in its calculation of the inflation which it limits in order to provide a stable economy. It needs to include house price inflation in with this measure, and control the economy as it currently does, but with that in mind too.

It is self evident that the economy is not sustainable when this situation has been allowed to occur. Just wait and see, the economy is going to the wall.

The other problem is that you are basically expecting the government to take money away from people to give to other people who may not have as much money. So in essence the "government" is deciding that those people don't deserve the fruits of their labor as much as someone else deserves them.Again, no this is not what I am 'expecting'.

I am expecting the government to control the level of inflation on house prices, so that buying multiple houses makes as much economic sense to someone as does buying hundreds of tons of rice, say.

Your typical buy-to-let investor wouldn't go out and buy 100 tons of rice, because it doesn't offer a good enough return for them (because it is inflation controlled), as compared to house prices (which are not inflation controlled).

Ergo, the current trends in buy-to-let investments in this country are an unfair and unsustainable system.

[hubcap]

I am expecting the government to control the level of inflation on house prices, so that buying multiple houses makes as much economic sense to someone as does buying hundreds of tons of rice, say.

Your typical buy-to-let investor wouldn't go out and buy 100 tons of rice, because it doesn't offer a good enough return for them (because it is inflation controlled), as compared to house prices (which are not inflation controlled).

Ergo, the current trends in buy-to-let investments in this country are an unfair and unsustainable system.
Demand in the market will determine the price. Not the government.

[realJim]

Housing prices. What a rip!

Tulips were a bubble market in the 1600's. Speculation pushed a contract to 10 times the annual income of a skilled craftsman. Greedy stupid people. It seems that everyone wants money for nothing. The same has happened with house prices. Now, the correction is happening. Good!

My first house I bought was near Detriot Michigan for $48,000. Making slave wages, I was house poor. I worked on the house, built a garage, finished the attic to make a nice master bedroom, and remodeled the kitchen and bath. In 3 years I sold it for $72,000. That seemed a fair return on investment.

Your house should be a shelter and place to nurture yourself and your family. Not a get rich scheme. Prices should reflect what you can afford.

[tp6626]

Demand in the market will determine the price. Not the government.
Why then does the government act to limit inflation below certain targets linked to the the RPI and CPI?

Why do governments ration certain commodities?

[hubcap]

Why then does the government act to limit inflation below certain targets linked to the the RPI and CPI?

Why do governments ration certain commodities?
It depends on which government you are talking about. Inflation is generally considered undesireable by most people because it erodes the value of current accumulated wealth.

As far as government rationing you'd have to be more specific in your question before I could answer it.

[tp6626]

It depends on which government you are talking about. Inflation is generally considered undesireable by most people because it erodes the value of current accumulated wealth.

As far as government rationing you'd have to be more specific in your question before I could answer it.
Re rationing: Food is occasionally rationed, when it is in short supply. Why do they do that?

[pw242]

I agree with the OP. More and more people in their 20s and 30s are realising we have been utterly screwed by our parents. They've sold off the national assets, borrowed more, granted themselves unfunded benefits, literally poisoned the earth, and left us the mess.

It's unlikely we can do much democratically. The boomers are a big bunch and will be around for a long time.

But we can just walk away and let them stew. So... which country to flee to?

[tp6626]

It's unlikely we can do much democratically. The boomers are a big bunch and will be around for a long time.

But we can just walk away and let them stew. So... which country to flee to?
It would be a brilliant thing to do, that, wouldn't it!

Just to say, no, fuck this, we're all off to live elsewhere. You lot do what you like with the mess you've created. :)

[Aronnax]

I agree with the OP. More and more people in their 20s and 30s are realising we have been utterly screwed by our parents. They've sold off the national assets, borrowed more, granted themselves unfunded benefits, literally poisoned the earth, and left us the mess.

It's unlikely we can do much democratically. The boomers are a big bunch and will be around for a long time.

But we can just walk away and let them stew. So... which country to flee to?

Australia and Canada have a lot of extra room and have taken pretty good care of their countries. It depends on your taste in weather, personally I prefer it hot.

[tp6626]

I just got into a fb argument with some dimb bint about why house prices in Britain are overpriced.

She tried to tell me that I was a conspiracist, and that her owning more than one home was not really her fault.

Ms X:

Thomas - I own more than one home - we had to move and I didn't want to sell my other property at the bottom of the market - so I let it out to out to friends - who because the banks are not lending at the moment where not in a position to buy. This is a perfectly symbiotic relationship. They love the house ad look after it - and we get the best tenants in the world - whilst of course we have done a tenancy agreement - the whole thing is really done on trust.

Conversely I think it is the professional landlord who is keeping people off the ladder not the odd "rent to buy" landlord. We have entered into this agreement for convenience not for profit and unless something terrible happens we will not sell their house form under them - although I will probably now sell the house when they are ready to leave.

Ms Y:

Thomas you are talking bollocks...'deliberately set it up to dleiver it into the hands of the older generation' not true I know plenty of people of my age in housing need who for one reason or another never bought into the whole owning your own house philosophy or simply had a life that was never settled enough to do so at a young enough age. No conspiracy there to deprive younger people of homes....it a general lack of affordable housing in both sectors that this governemnt haven't addressed fully and a legacy of Thatcher's sell em cheap policy, retuning no money to the social housing market.

tp's response:

I'm no conspiracy nut. There has been (intentional or not), a major change since 1997 which made buy-to-let a 'too good to miss' investment opportunity for anyone with some spare cash.

"Buy-to-let boomed under Tony Blair, with the number of buy-to-let mortgages growing from 28,700 to 1.1m since 1998."

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

Ok Caron I accept that you didn't go into it 'looking' to make a profit from owning multiple properties, but in light of the crash, you made a bad investment decision when you bought the original house. Generally when people make bad investment decisions, they lose either the asset, or an amount of capital when you sell. That's just tough luck.

You were lucky that the regulations allowed you the opportunity to be able to rent that house out to save yourself losing a lot of money.

All of this property mess has been caused by a lack of supply of housing, and 1.1million homes in the hands of buy-to-let landlords, is partially to blame for that. There are only 25million households in the UK, so 1.1m is a very significant portion of that.

It has been a vicious circle:
1. Person buys 'extra' house, rents out to potential FTB.
2. Potential FTB pays rent to landlord.
3. Landlord makes a substantial profit withwith FTB's potential house deposit.
4. Landlord needs somewhere to invest that profit, and so opts to buy another house as the best performing investment (i.e. back to step 1).

Net effect is that landlords amass properties, restricting supply, increasing price, and putting them further and further out of reach of FTB's.

Which is why average house is 6-7 times average salary, but in stable periods is 3-3.5 times average salary.

That isn't an exaggerated account of what's been happening since 1998. And I'm not 'blaming' anyone here for selfishly aiming to do this. What has happened is that these landlords have followed the most economically sensible route open to them, and it's ended up having this effect.

That route should NEVER HAVE BEEN ALLOWED to be open to anyone in the first place. Then there wouldn't have been a bubble, and no crash.



I eagerly await the replies (although it's less civil there; far less likely to get satisfactory responses of the ilk we're used to on INTJf). :D

[Yhor]

Our family (both of my parents' families) is in the home leasing business in Georgia, Alabama, Maryland, Florida, and Texas. I work with a guy now who is also in this business. In the US, it seems to work. There's not much in the way of a shortage like in the UK, because your country is very old and not nearly as large. In some localities here, there may be shortages, but nothing like it is there.

Here, you can get cheap homes often, fix them up and sell, lease, hold for tactical purposes (show a loss, hear of a developer coming nearby, etc..); a lot of possibilities. It's a much safer investment than the stock market, if you do it right.

If it got to a point of a real shortage, I'm not sure how I'd feel; I guess it would depend on my own situation. To deny the right to invest with property seems a bit out of whack to my beliefs. I believe having the freedom to make a living this way to be higher than not being allowed to because someone else can't afford the initial investment.

[Tristan]

Let's put the US and UK's problems together for a change.It has been a vicious circle:
1. Person buys 'extra' house, rents out to potential FTB.
2. Potential FTB pays rent to landlord.
3. Landlord makes a substantial profit withwith FTB's potential house deposit.
4. Landlord needs somewhere to invest that profit, and so opts to buy another house as the best performing investment (i.e. back to step 1).

Net effect is that landlords amass properties, restricting supply, increasing price, and putting them further and further out of reach of FTB's....And for the US, here is Warren Buffet's reasoning in a Berkshire shareholder letter (2009 (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.))... with his customary wit ;DThe [manufactured housing] industry is in shambles for two reasons, the first of which must be lived with if the U.S. economyis to recover. This reason concerns U.S. housing starts (including apartment units). In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news.

People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses.

There were three ways to cure this overhang: (1) blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program; (2) speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers or; (3) reduce new housing starts to a number far below the rate of household formations.

Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.

It's an interesting mirror-inversion. I want to point out that US housing demand seemed buttressed as it failed, for years, to react to massive supplies, whereas tp says that in the UK, supply was constricted artificially in a scenario where FTBs basically competed unnecessarily with older property owners. Different causes with identical effects?

[tp6626]

Different causes with identical effects?
Yes, almost exactly. The main difference being, though, that 'new starts' as Warren calls them, are extremely limited in the UK. We don't have a massive amount of land like in the US, and our planning laws are such that it is extremely difficult to gain planning permission to even be able to build new houses.

Planning permission is so scarce, that you could buy a piece of land for £3000-£5000 which will never get planning permission, but an identical piece of land with planning permission could be "worth" 20 times that. Getting on for £60,000.

Nearly every town and village in the UK is surrounded by what is called "green belt" land, which is extremely tightly controlled with the aim of preventing urban sprawl. There is virtually zero chance of developing it at all.

Then we have "brownfield sites", which are easier to develop, but the planning authorities govern what type of development may be placed there. And those authorities are largely (seemingly) based on the particular officials whim. He / she may believe that your architects plans don't fit in with the surrounding community, and so will reject it. Or there may be objections from the local community. There is a lot of history in the UK, and a lot of NIMBYism with people trying to protect that.

So I think that's the main reason the UK has reacted to the same problems in this very different way.