Stamp Duty should be abolished and replaced with an annual tax on the value of the property – essentially a higher council tax.
The call has come from the Organisation for Economic Co-operation and Development.
Its report is critical of Stamp Duty, which it says discourages mobility among home owners by raising the cost of moving.
The OECD also points out that an annual property tax would, over the years, raise more than Stamp Duty. It wants the new tax to go partly to local councils and partly to the Treasury.
But David Newnes, estate agency managing director of LSL, was not impressed. He said: “Swapping a single payment tax for one that continues indefinitely will have an adverse effect on prices.
“Property buyers can’t be hoodwinked by a short-term saving that is so clearly a poisoned chalice. An ongoing tax on property would put the brakes on demand even further.”
The EOCD report is also critical of the planned cuts to housing benefit, saying that they will cost more than they save, and stifle economic growth.
It calls for housing benefit to be maintained at its current levels, to support low paid workers as they search for jobs further afield.
The report warns that otherwise they will be restricted to poorer areas with few jobs and become locked in a cycle of worklessness.
Comments
(Look what's happening at the moment. The banks are not lending - and house prices are falling. This is a GOOD thing.)
Mike, demand for property is still there and just because the banks aren't lending right now, just means that when they open the flood gates of credit again, property prices will rise again.
The Dutch government embarked on a huge building program in the early 90's to lower unemployment and get more people into jobs, kick-starting the economy. My uncle (A Dutchman) lost out big time as all these surplus properties killed the Dutch house prices, leaving him in negative equity. Supply & demand is the only thing that can control house prices. Sure by limiting credit, you are effectively reducing the demand with people unable to find a loan, but they would buy if the opportunity of a loan came about. It's like a coiled spring at the moment.
Forget about how much more competetive we would be globally as this will never happen. Immigration, increased life expectancy, family break-ups increasing demand for more properties, coupled with the lowest level of house building since the 1920's means that another housing bubble in the future is a certainty.
In response to Wesbland. Look up Quantitative Easing. I accept that it is possible to just print money, but it is wrong as it drives up inflation. Mervyn King said yesterday that inflation could rise to 5% this year. Could this have anything to do with the amount of money they were printing last year?
@Jakob
You said: "Mike. Why shouldn't property go up? Do we not expect wages to go up. Does our council tax go down? "
Of course property should go up in line with inflation (wage inflation). What I am talking about is the free for all that went on in various parts of the country between 1997 and 2007. 2 up 2 down terraces in Newcastle going from 14k to 114k in a few short years.
Cottages in Devon going from 60k in 1998 to 300k by 2007. Etc.
All this does is make us more uncompetitive as a nation. If it costs (particularly young people) a fortune to put a roof over their head, they must have high wages to pay their high mortgages. It might make people 'feel good', it might make people feel more wealthy - but the gains one makes on a property are paid for by someone else taking on more debt.
Look what's happening at the moment. The banks are not lending - and house prices are falling. This is a GOOD thing. The more they fall the better. Just think how low our wages could be if housing was CHEAP. Think how easily we'd compete in a global economy then.
" You can't create money out of thin air!!! "
Sorry Chris but that is exactly where money comes from
Money is created by Debt. The Banks Create it. and without Loans and Mortgages being created there is no money.
And if you think they need savings to cover what they are lending you are sadly mistaken. Google Fractional Reserve Banking
Dont intend to explain fully here so if you want to learn more then I suggest you Google the following
Money is created from debt
Loads of articles and videos to watch.
You will be amazed
You can't create money out of thin air!!!
Imagine you have half drank your pint of beer and I refill your glass with water. Okay, I might get a slap, but your left with a crap watery pint. It will now take you twice as many pints of this stuff to get you drunk!
The same goes for money. You print more of it and it dilutes the money already in circulation and the new printed money is not pinned to anything, only the paper it is printed on.
Even your bank. It needs the money to lend in the first place. They are not just numbers on a screen, they are actual pounds in their account and this money will run out if they keep on handing it. When its gone, the bank needs to borrow more from another bank and pay interest on what they borrow.
We need to stop think of ways to keep on taxing this country. We are already one of the most heavily taxed nations in the world and if it keeps getting worse, people like me that own a business will think, what the hell, I'll close everything down, lay off the staff and go on the dole like everyone else and watch Sky Sports!! Then what, no one is earning anything to pay taxes, so the government can't pay people to sit at home and we all die of hunger.
We need to go the opposit way. Slash government spending with things like unemployment benefit for people unemployed for more than 1-year, get rid of quangos etc. and then halve income tax & VAT. Less money needed by the government means less taxes, which means more people have money in their pockets to spend, invest etc. means more jobs, means more tax paid to the government!
On the subject of unemployment benefit, if this is phased down on month 12 by 10% and month 13 by another 10% and so on, people start to become desperate and will actually do something to find a job!! No really they will. There are jobs out there that people can do, but people don't because it is benieth them! Grab a bucket and a sponge and start cleaning windows, work the farms etc. Start a business like I did, when I became redundant, be succesful and then start creating jobs for others. When people are too comfortable to sit at home and do nothing!!!
If anyone really wants to understand how this country needs to get out of this mess, they need to watch this Channel 4 documentry. It changed my understanding completely and is essential viewing: http://www.channel4.com/programmes/britains-trillion-pound-horror-story/4od#3153186
Keynes: I am sure others want to ask, but are too polite.
What on earth do you mean?
There's obviously a valid point in there somewhere, but it has eluded me and I surmise many, many more...
Scrap stamp duty, tax profit on sale, curent system taxes whatever loss or profit but the buyer, put the onus on the seller. They would pay less for what they buy, faltten the market but bot help kill it as stamp duty does, making it harder for those at the bottom end that needs activity, needs help, however small a %, it would help.
Chris. I think you misunderstood me
Let us think about how money is created.
If I go into High Street Banking Corporation and say I need £100,000 to buy a house down the road, they , subject to valuation credit checks etc., simply credit my solicitors account with £100,000 and enter this amount in their books as a debt.
No Gold or Silver changes hands.
That £100,000 then is passed to the Vendor who can spend it on what he likes. The £100,000 which is now washing around the country has been created from nothing except a book entry.
The Bank charge me interest at around 4-5% which I must go to work to pay each month for them entering a line in a ledger.
Their books still balance because against this £100,000 they have a charge on a property worth more
The Banks however penalise anyone who wants to borrow 95% with high Interest Rates which of course is the major obstacle to jumping on the ladder when Mum and Dad say " sorry we havnt got 30 grand to lend you"
Now let us imagine that instead of allowing them to issue the money the Government uses its own Banks to do so.
The Government (read taxpayer) could still borrow the money each day at LIBOR rates of currently around 0.75% and lend it to first time buyers only offering 95% loans at say 2% fixed for three years to help them get started
This would enable thousands of 20-30 year olds currently stuck at home to get on the housing ladder and in turn this would kick start the second time/third time buyers into moving
The Kitchen, Bathroom, Tiling, Landscaping, Furniture and Carpet, household goods suppliers would all see increased business and VAT and Income Tax receipts would improve bringing in more revenue to the Government (read taxpayer)
This is the way the Government could inject real money into the economy and control the supply of it rather than leave it to the Banks who may well at present take the view that they are better giving it to their stock market gambling departments rather than to less profitable first time buyers
The creation of money and the revival of the market is thus within the power of the Government but some may doubt that a housing recovery is what they actually want to see
Westbland. You really need to learn more about economics mate! You can't just go around printing money. It's not creating wealth; it's devaluing the value of money. Go to a photo copier, copy a £10 note and try to spend it! It's worthless as it's based on nothing but the paper it’s printed on. When the government does this, it's also based on nothing and while you might be happy to accept it, the currency is worth less abroad and you will have to hand over twice as much for your oil, gas, and everything else we import. It also leads to hyper inflation where you will need a wheel barrow of money to buy a loaf of bread. Asset values will increase in relation to money, so an average car will cost millions of pounds and houses will cost trillions, but in real terms, no one will be wealthier!
Back on topic. Taxing property at a greater rate forever as apposed to a one hit tax for home buyers will start the revolution!!! Poll tax crisis all over again! It will have no effect on house prices because people need to live somewhere and unless it drives all the buy-to-let investors into selling their property, which creates an over supply problem, the prices will stay where they are!
BTL investors, however, won't dump their properties because like the council tax, the tenants are paying it and if tax on property rises, rents instantly go up, so the tenants get hit again. As tenants have little choice to go elsewhere with huge shortages in housing stock, they bite the bullet. Furthermore, most of the tenants are on housing benefits that can't afford anything, so when rents increase, so does the burden on the government, who then has to pay its own tax, plus the cost of administering it! Doh.
The problem we all face is that this country is already over taxed with a big fat public sector that needs more and more tax to feed its fat lardy arse. It needs to go on a huge diet of public sector cuts, to reduce its dependency of our taxes. Then, with less taxes to pay,(Not more) business owners like myself, might actually have some spare cash to invest into expanding and taking on more staff, who will in return pay more tax on their earnings and generate the government more wealth. It's a win, win for everyone, well away from more poll tax riots etc.
By the way, off setting tax against bank interest paid on rental property is no different than a company that offsets its losses from its gains to reach a profit figure to be taxed upon. If a private individual is deprived from this right, they simply set themselves up as a self employed business and get the tax back that way!
The cost of housing is set by the ease & cost of bank loans coupled with the demand for property. House prices are not falling in the way they did in the early 90's because of under supply and because nothing is being built, this will remain unchanged, unless all lending stops, but most people will simply sit tight until it starts again!
I also wish the sad pro-house price crash lobby visiting this site would sod off and allow housing industry professionals to discuss policy between ourselves. If you’re not in your own house already, get over it and get saving because we all know that once you’re on the ladder, you'll soon change your tune and do your best to drive prices up again. And if I'm wrong, you’re clearly a communist and shouldn't be living in a free society, which is what Britain should be about. Free enterprise where people can generate money & wealth from other people!
Mike. Why shouldn't property go up? Do we not expect wages to go up. Does our council tax go down?
It's healthy for property prices to go up with time, as in indexed to any increase in inflation.
Strangely, the last time I saw comments on bb like this was when people were saying property was finished and would not recover for another 50 years....
2 years later property prices had doubled.
You cannot unhinge property prices from the fact we have built less and less property over the years, and you can't then try and make a situation whereby such large demand is met by having falling prices!
what builder is going to commit to building more homes if they expect the cost of them to be worth less after they have built them?
Will Hicks. You clearly don't know what you are talking about with regards to CGT or buy to let or 2nd homes.
A buy to let is not necessary a second home, if it houses a tenant!
Likewise, where on earth did you get the absurd idea that buy to let CGT is low, or inferring it is lower than any other CGT.
It's been increased, but worse, its been increased to benefit the short term speculator over the longer term landlord.
Now we have the ridiculous situation that capital in any purchase of a property is not even protected from the effects of inflation, and this will only encourage long term professional landlords to quit the market. Whereas if you buy a property and sell quickly at a profit, the chances are your gain will be tax free! Where is the sense in that?
Bring back index and taper relief to ENCOURAGE long term landlords, because as sure as eggs are eggs, and contrary to the public persona, we cannot afford to provide so called 'affordable' accommodation by housing associations or council housing, as its actually the MOST expensive form of housing.
The fact that someone quotes an 'affordable' rent bearing no relationship to the capital cost of the building or the maintenance costs, or the car parks full of BMW's of the housing association directors boasting about NOT FOR PROFIT, doesn't alter the fact its more costly not less, especially with the vast support mechnanisms and grant and subsidy structures.
I know, I used to let TO a housing association. They paid £120 a week to let off me, to let at an 'affordable rent' of £54, but with administration cost that made that figure double, so the real costs that you don't see are massive.
Yes, what a stupid idea. A double council tax effectively or a rebadged poll tax. Another stupid scheme dreamed up by someone who won't admit they are overstaffed, so look for another way to prop up an already bloated bureaucracy.
All this talk about keeping property prices low too. WHY? Does anyone really think that the under supply of homes will be assisted if property prices fall?
Look, there's no way we can afford council houses and even housing associations are only propped up by massive subsidy where the term affordable only means affordable to the person letting it, not to everyone else.
Put a property tax in, and you can double rents at a stroke just for starters.
It's about as sensible as the window tax...just an excuse
We have a housing SHORTAGE in the UK, so don't anyone get confused and use arguments based on the US housing and Spanish housing, where they have no shortage.
Apart from which when I first bought it was a struggle for my wife and myself to buy a converted coal shed, which our first flat was...but we did, and we worked our way up.
Too many people quote property as being toio expensive because they talk about a 4 bedroom detached property as if its the normal first purchase.
Drop prices, and you will get even more acute housing shortages.
As it is, the only people protected in this country are those already on benefit, already on 'affordable' rents, and who kick up so much at the idea that they should not have those affordable rents if they win the lottery, or their circumstances mean they no longer should get that 'luxury' that all the rest of us pay for.
And should 'affordable' be used, when in many cases its not affordable its FREE, but where the hidden costs to the rest of us, is absolutely massive in terms of housing revenue account subsidies, or where this bonkers term of NOT FOR PROFIT, is wheeled out like a badge of distinction, when any idiot can NOT make a profit. Take a look at the car parks of these organisations, or the pensions schemes....easy to see why they don't make a profit, but my God they live well!!
OECD probably chaired by some Lord blah blah blah of blah b;ah. Who is has no idea how the working and middle classes live? They live in their ivory tower trying to sort out the nation's woes without knowing how we live.
I keep reading all sorts of ideas and thoughts on the housing market. What will sort out this mess is to stop fiddling with economic issues, and allow free market forces to operate. This will allow house prices to regain their true magnitude, about HALF what they are now.
It's going to happen anyway, so allow it to happen and we can get on with our lives.
Talking about housing being a part of the economy is nonsense. Housing can never be a wealth producer. Only things like manufacturing and natural resources.
God help any government that introduced a tax based on the 'annual value' (Incidently how would that be decided I wonder) because they would be slaughtered at the following general election. What is needed is an adjustment to the starting stamp duty to reflect average first time prices?
@Malcolm Tucker
Don't forget who you are dealing with here. Estate Agents are indoctrinated with the idea that house prices must go up. That property must be an investment. That the concept of 'rising house prices' creates a healthy market with lots of transactions - with punters desperate to pile in and grab a slice of the action.
So far, they seem to have failed to make the connection between the bubble in property prices formed (in various areas) over the years between 1997 and 2007, the credit crunch and current state of the market. i.e. Lowest transactions for donkey's years.
"Swapping a single payment tax for one that continues indefinitely will have an adverse effect on prices"
And the problem with this is.....what, exactly?
To the moron who suggested this (yet ANOTHER bloody) TAX.
When this is introduced, can I have the 20 grand back I've just paid to the bloody government in Stamp Duty?
Sounds like a great idea. The only reason we don't still have Domestic Rates - which in general is a very fair tax on the utility of houses - was Scottish Tories' fear of electoral wipe-out as the very few losers under the system - mainly little old ladies in houses far too big for them - finally stopped voting Tory after a long-delayed rates revaluation put their bills up.
Hence the Poll Tax, which due to a quirk of UK law then had to be also introduced in England. Council Tax is a mere amendment of this.
A valuation-based tax combined with abolition of stamp duty would be a great way to reduce barriers to purchase while at the same time keep prices from getting too out of kilter.
Anything that revives the market is good in my book even if it means prices take a bit of a dip. The sooner we get this crash over with and volumes recover, the better for everyone. Volumes simply aren't coming back at current valuations as the finance has evaporated and won't be back in the crazy form that inflated prices so fast. So alternative solutions have to be found to get things unblocked.
This tax would benefit the economy and future generation of home owners massively.
However, I suggest the Tories change the tax laws created by Labour that have encouraged property speculation; namely tax on property income (allowing mortgage interest to be claimed as a cost loss) and the very low CGT on buy-to-let "2nd homes".
This should be addressed in the next budget to allow a level playing field for ALL residential property buyers, and not one that favours speculators, Sarah Beeny type "developer" and "landlords".
I don't agree. If the exorbitant cost of Stamp Duty Land Tax were spread over a number of years, perhaps incorporated into Council Tax or as a 'stand alone' annual/monthly charge, house purchase volumes would increase.
Remember, it wasn't so long ago that the Stamp Duty cost could be factored into the mortgage loan! Giving 110% wasn't limited to the sports field in those days.
Another thing - I'd very much like to know what proportion of my fellow agents are, like me, madly allowing families to have 'Probate Valuations" free. With, at best, a one-in-three chance of instructions are we seriously unhinged. Can you let me know here or on probates@trevorkent.com. Thanks folks.
Oh dear, here we go again.
"David Newnes... said: “Swapping a single payment tax for one that continues indefinitely will have an adverse effect on prices.
“Property buyers can’t be hoodwinked by a short-term saving that is so clearly a poisoned chalice. An ongoing tax on property would put the brakes on demand even further.”
Let's assume that prices go down. From the point of view of the seller this is 'adverse' and from the point of view of the buyer this is 'positive, and from the point of view of the economy as a whole, it is very positive indeed.
Opponents of taxes on land and buildings always wail about "The poor widow in a mansion who will be forced to downsize". Let's assume that this is true (it isn't, but let's assume it is), then more houses come on to the market (you can't have a 'forced seller' without there being a willing buyer).
The potential buyer will of course deduct the future tax payments from the price he is prepared to pay, so the tax costs the next purchaser absolutely nothing.
The tax is a bit like a higher interest rate. if you buy when interest rates are low and prices are high and then interest rates go up and prices go down, you have lost out.
But the next wave of buyers who are paying a higher interest rate only need to take out a smaller mortgage, so their total interest payments are the same.
Therefore unlike government borrowing and high house prices which transfer wealth to current baby boomers and steal from future generations, such a tax levels out the playing field a bit and baby boomers end up paying for their own excesses.
Go back and read up on Adam Smith, David Ricardo, JS Mill, Tom Paine, Henry George, Milton Friedman, WInston Churchil etc etc etc, or failing that, think about your own children or grandchildren - if house prices fall, then your loss is your children's gain.
People want assurance of budget. When someone buys a property its then that people account for what costs are involved. To set this aside for a year is creating a further later burden and for many other bills would pop up before the return became due. Restructure existing SD by all-means, but do it to assist FTB's to buy and release upward chains, which in turn would roll the government SD tax.
The OECD was spawned from the UN which was initially funded by the International Banking Families to try to create a World Government over which they would have control.
The UN has already started to tax the air we breathe out under the false doctrine of "Man Made Global Warming" and now suggest that we tax the annual value of property owned by the Western Middle Classes to further move wealth to the World Centre of Tax Collection.
In America you can buy a nice Flat in Miami Beach from between $250,000 and $350,000 but the annual Florida Property tax you will pay may be up to $12,000 per annum
Here you would pay, at present, Council Tax of around £1,000 with benefit safeguards for those who cannot pay
Its a proposal for another (very expensive) stealth tax dressed up for the gullible as "helping first time buyers" but designed to transfer more of the wealth of the nation to the Tax (Interest on debt) collectors.
The way to get rid of debt in this Country is to start issuing our Own Money rather than borrowing it from Private Individuals who charge us Interest.
If the Country can issue Treasury Bills which bear interest it can issue Real Money but that of course will not go down well with the International Money Lenders who profit greatly from our current system of debt and effectively run our Government.
A further example of a quango employing failed professionals sitting around all day thinking of rediculaous and unworkable 'ideas'.
Presumably young first time buyers and retired folk will be required to find this additional annual tax?
Cameron here is another quango that be got rid of.
No thank you. Rubbish idea though.
Oxygen tax next, everyone will have yo pay for that.
what a stupid idea what ever next!!!