Housing market collapse.

I don't know. It's a drop in prices by a significant amount. One thing that's never really specified well is over what period. You would think that implicit in the word "crash" is that it's something which happens suddenly, an almost instantaneous event. Yet figures are being bandied about of a "prolonged" slide of nearly 20 years, or of a "quick" one lasting 5 years. Even the latter can hardly qualify as "sudden", and so we can only conclude that there will be no crash, just a nice gentle adjustment.

There's a hidden premise there, which ought to be false. If "moving back in with parents" means "having no life", I put it to you that there has to be something dodgy about the quality of the "life" you'd not be having. Rebellion is something you get over during your teens. You're a grown-up now, and should be responsible! :-) Your parents were young too once, there's nothing you should be wanting to do now that would shock them. If you want to hold loud and late debauched parties with your friends, you don't *have* to hold them in *your* parent's house. Hold them in your friends' parents' houses! :-)

That's true, and it makes it look worse the longer the drop lasts (if it ends at the same face value). But if the period over which the drop is accompanied by deflation, the opposite is the case, it will look less bad. Perhaps we should hope for deflation, then!

Some good analysis of the general problem here. The Churchill quote is interesting, he could have written it today.

That way lies unemployment. Great option there.

It's a hell of a long way from Birmingham to London, or London to Manchester, for a commuter.

Not really an option for most people. I don't know about you, but the people I know who move house generally do so because they need somewhere bigger. It's fine to say "move to a smaller house" but if you've got two kids, downsizing from three bedrooms to two isn't likely to be a useful option.

The overall average tax burden need not change.

Stamp duty is on the total price of the house. CGT is only on the gain.

Clearly Stamp duty works against people who need to move regularly.

It would also possible to decide a specific rate of CGT for housing less than the standard 20 or 40%.

Brian Redhead.

"Nick" wrote

So? How does that help the house owner to pay the tax earlier, *before* they've received the money from the gain?

"Nick" wrote

You mean "less than the standard 18%" ?

One obvious thing would be to allow people to carry forward their unused CGT allowance. Maybe it would be better to allow them to "realise" a gain each year on their tax return and use up the allowance without actually selling or buying the house.

One "quirk" of this system is that it would make it easy to value for council tax purposes - you just take the value at last sale or last declared. Of course, people could then declare their house very much lower than its value and carry a loss forward but they wouldn't be able to use up their annual CGT allowance. In a falling or static market that could be a problem. Pensioners who were never going to move again could take advantage of this.

A 200k house with two adults owners could inflate by about 10% per year and not incur any extra tax. Admittedly, the CGT allowances haven't been growing by 10% per year, (average 3.5% from 1990) but I'm not sure that 10% per year house price inflation was healthy either.

Tim.

Erm, yes you are, unless you had a 100% mortgage, or no mortgage, given both those are not the nomral, you're worse off, as the fall is wholly within your equity

so 400,000 pound house with a 200,000 Mortgage loses 50% of its value, you now can only buy an equivalent new house on a 100% mortgage, which will cost a lot more if it's available at all than the 50% Mortgage you had before...

Jim.

From the same place they fund other taxes like council tax.

I may well mean that.

"Nick" wrote

Are you now suggesting that the CGT on main homes *replaces* council tax?

People can't use the same money to pay *both* ...

No, but they can use money from the same source. So the money which would have paid for the second annual foreign holiday now pays this tax instead. Then, when you sell the house for a whopping gain, the tax on which has already been paid, you can blow the lot on a whopping holiday to make up for all the ones you've not had.

"Ronald Raygun" wrote

Not if it's already fully extinguished from other outgoings, they can't.

"Ronald Raygun" wrote

You appear to be assuming that the householder actually takes a second (or even a first!) annual foreign holiday...

But what if they don't? Do you want them to give up on food or heat until they move house, then binge-eat or roast themselves when they pick up their "whopping gain" on eventually selling? :-((

"Ronald Raygun" wrote

That would seem to strongly favour constant-movers, over long-term stayers, wouldn't it? :-(

There's always welfare.

Binge-eating looks like an attractive option if they're going to roast themselves (or each other). :-]]

Nothing a bit of fine tuning of stamp duty won't fix.

The main problem with Stamp Duty IMHO is that it applies to the whole purchase price when you move up a band. If it only applied to that band the market distortions that result would be less severe.

(\__/) M. (='.'=) Owing to the amount of spam posted via google (")_(") I am blocking all articles posted from there.

"Mark" wrote

That'd be good - if you move *down* a "band", the govt would have to pay *you* Stamp Duty!!