SIPPS shock as Brown shelves tax loophole for residential property.

However people wanted things done is how they'd get done. Different bunches of people would do things in different ways. Trade unions might run collective health insurance and pensions. Churches might run housing estates for the poor.

FoFP

I suspect the phrase 'libertarian utopia' is sarcastic :-)

by defining everything as 'not central' I suppose

Education, health, policing, prisons, roads, waste, libraries etc., some leisure, and so on.

I definitely think all of the above should be provided free at point of supply to at least a minimum level.

As I've said, human nature is such that, given the choice, many would not pay for the services to the detriment of others.

'etc' is a nice catch-all :-)

In message , Tumbleweed writes

I cant be bothered to think of everything, and you know what I mean

That you think so is insufficient reason why any of those things should be either central or free. I'm not endorsing this dream world, you understand, just describing what I suppose it would be like.

Education and health: Go to school and pay the fees. Go to your doctor and pay his honorarium.

Policing and prisons: Wouldn't need any. The world'd be so perfect no-one would commit crimes, or alternatively folk just shoot burglars and put them their carcasses in the bin.

Roads: People who want them would pay someone to build them, and they would then be theirs, and they could allow others to use them for a fee. Toll roads are not exactly a new concept, nor an outdated one.

Waste: Likewise. You want rid of it, pay someone to take it away. It increases your incentive to re-use, re-cycle, etc.

Libraries: These become members' book clubs.

Some leisure: Well, most leisure in our present world is not provided free. You wan to go sailing? It'll cost you.

But then they wouldn't receive the services.

In many ways the way we do things in "our" society seems better, but with so much done centrally we lose track of whether perhaps too much is done centrally, and we don't see how much is wasted on administration. If you pay for what you use, this is in many ways fairer than paying your deemed share of everything.

Note that most of those things were originally provided as private services anyway. It's not at all clear that the state does them better, cheaper, or more efficiently than private providers would.

Note that before the justice system was effectively nationalised by Henry II, a crime against someone would, if detected, mean that the criminal would have to pay the Court, and then pay the victim restitution to make him as near as possible to his position before the crime - or the criinal would be indentured to work for the victim to the same amount. Prison was a last resort since it didn't do the victim any good.

Henry, needing cash for war, decided that the crime was against the state rather than the victim, and thus the cash could be grabbed by the state. Now the victim doesn't have as much interest in reporting the crime and crime gets a leg up. Plus we waste resources putting people in prison when we don't need to.

That seems insane to me, but that's what happens when you nationalise something.

Now that would be very much more efficient, and its why the uS has a burglary rate an order of magnitude below ours.

Mind: politicians do know a lot about waste.

One of the biggest problems with "free at point of sale" is that it removes all the incentives provided by the price mechanism. Let's say you pay for your own health insurance. No doubt you'll get it cheaper if you don't smoke or drink, and the gym signs you off as doing your three sessions a week. Now provide it all for free at the point of sale by removing fees from your paypacket unrelated to how healthy is your behaviour and you lose the incentive to stay healthy. The inevitable conclusion is that the NHS system promotes ill-health.

FoFP

Like a spider spinning his web to catch a fly has Brown deliberately lured unwary and naive investors into SIPPs in order to extract more tax ?

I almost feel sorry for these speculators. (not really ;-))

The Times December 10, 2005

Tax shelter caves in on property investors

You bought a £100,000 house for your pension. The Revenue wants £110,000. Rebecca O'Connor and Antonia Senior explain

INVESTORS who rushed to buy new-build houses with their retirement kitty could face a tax bill of more than 100 per cent of the property value after the Chancellor's U-turn on holding homes in pensions.

Anyone who thought they had bought an off-plan property worth £100,000 for just £78,000 (and just £60,000 for higher rate taxpayers) through their pension scheme could end up paying £210,000 under a bizarre loophole created by Gordon Brown's surprise decision.

Since December 2003, the Government has been telling investors they will be able to hold residential properties in self-invested personal pensions (Sipps) from April 6, 2006. But this week Gordon Brown changed his mind and residential property will no longer be a viable pension investment.

Experts believe that thousands of savers have already committed cash to property developments. Developers in the UK and Europe have been using the proposed changes to the Sipp rules to attract would-be property investors.

Iain Oliver, head of pensions at Norwich Union, the insurer, says: "A lot of people have bought properties ahead of the rule changes. The Sipp market is hard to size anyway, but it's virtually impossible to work out how many people have been hurt by this."

A property is considered to be residential only if it is habitable. While a house is still being built it can be bought through a pension with full tax relief. But Gordon Brown's U-turn means that the tranche of investors caught by this loophole will have to sell the property before it becomes habitable otherwise they will face punitive tax charges.

Investors holding an unauthorised residential property face a personal income tax charge of 40 per cent on the value of the house, as well as a further punitive 15 per cent charge. The pension scheme itself will incur separate tax charges of up to 55 per cent.

Tom McPhail, head of pensions research at Hargreaves Lansdown, the independent financial adviser, says: "A lot of investors will be very unhappy. The manner in which the Treasury made this decision is particularly disappointing."

Simon Tyler, of Chase De Vere Mortgage Management, the broker, says: "We have many clients who have bought properties with the intention of placing them into Sipps next year. They had no intention of 'abusing' any system, but merely wanted to plan for a comfortable retirement. If the Government was seriously considering scrapping the idea it should have at least hinted as much at some time in the past few months."

There is no means of gaining compensation from either the Government or any of the developers who were promoting property on the back of the proposed new Sipp rules.

The only chance of redress is for investors who were told by a financial adviser that they should move their pension pot from a regulated product such as a unit trust to a Sipp, without being warned that the new rules might not happen. The Financial Services Authority says that in this case you should pursue the claim with the firm and then through the Financial Ombudsman Service.

Investors who were persuaded to move cash from a company pension scheme into a Sipp could also pursue their adviser for redress. However, some may still wish to keep the property. Mark Harris, managing director of Savills Private Finance, another mortgage broker, says: "The Government's U-turn does not change the fact that buying an off-plan property for the purposes of buy-to-let can still be a good long-term investment."

Mr Oliver said that research by Norwich Union suggested that amateur buy-to-let investors were more likely to have been drawn to the idea of purchasing a property through a Sipp.

He says: "A lot of experienced property developers backed away from the idea as soon as they realised how much control over the property they would have to give up. The ordinary consumer was getting drawn in because of the appetite for residential property."

George Georgiou, an experienced property investor, was wary of putting residential property into a Sipp from the start. The 28-year-old, who has a portfolio of 40 buy-to-let investments, mostly in London, says: "I looked into it when the Government first announced the measures, but it looked too confusing and only seemed to benefit those who already had a large pension fund. Many have now suffered as a result of the U-turn, I am pleased that I did not get involved."

Mr Georgiou has escaped the dilemmas now faced by thousands of investors who have already signed a contract to buy property with the intention of investing it in a Sipp.

read more....

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Well in all the years you and other pundits been rattling on about a house price crash they've continued to rise where I live.

If they drop I could afford to move to a bigger/nicer house. If they don't, well my current gaff suits me fine.

How long have we been 'rattling on' ? :-)

Personally. Ive been 'rattling on' about a house price crash for just over a year (not years)and though they haven't crashed yet they have fallen for 16 consecutive months according to the estate agents organisation Hometrack.

They are still around double the long running average price/earnings ratio however, and this is combined with : first time buyers down to just 10% of the market (from 40% a few years ago) increasing problems around record debt, pressure on interest rates from rising inflation and rates rising in the US and Europe, sales volumes falling, signs of credit tightening, house sales volumes falling, increased evidence of chains breaking down.

All of this points to gloomy times ahead for the UK house market IMO.

Now that SIPPS for residential property has been shelved what is there to hold up prices at these hugely overvalued levels ? (not that SIPPs alone could have done so for long although it may have had a positive effect on sentiment)

" Incidentally the price of gold has been rocketing and now stands at $540. A traditional sign that many investors foresee troubled times ahead.

In message , Crowley writes

As far as I recall, Hometrack ask questions about asking prices which, as has been said many times, are not selling prices.

So it could be the case that asking prices are falling, whereas selling prices are static or rising.

Thats right. Hometrack figures are based on asking prices which they say have been falling for 16 consecutive months. I've read elsewhere (can't remember but it was probable Hali/wide) that selling prices are achieving around 93% of asking price so if thats the case how can average selling price be rising ?

One possible explanation is that more expensive houses are selling in proportionately higher numbers than lower priced houses (someone on housepricecrash.co produced a graph recently to demonstrate this)

So if thats the case (and it could be correct in view of the fact that FTB numbers have crashed) then it would explain static or rising average prices (if thats what is happening).

In any event the cycle for prices is on the downward path and if hoistory is anything to go by, will be for at least 4 or 5 years.

"

ODPM figures (based on sold prices) indicate prices falling.......

Official stats show further house price inflation drop

The Office of the Deputy Prime Minister has said that house prices across the UK continued their fall in the year to October.

The ODPM's survey is based on a sample of 40,000 completed sales and reported that the average home cost £186,103 in October, compared with £186,755 for September.....

tml

Yeah, it's making me damned uncomfortable that my traditional Minority of One bunker is getting crowded. The only joy left to me is counting the gold...

FoFP

There was an article last week to this effect. Basically because of planning laws, new build has moed to a higher prportion of flats even though people clearly prefer detached and semi-detached.

FoFP

Of course that's a cough, not a crash.

Personally I'm still expecting a credit crash rather than a house prce crash.

FoFP

Yes. No crash yet but the ingredients are there.

I expect we'll have both.

In message , Crowley writes

You are again choosing to use asking prices to suggest what selling prices are doing.

If houses were selling for say, 100% of asking price 12 months ago, and asking prices have increased by say, 7%, and prices have remained static = houses are selling for 93% of asking prices - That's how it can be. You can modify the numbers a bit to create a rising market, or a falling market if you wish.

Could be, but is it??

agreed

If history repeats itself, prices will fall. But what if history doesnt repeat itself.

The last crash was mainly as a result of interest rates reaching 15% or so.

In message , Crowley writes

I would have hoped that the ODPM would use land registry figures, rather than a whole new sample. Nevertheless, I wont argue with the figures, and am perhaps in an area where the market is lagging, (NWest up by

6.4%).

I just cant help being frustrated with people who use asking prices to tell us what the market is doing, when there is actual selling price information from not too long ago.