Been thinking about this today. People already pay CGT on 2nd homes but given that housing is being used as an investment vehicle by virtually everyone in the UK, does it make sense to apply it to single homeowners too?
Would have to ignore the current govt's pledge to not raise taxes but with national debt at over 100% of GDP and us spending over 100 billion pounds a year in interest alone... not sure that is sustainable.
Thinking it through, house prices would fall since they would immediately be a less desirable commodity. Although they wouldn't plummet because houses still have intrinsic value and the supply of houses being sold would begin to dry up as people are dissuaded from selling.
The rental housing supply would increase in terms of properties since it would be more profitable to let them out than sell them. An increase in supply would reduce the cost of rent. It would need to come in with an increase in renter protection laws. Focusing on long term rented properties as family homes works well for other countries like Germany.
At the moment we've got a situation where people buy the most expensive house they can possibly afford because it has the best return of any investment by being exempt from CTG. In theory, people might buy more modest homes if they are buying and potentially could put more money into stocks/indexes which would stimulate the wider economy.
Anyway, this was more of a showerthought than anything else. What do you think?
Hmm, my opinion would be no.
I'm of the opinion that everybody should be able to have the opportunity to own their own home.
CGT for single property ownership would act a a barrier to getting on the property ladder. Keeping it for owning multiple properties is a way to restrict purchasing multiple properties that you are not living in. Eg: second homes, letting holiday rentals.
The two biggest barriers to housing in my head are the initial proce and lack of available stock.
The biggest driver of property prices for me is the interest rate. Banks seem to like keeping interest payments at about the same levels. So when rates go down, prices go up to compensate. No government would push the rates back into double digits as that would cause a crash bringing property prices down but crippling existing repayments and making them deeply unpopular for the next election.
More available housing would help but as you've pointed out every man and their dog is investing in housing as its got the best returns. This drives up demand which pudhes up prices. It doesnt help that house building has not kept up with population growth, which also drives demand.
Of course not everyone can afford to buy, and thats where rentals come in. Used to be social housing, but that got sold off in a quick cash grab. So very limited council housing is left.
Nothee driver o housing stock is the rise of air bnb and the like. Plenty of housing that you could previously rent, now sits idle waiting for short term leases at High return prices.
My preference would be to limit short term rental stocks as a percentage of local housing, scale CGT for multiple properties, councils to have the balls to start building new coucil houses and government to start creeping up the interest rates to lower prices
I don't think it would be a barrier to entry for first time buyers because they'd only be charged CGT in the event that: 1) they sold the house, and 2) the house had increased in value during the time they owned it.
I'm not sure that banks would charge larger interest rates on smaller loans if house prices went down but maybe I've misunderstood your point there.
You are completely right about the housing supply and presumption of homeownership being baked into our economy. Scaling CGT for each additional property is also a neat idea.
Okay well my house has gone up 80% in 5 years, so I'd have to pay on all of that? How would that not make it harder for me to afford a house I'm already just barely able to afford? If my property taxes weren't capped at raising 3% a year I'd be fucked already.