House about that then…

I’VE reached the age where every time I phone home, my mother wants to know if I’ve bought a house yet – but where I want to be and what I can afford are two different things. In Belfast and elsewhere in NI, first-time buyers are being squeezed by the stratospheric rise in house prices. The Government’s move to raise the stamp duty threshold was, let’s face it, no more than tokenistic. Here’s how Kevin McCauley of the BBC coped.

  • curious

    What we need is a huge increase in capital gains tax on second homes to keep the developers away from the market

  • ch in dallas

    Curious, If you increase cap gain tax on homes, people will be less likey to sell due to the tax hit. I think they need to decrease cap gain on homes to free up inventory, and provide capital for devolopers to build more housing.

  • Dread Cthulhu

    curious: “What we need is a huge increase in capital gains tax on second homes to keep the developers away from the market”

    To echo CH, the higher the tax, the less likely someone who is considering selling a home will do so, the same way an exorbitant income tax has a “capping” effect on earned income — if every monetary unit after a certain point is taxed at say, 95%, he says, recalling the Beatles tune, what incentive is there for earned, taxable income beyond that point? You’re keeping pittance. Increased tax on sales would reduce sales, in turn reducing inventory to those who HAVE to sell for whatever reason, potentially causing a boost in price, due to the reduction of inventory. Once you have one fewer item in inventory than your have buyers, you have, in essence, an auction. Further tighten supply and you exacerbate the auction, driving less affluent bidders out of the market.

    A temporary reduction of the tax rate would somewhat encourage sales, since the limited period would represent an opportunity to benefit to the seller with a limited time to commit to the act, spurring them to act. Enlarged inventory would have a depressing effect on price, which would not necessarily reduce seller enthusiasm, since the reduced tax bite leaves more in the seller’s pocket. Admittedly, these are all marginal items, but its a start.

  • curious

    Considering that CGT is only payable on the second or more house?

  • Dread Cthulhu

    curious: “Considering that CGT is only payable on the second or more house?”

    Taxes and tax rates always create incentives or disincentives, depending on the facts and circumstances. Increase the CGT on non-primary residence sales and you will decrease that set of sales. Secondly, if the problem is a “hot” market, you need to create a greater supply to feed the market’s hunger.

    Similarly, there are other factors. F’r’instance, rent control has grossly inflated the NYC and Boston housing markets. Tax policy, zoning laws — all feed into the market.

  • curious

    Ah, but it might discourage the bastards from keeping first time buyers off the market!

  • Alan

    I suppose its a bit like Blue Peter really. There’s always a new generation experiencing things for the first time – that’s why Blue Peter always do the advent crown at Xmas.

    I remember feeling exactly the same thing described in the article – away back in 1985 – and prices were rising then too.

    The political instability has a lot to do with the problem. Why else are developers buying houses in South Belfast, knocking them down and building two in place – thereby distroying local amenity, over-crowding areas, blocking streets with cars and generally causing offence to residents who have no rights to influence the planning process.

  • aquifer

    We have a big demographic driven demand for housing, and supplies of cheap Euro lending to drive prices up. If the builders here were less active the prices would have been higher.

    We may have to ‘go dutch’, building lots of cheap starter homes near railway stations outside urban areas. Cars are cheaper than they were ten years ago. The danger is that buyers will try to commute to a bargain.

    One way to increase the effective supply of affordable housing would be to destigmatise areas that suffer from sectarian graffitti- by painting it out, or by shifting habitual flag raisers to some of the empty NIHE homes in Larne and Ballymena.

    Building good sheltered apartments could entice some lone older people out of oversized homes.

    Having Housing Associations selling bonds linked to house prices could finance affordable rental housing while protecting the value of deposits saved by first time buyers. Otherwise state housing subsidies just pump up land prices making housing less affordable.

  • stu

    Interesting points

    Alan

    Having lived on the Lisburn Road, I can agree with you, but I’m willing to go with aquifier on this one; we need to destigmatise areas. Vast swathes of land between the city centre and the ‘burbs are lying misused and its mostly because people don’t move much from one part of town to another much, certainly not as much as in any other similarly sized city elsewhere.

    Desegregating areas is, I think, an important step; the Lisburn road has come on leaps and bounds, but that’s mostly due to students who don’t want to live in the Holy Lands. There are plenty of houses lying empty in Belfast, apartments in particular, with many city centre properties. Perhaps making Belfast a cosmopolitan, mixed city with local amenities better positioned instead of pretending it already is might be a good start.

    The Newtownards/Albertbridge roads are in desperate need of development, but with so many families having lived there for generations with no real desire to move I can’t see it happening too quickly. Would the opening of more 24 hour facilities and a spreading of the city centre out across the bridges help? The same for the bottom of the Antrim Road, the Village etc – less flags, less graffiti, more facilities?

    Again, compared to other similarly sized cities, Belfast is dead at night, except around the student zones, if we utilised some un/underdeveloped real estate within the city could this alleviate some of the problems?

  • Dread Cthulhu

    Curious: “Ah, but it might discourage the bastards from keeping first time buyers off the market!”

    While a hike in the CGT will discourage buyers of second houses, it also discourages owners of second houses to sell, so its effect would be debatable. Also, I feel obliged to point out, most people who buy a second house do so as either a rental property or as a vacation home. Now, most vacation homes I’m acquainted with are not the sort of places one would want to live year-round. As a side note, most of the folks who own a second house you’d want to live year-round in are wealthy enough they won’t care about tht CGT.