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Weekend reading: Just the links, ma’am

Weekend reading logo

What caught my eye this week.

Sorry guys, I am up against it this evening so no devastating hot take preamble from me today.

As ever though, thoughtful responses on the articles featured this week are more than welcome in the comments.

Have a great weekend!

From Monevator

Should you hold cash instead of bonds? – Monevator

From the archive-ator: Reasons to rent a house instead of buying – Monevator

News

Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Social Market Foundation proposes 10% capital gains tax on own homes – ThisIsMoney

Small investors take to high-risk punts during lockdown – Guardian

Are banks playing fair when they close the last branch in town – Which?

‘Burrito Bond’ chain Chilango goes into administration – ThisIsMoney

Mortality rates from Covid-19 around the world – John Hopkins University

Products and services

Robinhood abandons plans to come to the UK, set to delete 200,000 wait list… – TechCrunch

No worries, we’ve already got Freetrade! Sign-up to via my link and we can both get a free share worth between £3 and £200 – Freetrade

Eat Out to Help Out: the restaurants taking part and the discount rules explained – Which?

Club Lloyds customers to earn less interest in latest cut to current account perks – ThisIsMoney

Homes for sale by the sea in the UK [Gallery]Guardian

Comment and opinion

Dividends are not dead, but your strategy might need recharging [Search result]FT

There is nothing wrong with a traditional career – Of Dollars and Data

Eight timeless contributions for everyone from Warren Buffett – Validea

Crash test – Humble Dollar

The days of the 60/40 portfolio giving equity-like returns are over – The Irrelevant Investor

Why most people are so bad at stockpicking – Financial Ducks in a Row

Needles in the haystack we call Twitter – Abnormal Returns

Pandemonium – Indeedably

Five midyear questions for disappointed investors – Bloomberg BNN

Now is the right time to hedge against unexpected inflation – Market Watch

Generational wealth inequality – A Wealth of Common Sense

Leasehold mini-special

England’s leasehold system is crumbling. Freeholders’ fightback will be nasty – Guardian

Should we ban leasehold property? [Search result]FT

Naughty corner: Active antics

What does the democractization of share trading mean for valuations? – Medium

Debt investment trusts: For the brave only – IT Investor

Active management has become a game of musical chairs – Behavioural Investing

Mid-year FTSE and S&P CAPE ratio review – UK Value Investor

A deep dive into Bill Ackman’s new SPAC – CNBC

Is hedge fund secrecy a sign of skill or a red flag? – Institutional Investor

Tesla agnostic – Ramp Capital

Stocks suffer a seasonal headwind, starting now – Sentiment Trader

Coronavirus corner

America is sleepwalking towards catastrophe – Vox

25 Swedish doctors warn against the Swedish response to Covid-19… – USA Today

…yet fact is daily deaths are now down to single digits, without a lockdown – BBC

Fermented cabbage may provide some protection against Covid-19 – Eat This, Not That

The pandemic / lockdown seems to have reduced the number of babies born prematurely – NYT

In Italy, the coronavirus exposed the West’s weakest link – The Atlantic

Brexit

UK must “face possibility” of no deal on future with EU by end of transition – Sky News

Marina Hyde: Get set for the next round of Britain’s Brexit brinkmanship – Guardian

Kindle book bargains

Drink?: The New Science of Alcohol and Your Health by Professor David Knutt – £0.99 on Kindle

The Economics Book: Big Ideas Simply Explained by Niall Kishtainy- £1.99 on Kindle

When Genius Failed: The Rise and Fall of Long Term Capital Management by Roger Lowenstein – £0.99 on Kindle

The Hidden Life of Trees by Peter Wohlleben – £0.99 on Kindle

Off our beat

Researchers find earliest confirmed case of smallpox in the Viking era – Guardian

Forget getting credit. Do the work – Ryan Holiday

Boom time for death planning – New York Times

The parrot king – Audubon [via Abnormal Returns]

And finally…

“Investment is essentially the arbitrage of ignorance.”
– Jim Slater, The Zulu Principle

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{ 54 comments… add one }
  • 1 Gentleman's Family Finances July 24, 2020, 9:25 pm

    I thought the burrito bond was already bust – goes to show the risks of crowdfunding and popularly plugged investments – I’ve made a few of those mistakes myself but didn’t get involved in this one (possibly because I don’t like Mexican food)

  • 2 JimJim July 25, 2020, 6:23 am

    I look forward every year to UK Value Investors CAPE posts, they are a highlight of my financial year. How long market pessimism can continue in the U.K. is anyone’s guess – and maybe it is cheap for a reason in the uncertain times we have put ourselves in. How long optimism can survive in the U.S. is still beyond my ken. Nothing I can think of explains some of the valuations. BUT. I was in this position two and a half years ago with money to invest and came to the same conclusion, which kept me out of the U.S market. More fool I.
    JimJim

  • 3 David July 25, 2020, 6:51 am

    Interesting you have nothing to say about the collapsing dollar and the possibility that this is the beginning of the end of the current monetary system ( or have we all heard this prophesied too many times before?). (Former?) gold standard advocate now on the FOMC. Gold near all time highs and will soon pass the previous high without even braking..

  • 4 PC July 25, 2020, 9:22 am

    “Fermented cabbage may provide some protection against Covid-19 ” mmm .. correlation does not equal causation https://blogs.scientificamerican.com/the-curious-wavefunction/chocolate-consumption-and-nobel-prizes-a-bizarre-juxtaposition-if-there-ever-was-one/

  • 5 ZXSpectrum48k July 25, 2020, 9:44 am

    @David. The USD is weaker but it’s not collapsing. The dollar index (DXY) is at 94.4, off from a peak of 102.8 in late Mar, or 8% weaker in just 3 months. It’s a rapid move. It’s no more rapid, however, than the 12% move weaker in 2017 or the 10% move stronger in early 2018. It’s nothing compared to the 25% move stronger in late 2014. These gyrations are not anomalous.

    We went stronger in the USD cash squeeze of March and now we’ve retraced all of that. Compared to the start of 2020, it’s 2% weaker. Not typically a sign of the end of the current monetary system.

    Two-thirds of the weakness vs. start of year is explained in terms of changes in rate differentials. The Fed had more room to cut rates than other major central banks such as the ECB, BoJ. That carry advantage has gone. It’s probably not helped that the ‘leader of the free world’ has been acting extra bonkers in recent times.

    DXY is back at it’s average of the last five years or so. It’s 30% stronger than compared to a decade ago. For context, since the end of Bretton-Woods in late 71, the DXY range has been 71 (early 2008) to 165 (early 1985).

    If journalists talk about the demise of this or that remember the basic rule. If want to go into markets and you have the ability, you get a job into markets. If you want to go into markets but don’t have the ability, you get a job as a financial journalist!

  • 6 taxmancometh July 25, 2020, 2:50 pm

    I quite like the idea of taxing the gain on peoples homes. Seems fair to me, in fact why not simply scrap the primary residence exemption? After all its unearned income and you pay CGT on gains on other assets. I had a look at comments on This is Money and there was much frothing in the mouth and little proper dialogue. I suspect there will be a more interesting debate here…

  • 7 Sam July 25, 2020, 3:04 pm

    Taxing the gain on peoples homes is all well and good but will it be indexed and take into account inflation? Also what happens if I spend £30k on an extension/improvements will I be able to deduct this when I sell, it could create an admin nightmare. Relief on losses won’t be much use for your average Joe either!

  • 8 John @ UK Value Investor July 25, 2020, 3:50 pm

    @JimJim “I was in this position two and a half years ago with money to invest and came to the same conclusion, which kept me out of the U.S market. More fool I”

    Making binary decisions based on valuations is always going to be tough because of the degree of uncertainty involved. That’s why Ben Graham often suggested tilting asset allocations based on valuation rather than completely avoiding asset classes. For example, allocating less to US stocks when they’re expensive may be better and easier to live with than holding none.

  • 9 Griff July 25, 2020, 3:53 pm

    Taxman if you feel happy to pay tax on your assets gaining in value, perhaps you also think we can claim tax back on assets that go down in value. Only fair.

  • 10 tom_grlla July 25, 2020, 3:58 pm

    taxmancometh – no doubt there’ll be some lively replies to this…

    It’s an interesting idea, but I suspect fraught with potential unintended consequences.

    The main issue is that you’d have to be confident that house prices wouldn’t rise – otherwise it means you can never move from your first place as the tax you’d pay would mean you were starting below where you were initially with regard to other properties.

    Property taxes are undoubtedly a hot potato. I believe the most important thing is that people are free to move, for one so they can go where the jobs are.

    The current stamp duty regime means many relatively ordinary people in London can’t afford to move any more given the unrealised gains on their property, which seems stupid.

    While I don’t really like the idea of land taxes (though the obvious appeal is that they’re hard to avoid), they seem fairer as something that wouldn’t change wherever you lived.

  • 11 XF331 July 25, 2020, 6:28 pm

    One solution to the concern that charging CGT on primary residences might choke transactions is to allow people to roll it up until death or downsizing. Explicitly linking taxes payable on death to the unearned growth in a taxpayer’s primary residence value is also likely to make the idea of a tax payable on death more palatable than IHT generally (as the application of it to unearned profit makes clear that it is not double taxation).

  • 12 Matthew July 25, 2020, 7:13 pm

    Surely taxing capital gains on the primary residence would stop people moving house and gum up the housing market so that old people don’t downsize and fewer houses get built

    Likewise if you banned rip off leases on new houses fewer would get built if you made the whole thing less profitable, at least a house gets built this way and its peoples choice whether to buy it. Buyers of leaseholds really ought to do their homework – how do you get caught out by doubling ground rents? Or short leases when theres info online about marriage value.

    Rip off leases sit in a generally better place than being a normal rental tenent, and landlords can tax deduct the maintenence charges/ extension costs – the tax system makes it actually better for them in this case than an owner occupier

  • 13 Matthew July 25, 2020, 7:19 pm

    It’d make property crashes worse because everyone would look to move house in a crash, and it’d devoid millenials of their inheritence

    Also what if the house is sold to pay for nursing home fees?

  • 14 ZXSpectrum48k July 25, 2020, 7:31 pm

    CGT on primary residence has never seemed unreasonable to me. There is little logical reason that one type of asset should ever be taxed differently to another. Treasury puts primary residence tax relief at £28bn/annum, so it’s a worthwhile simplification.

    CGT tax rates should also be raised and set to the same level as income tax rates. Income can be transformed into capital and vice versa so any discrepancy is just tax arbitrage. But all CGT needs indexation or else you are taxing nominal returns not real returns. Sold assets that underperform indexation should be an allowed taxable loss. HMRC hates indexation. I think the’ve done the calculations and they didn’t like the answer.

    Also get rid of the ridiculous Enterpreneur’s Allowance and tax relief on VCTs and EIS. To be fair these reliefs only cost $4bn/annum but they are just unnecessary.

  • 15 taxmancometh July 25, 2020, 7:39 pm

    @sam Yes the gains should be indexed. No-one should be taxed on inflation. And yes any extensions and improvements to the property should be excluded from your gain. And furthermore, yes if you make a loss that should be allowable against other or future gains just as it is with other assets.

    As to it gumming up the housing market – Ive heard this many a time before but no-one has explained to me how exactly that happens. How come the same doesn’t ‘gum up’ the stock market? Surely the market will sort it self out. But yes it may mean prices fall somewhat but that would not be a bad thing in my opinion. Do explain if you think otherwise.

  • 16 Matthew July 25, 2020, 7:51 pm

    @taxmancometh – gum up as in “I can’t upsize yet because I’ve got to pay extra cgt/stamp duty because of this new rule” or “I won’t downsize because I hope the law will change at some point, or I may be able to deduct the extra CGT if I hold on against my nursing home costs”

    Yes it probably does gum up the stock market a bit, tax gums up the jobs market by making employing someone more expensive and work less rewarding, and it gums up consumerism with VAT. Tax is a slowing force

    I wouldn’t count on house prices dropping as a result, people may demand higher prices to pay the tax, and that’d move prices up further down the chain to compensate. People might not buy newbuids because buying becomes less rewarding

    Add to that exacerbating the sort of selling at a loss people do in crashes if they are trying to move equity to tax shelters

  • 17 taxmancometh July 25, 2020, 7:54 pm

    @tom_grlla Its not the same as stamp duty, that is just a tax on moving. I’d suggest scrapping that completely. A tax on the gain on your home is simply fair to all the other people that pay CGT on other assets. If you are downsizing, and because of the tax, you can no longer afford the property you want, then the price of the property you want to buy will have to fall, thats supply and demand. The reason property is unaffordable for working people is because the fortunate boomers (and I am one) have a huge untaxed windfall in their property which keeps prices high. I cannot think of anywhere else tax needed to pay for COVID-19 could be more fairly be directed.

  • 18 Neverland July 25, 2020, 7:59 pm

    ‘I cannot think of anywhere else tax needed to pay for COVID-19 could be more fairly be directed.’

    Cough…inheritance tax… cough.

  • 19 Sparschwein July 25, 2020, 8:20 pm

    In important news, airborne SARS-CoV-2 transmission seems to be a thing. This easy Nature article sums it up, and new studies strengthen the case.
    https://www.nature.com/articles/d41586-020-02058-1?

    It will be up to UK citizens again to be more sensible than their govt and take the necessary precautions. Please spread this info far and wide.

    The “fermented cabbage” crew has another one where they describe the “negative ecological association between COVID-19 mortality and the consumption of cabbage and cucumber”. (Cabbage & cucumber good, lettuce bad).
    @PC called it; these are statistical artefacts of course. Such news are good for a chuckle, and if they get people to eat more vegetables, great.
    If only all the nonsense published about Covid was as benign.

  • 20 BeardyBillionaireBloke July 26, 2020, 4:00 am

    Mortality rates from Covid-19 around the world – John Hopkins University

    JOHNS Hopkins (again)

  • 21 Taxmancometh July 26, 2020, 8:06 am

    I don’t think people can delay home purchases and sales for very long because of tax. If you need to move up or down or relocate eventually you will regardless. And no, people ultimately don’t buy homes to make money they buy them to live in. At least that’s the way it should be.

    Stamp duty certainly does put a downward pressure on prices so why wouldn’t CGT? As you say yourself tax is a slowing force. But people have to move eventually so prices will fall to a level that is more equal to other assets that don’t have the particular advantage that homeowners enjoy.

  • 22 Taxmancometh July 26, 2020, 8:10 am

    Another can of worms and a whole new thread! I think though you could scrap IHT entirely if CGT was paid on death including on the primary residence.

  • 23 Taxmancometh July 26, 2020, 8:14 am

    Yes I think I agree with all you say. It would massively simplify our ridiculously complex tax system too.

  • 24 Vanguardfan July 26, 2020, 8:47 am

    I believe other countries tax the profit on private homes, so clearly it can be done without the sky falling in.
    Though of course, any major change requires careful thought and understanding of both intended and unintended consequences.

  • 25 Matthew July 26, 2020, 9:02 am

    @taxmancometh – they’d delay because of affordability – people put up with overcrowding/bad leases not out of not needing to move but not being able to
    The idea of home ownership being profitable is a factor in not renting – essentially this takes a carrot away. Renting is less tax efficient and is known to encourage dependance on the welfare state and thus labour politics – a low earner renting is hardly any better off at all working than not – you need to give people a reason to work otherwise the economy would sieze up / wages would get expensive (which would be a bigger part of every transaction since the workers of every shop&factory would be paying more tax

    Stamp duty only suppresses house prices near its thresholds, not house prices in general – the threshold effect happens to wages too, if tax were based on an equation rather than thresholds we would have smoother pricing

    Ultimately theres an ideal laffer curve point to be found for every tax / tax as a whole. Would stinging the boomers actually help millenials now? I think its too late, itd only burn up inheritances – with yields so low the government doesnt really need to be raising taxes and especially not beyond the laffer curve (although I wouldnt be casual about spending either)

  • 26 BBlimp July 26, 2020, 9:30 am

    @Taxman … people really do avoid moving to avoid paying tax… anecdotally I’ve given leave to three members of my team over the past or next week who are seriously house hunting as they are currently living in unsuitable homes but didn’t want to pay the stamp duty incurred by moving ( which has now been reduced).

  • 27 Matthew July 26, 2020, 10:41 am

    The only benefit I can see of taxing the boomers now at this point in time is deficit reduction to keep borrowing cheap for companies without the inflation risks of too much QE/helecoptor money – it would benefit the 1% who hold the most assets. Who would lose? – millenials set to inherit – not boomers who already have the house.

    Hurting one does not necessarily help another, or at least not who you intend it to. Likewise polices that you’d think are anti worker or anti poor (like uncontrolled capitalism) may indeed help the rich far more than the poor, but DOES ultimately help the poor over time more than socialism. You have inequality but in the long run everyone is at a higher level than they’d otherwise be – hence why we have immigration from ex socialist countries. We may be workers but everyone is also a customer, we need efficiency.

    Also equity release would be less viable – some of that cash must stay locked up until death.

  • 28 ZXSpectrum48k July 26, 2020, 11:06 am

    Regarding IHT, nil rate band tax relief (which is primarily relief on primary residences) is valued at £22bn/annum by the Treasury. Add that to CGT tax relief on primary residences, valued at £28bn/annum, and that’s £50bn in extra revenue.

    Now, I can’t quite see how those two reliefs aren’t correlated and I don’t imagine you would raise even close to that. Anything, however, that undermines the favourable treatment of property over other asset classes in the UK, anything that can reduce prices, is highly welcome in my view. Add in a land value tax on unimproved land values to hurt the land banking cartel and I’d be even happier. Smash property up good and proper and perhaps the UK population might even start investing in productive assets. Never will happen!

  • 29 Matthew July 26, 2020, 11:22 am

    @zx – tax land bankers yes, since land cannot be produced so a tax won’t reduce the “production of” land

    I wouldn’t tackle housing from the demand side, as that won’t increase production – house prices would only drop because people were miserably overcrowded and had no other option (which would reduce birth rates)

    From the supply side we must make it cheaper to make houses, and profitable to do so. Policies that force for example a certain % of homes to be affordable take the profit out and reduce production – but even the production of expensive homes does help increase supply of property in general which would help keep prices a bit more suppressed for affordable homes by moving the whole chain along so to speak

  • 30 Barn Owl July 26, 2020, 1:05 pm

    ISAs, Pensions and annual use of the CGT allowance, mean that most private investors do not have to pay any CGT. As @TI had said “unless they are muppets” and don’t use their allowances.

    So arguing for CGT on primary homes because we pay it on shares, is misleading.

  • 31 Seeking Fire July 26, 2020, 5:01 pm

    There absolutely is definitely no signs of a bubble. Definitely not. No way. ahem.
    https://www.bbc.co.uk/news/business-53201204

    I’m all for removing CGT relief on property. In fact I would favour removing every tax relief there is, all personal allowances, isa relief, pension relief, basic – additional rate taxation, iht relief and move straight to a flat tax. Cut out the bulk of the tax code. Make life a lot simpler and encourage people to actually focus on generating productive enterprises. isn’t gonna happen though.

  • 32 Tony Edgecombe July 26, 2020, 8:45 pm

    >Likewise if you banned rip off leases on new houses fewer would get built if you made the whole thing less profitable

    Or perhaps the land builders need would fall in value. I’m not sure builders profits are that much of a constraint on building. The real problem seems to be the cost of land, availability of skilled labour and planning requirements.

  • 33 Indecisive July 26, 2020, 9:36 pm

    @Matthew, #29

    From the supply side we must make it cheaper to make houses, and profitable to do so.

    I went through a self-build phase a couple of years ago, and my takeaway was how cheap building a house was. In most cases I examined the cost of the plot was going to be 50% of the final build cost.

    Mass house builders will no doubt get plots at a sizeable discount. I’d also expect their cookie-cutter construction to have significant cost savings. From both angles I’d say the house builders are doing fine.

    Cheaper housing construction would be interesting, so long as the savings are passed onto the consumer. I like the pre-fab ideas coming out now, of factory-built houses. It will remove some of the variability if they QC properly during construction, my bugbear with new build.

  • 34 Matthew July 26, 2020, 9:39 pm

    @tony – I think at the root we are saying that a house in this country must meet set standards, demanding a level of work and skill that is simply beyond the economic value of what many workers do. It’s the harsh truth you see in slums abroad, and lower building standards would at least give them living options that are better than homelessness. – even a modified shipping container might be better than paying through the nose for a rental.

    And if even our low paid workers can’t be justified a normal house I shudder to think how the benefits class expects to justify the privelige of a well built spacious council house.

    The boomers benefited from post war state (unprofitable) housebuilding and keynsian spending splurges, and high rates that wouldve been hard at first but where saving actually made a difference and then those rates dropped (the capital gains didnt actually make most of them any richer). Some are fond of the keynsian policies that benefitted them. Boomers were from a time of 3x limits to borrowing which wouldve restrained prices demand side but wouldve also made it overcrowded at the time and wouldve limited the profitability of private housebuilding. Also bear in mind that increasing the hours women tended to work in the family has raised the bar on prices but also wouldve helped us all as customers by increasing the labour supply thus keeping wages under control – the country as a whole is richer for it and higher house prices should encourage building – so ultimately more families get the house they need, irrespective of being financially deoendant on each other and single people not standing a chance.
    Economic normal without government intervention is more like the state we had before ww2 – families living together, the idea of one person on a low job buying a house themselves being totally ludicrous

    Anyway point is millenials have more in common economically with the pre-war generation than the boomers who lived in a time of government intervention, millenials should not compare themselves to the boomers or expect to aspire to the same thing.

    But maybe there are efficiency wins to be found – low hanging fruit – tax reductions, dropping insulation needs, etc

  • 35 Matthew July 26, 2020, 10:02 pm

    @indecisive – if its profitable like you say, competition should in theory move in and thus increase the supply, in turn bringing down costs – so what is holding competion back? Maybe there are barriers to entry for new housebuilders, or they demand a certain minimum profit to cover the risks, or they have to pay out large amounts in employee pension + NI (which you didn’t as a self build)

    If land is expensive maybe we need to make the planning permission to change land use cheaper so agricultural land & greenbelt can be used

    On the other hand there must come a time eventually when population can grow no more and the only way to save the environment is getting births under control by making would be parents uncomfortable by slowing building

  • 36 Barn Owl July 26, 2020, 10:29 pm

    Looking at https://ec.europa.eu/eurostat/statistics-explained/index.php/Housing_statistics#Type_of_dwelling

    The UK has a much lower than average number of flats compared with the rest of Europe. Maybe we need to built more flats. They use less land and maybe are cheaper per unit area especially if pre-fabricated.

  • 37 Matthew July 27, 2020, 6:04 am

    @barn owl – perhaps, more that many of the countries in the like were ex-socialist so I wonder if it was policy one time to build flats en mass at a loss (an ex Soviet at work told me their government wanted to outbuild America to “show it was better”) – and/or maybe they had looser planning permission/standards

    Perhaps if we loosened planning permission and didn’t listen to nimbys and has disregard for damage to values (an undemocratic centralised government that didn’t value asset ownership would be like that) – ethically though the nimbys could just be compensated for low land value to remove their opposition and so as to not undermine the value of assets, within the limits of compulsory purchase valuations

  • 38 Taxmancometh July 27, 2020, 7:54 am

    @matthew. You make 2 assumptions. 1 that renting is always bad. It isn’t. At the moment I can rent for about 3% of the capital value and enjoy the flexibility and my capital is available for hopefully more profitable returns. 2 you think house building is expensive. It isn’t. It’s the land that is expensive because the value of the end product dictates the value of the land. So the inflated prices of the current houses that boomers enjoy tax free cause new builds to be expensive. The only reason people have a hope of buying is because interest rates and a whole host of government intervention schemes ensure that rates are rock bottom to hold the entire bloated edifice together. lowering of house prices would reduce land prices.

  • 39 Taxmancometh July 27, 2020, 8:02 am

    I’m not arguing that there shouldn’t be reliefs on house CGT also. I’m arguing that it should be equally applied as I don’t see why not and it’s a very large source of untapped potential to solve the problem of our massive deficit. Ultimately I also believe we need to get interest rates back up so that savings become worthwhile again. It’s hard to see that happening when there such a vast amount owed by the government

  • 40 Matthew July 27, 2020, 9:32 am

    @taxman – if you can rent at 3% of capital value then I’m amazed, numbers round where I live are 5-6% – and you have to add to that future expected capital gains (at approx the % of wage growth) – I’m not saying it can’t be beat but it’d be tough to, especially on a risk vs reward basis – lets put it this way – you’d never find a more tax efficient or reliable buy to let than the imputed rent you’d get as imputed rent if you are your own tennant.

    In principle a buy to let is adding middlemen – landlord needs a cut, mortgage company wants a higher rate for it, HMRC of course wants a cut, estate agents want a cut – after all that expense theres not much left to make buy to let worthwhile, so you’d expect landlords to demand sufficiently high rents to compensate otherwise they might as well be in equities – they’re not going to sit there making a loss – how could a landlord make profit on 3% rent?
    But since renters do have normal investment options its not the end of the world if they can’t buy straight away

    Maybe building is less than i thought (depending on wages though and tax in the sale) but still any cost is something we should tackle. I notice that land that has planning permission is worth a lot mire than land that doesnt – if we could cheapen the planning process (consider that as part of the building cost) then we could increase the supply of land

    There is the demand end like you say but also supply – from the demand side who is bidding up the price? – millenials are the ones now doing the buying and feeding the entire chain – government help like you say is demand side and further bid up the price (may encourage building)

  • 41 taxmancometh July 27, 2020, 10:19 am

    @matthew You can get good value on rentals at the higher end of the market in expensive areas. Though I agree at the bottom end its more like 5-6% which is supported by welfare payments. Your assumption that you will get a capital appreciation is just that, an assumption. And if thats the case why would it be unfair to tax this ‘inevitable gain’ seeing as its so easy to get?

    The cost of planning is negligible compared to the difference in value between agricultural and development land. 30-50% of a property development will be in the land price. Much higher in prime urban locations. To build a really nice 5 bedroom house should cost about £250k. With a half acre garden at agricultural land value would only add £5k to the cost. A high rise high density development on that could produce maybe 100 homes? No reason then that £25k homes shouldn’t be possible. These are top of my head calculations but you get my drift, its the land thats the expensive bit.

  • 42 Matthew July 27, 2020, 12:09 pm

    @taxman – you can see how if you did provide 100 homes for cheap you’d be providing a profound thing to many people, which would be reflected by the huge profits you could make (say you sold at 50k each). If that is not happening for profit when there is such a strong potential profit, why is it not? If land is expensive then building upwards is the solution like you say, it can still be done for cheap, why is it not happening? Why would land bankers cling on to land in the face of such huge potential profits? Somewhere lurks some sort of cost or regulation. If there is a monopoly maybe we must break that up

    Capital gain if there are no rate changes ought to approximately track wage growth so if we made an allowance for indexation that ought to cover it, maybe thats why it wasnt taxed as it was assumed to only represent normal inflation and you usually only sell a house to buy another – moving house to say add a conservatory would not be much different to building a conservatory on an exising one so would you impose capital gains at the point of extending a property if its analogous to selling & rebuying?

  • 43 The Borderer July 27, 2020, 1:16 pm

    @Matthew (37)
    “Perhaps if we loosened planning permission and didn’t listen to nimbys…” – I assume you are talking about building on green belt or rural land.
    The fundamental problem with your premise is infrastructure, or lack thereof. Any development in rural/sem-rural areas places enormous strain on roads, water treatment/sewer plants and potable water supplies. Many such areas are served by at best ‘C’ class roads. And because they are not well served by public transport, cars are an essential. Even a moderate development can add hundreds if not thousands of cars on the roads in the area. And the maintenance of these facilities is met by the tax payer,not the developer.
    It’s not so simple as “here’s a nice field, let’s build a load of houses”!

  • 44 Matthew July 27, 2020, 1:40 pm

    Good point borderer – maybe the planning permission should involve the short term cost of that infrastructure since the developer is imposing that on the council. In the long run though thar be council tax.
    Maybe infrastructure is the issue?

    Maybe redeveloping brownfield into high rise is cheaper?

  • 45 Vanguardfan July 27, 2020, 1:50 pm

    @matthew, here’s a report about what happens when you loosen planning restrictions in relation to housing: https://www.insidehousing.co.uk/news/news/permitted-development-creates-worse-quality-homes-says-government-commissioned-report-67242

    I guess since you are relaxed about poor people living in slums, you’ll consider this good news. Personally, I think the sixth richest nation on earth should be aiming a little higher.

  • 46 ZXSpectrum48k July 27, 2020, 2:00 pm

    @SeekingFire. Has to be said there is something very wrong with some of this day trading, particularly the tendency for post-bankruptcy rallies in various equities.

    Take Ascena Retail Group in the US. I’d never heard of it either. The share price rallied from 0.57 on Friday to 1.40 today (now 1.01). Normal volume is a few million shares. Today’s volume was about 60mm+. So what triggered that 100%+ rally? Well the only thing that came out over the weekend was the court declaration of bankruptcy. Creditors are taking control of the retail chain. Common equity will be canceled.

    Now to most of us, saying that would would probably mean the equity is worth zero, zip, a doughnut etc. But these days it clearly means buy, buy, buy …

  • 47 Matthew July 27, 2020, 4:09 pm

    @vanguardfan – still better than homelessness – at least you’re giving people an option they otherwise wouldn’t have, whether that’s being able to save or just to be able to live. What you can be sure of is that it won’t increase prices. I used to live in a damp old flat that caused me asthma and you can only escape that when you have options – saying “you can’t have this because it doesn’t meet standards” means one more door closes on you – no room at the inn
    People live in vans in London just to avoid rent/commuting costs….

    You need the threat of homelessness however to make people pay bills
    But I do think that prisoners shouldn’t get a better deal than the homeless, otherwise they might as well commit crime
    Personally I don’t see why prisons need roofs if you make the walls high enough and/or I don’t see why you can’t just stick them all in the same room – part of the punishment. Or just enact swift eye for eye justice – that’s fairer on victims than what we have, and a proper deterrent would help there (us death penalty too humane to be an effective deterrent)

  • 48 The Borderer July 27, 2020, 6:57 pm

    @Matthew (44)
    Yes, make the developer pay for improvements in infrastucture before granting planning permission might be a good idea – if you can enforce it! My local council did exactly this on a local housing development where they required the developer to improve a single track lane (with passing places, through a marsh), used by locals in the know, that cuts about 20 minutes journey time off the route from the nearest motorway to the development.

    They promptly closed the lane (so now no one can use it) and did nothing. This was nearly 4 years ago. The developer is now commencing phase 3 of the development!

    He’ll take his profit, saddle the company with debt from his other ‘group’ companies, and liquidate it. Result – no infrastucture improvement, and no way to enforce it.

    I’m afraid local councils are no match for savvy (and unscrupulous) developers.

  • 49 Matthew July 27, 2020, 7:19 pm

    @borderer – can’t they say no approval for you until you do this for us? Or at least pay the council what it would cost for the council to do it before approval is granted

  • 50 The Borderer July 27, 2020, 7:35 pm

    @Matthew
    You would think?
    But the council needs houses built. The developer gives them the sob story that he could only improve the road with profit from the development… sorry, didn’t make enough from phase 1, let us build phase 2, then we’ll have enough. Oops, looks like we’ll need phase 3…
    You can picture it.
    As I say, no council in the country has the people who can think like developers – they’re civil servants, not businessmen.

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