Monday, August 02, 2010

The price we pay for our house prices

Fucking house prices.

House prices are supposed to be falling soon, by 20% some have said, although some disagree, and some said this some time ago. So nobody knows, but the likelihood is that nothing is going to be done about the insane price of houses, especially in London. Most newspaper articles herald a fall in house prices with much the same foreboding they might mention the sighting of four horsemen on the horizon. Here's a good article about why the value of your house is mostly a chimera, since no matter how expensive your house has become you can't sell it without needing to buy somewhere else and that is also likely to be comparatively expensive, unless you fall into some slender categories: 1) moving to a smaller property or 2) moving to a poorer area or, at a push, 3) both of these.

Otherwise, your house could worth all the cheese on the moon and it won't be any good to you. The nonsense about "releasing equity", ie. remortgaging, is equally irrelevant, as he points out in the moneyweek article, since you can only release equity when you sell the house, and the money you've borrowed off it will have to be paid back either by selling or by simply paying it back, like any other bleeding loan.

But the problems with ridiculous house prices go beyond first-time buyers priced out of their own neighbourhoods by whoever the hell it is fuelling this insanity and into the murky world of inheritance tax. My friend's mum is very ill with cancer and is likely to die soon enough, whereupon the house that he, his mum and his sister live in will be part of her estate. Now inheritance tax must be paid on 40% of everything over £300,000 (or thereabouts) in her estate. Their house, which they have lived in since day dot, is probably worth £700,000. Not because they paid £700,000, or because they have £700,000, or because it's worth £700,000, but because this fucking insane house price balloon bubble decrees that it would sell for £700,000. Which is nice and all, except that as we saw earlier, the value is illusionary - it has no meaning - unless you want to sell. Or, as in this case, when the government gets involved to make sure it gets it hands on its death booty. So my pal and his sister will get 18 months after their mum's death to sell the house they have lived much of the lives, and where they currently care for her, sell the house in order to pay off the tax incurred simply because of house prices, and nothing to do with whether they wish to sell the house, which they don't.

This is an increasingly common situation for people whose parents bought a house when prices were reasonably in line with wages, who haven't been able to get on the housing ladder themselves, who stand to make no money from the price bubble, and in fact stand to have to sell their house and be out of pocket for no other reason than the house's value on the market, which is a total irrelevance most of the time. If they lived in Huddersfield, where an equivalent house is "worth" much less, they'd never have this problem, since the value of the house would be less than the tax-free threshold. There could be rules to excuse the value of the primary property in an estate, or rules that raise the threshold in line with average house prices in the area, or rules that allow the tax to be held-over until the house is sold, at a time of the inheritor's choosing, but there aren't. So this 20-year housing bubble continues fucking people, even those who already have a bought-and-paid-for-over-25-years house.

Lately Cameron's mob have said they will cap housing benefit, to try and rein in some of those tabloid outrages where a immigrant family live in some decked-out mansion and housing benefit meet the exceptional rent demands. Now, when I used to claim housing benefit, I was told in no uncertain terms that I couldn't possibly get more than about a thruppenny bit contribution from the HB squad, so I have no idea how this sort of thing happens, but maybe a key reason the London housing benefit bill is so large is that London rents are so astronomical. And is not the astronomicism of rents something to do with the house price bubble? Or is that just more house price babble?