When the government flirts around with tax law around housing, watch out.
In the UK, folks were led to believe the past few years that starting in April, they could purchase housing and real estate in their tax-protected "401k" type accounts, called Tipps.
However, the government ruled yesterday at the last hour that they were reversing, and will not allow real estate to be owned this way.
Essentially, folks thought they could get a nice 40% tax break on housing, and now that's not the case. But.... the unintended consequence always gets ya.
Folks had started building houses, anticipating closing on them post-April. Real estate was being bid up in the expectation of this new tax treatment taking effect.
Then pop. But it is interesting in the UK to see people wanting the government to do ANYTHING to get their housing market going again. Tax law, interest rates, whatever. As if it's the government's job to get home prices to appreciate. When in fact it may be the government's job to get home prices to depreciate - so folks who don't have one can flipping buy one (which a whole generation of UK residents can't because they're so overvalued)
Just wait here in the US if the government adjusts tax treatment policy on homes, especially those lovely $1 Million plus McMansions from Toll. You'll see blood in the streets if they touch that mortgage deduction. For anyone.
Here's the UK article for you wonks out there
December 10, 2005
Interesting development from UK will cause their housing meltdown to accelerate now
If something looks too good to be true, it probably is, which is why the shock decision by Gordon Brown to ban residential property from self-invested personal pensions (Sipps) this week shouldn't have been such a surprise.
Owners of country cottages and those who had already set up Sipps (at a cost of about £500) in the hope of putting residential property into them are particularly furious, and the property and financial services industries say the U-turn has cost them hundreds of millions of pounds.
Since there had been confident talk of the "Sipp effect" boosting the sluggish housing market, and some investors had even bought off-plan property in their Sipps in advance of rule changes, Mr Brown's decision has caused wailing and gnashing of teeth almost universally
Subscribe to:
Post Comments (Atom)
2 comments:
I know homeowners want to keep the appreciation going. They have treated it like additional income that just grew out of thin air. However there is no free lunch and money doesn't grow on trees and someone's gain is someone else's lose. Why should young first time home buyers have to pay double what something is worth because some homeowners were counting on their house to provide them with free income. An another note, why wouldn't people want the cost of housing to go down? Don't people want the cost of gasoline and oil to come down? A high cost of oil is good for oil companies the way a high cost of housing is good for home owners. The lower the costs, the more money people should have to spend on other things like food.
you're right - for every gain there is a loser. it feels like everyone today is gaining though - so who are the losers?
the answer - they're not old enough to vote yet... or to buy a home
any boy, are they gonna be pissed if they can't.
but they will. housing has to crash first though.
and it will.
Post a Comment