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From The Times

February 15, 2008

Opening bids: Mr Darling has one rule for the rich and another for first-time buyers

Anne Ashworth

A group of homeowners are in rebellion over their tax burden and their fight has already won concessions. But they remain incensed - and some are beginning to vote with their feet, with Geneva and Zurich being favoured destinations, even though a branch of The Wolseley restaurant has yet to open in either city.

These locations gives a clue to the identity of these agitators: the “non-doms”, the wealthy foreigners living in London's most splendid houses who are fighting back against the curtailment of their tax breaks. On Tuesday, in a second U-turn, an alarmed Alistair Darling once more softened his non-dom reforms. Gains made before April 2008 on properties in offshore trusts will now not be taxed.

Further changes could follow - or even the postponement of the scheme - as reports emerge that non-doms are selling their Belgravia homes and taking their bank balances, brains and business acumen elsewhere. Seldom has a campaign against an unfair tax been so deftly waged.

First-time buyers, by contrast, are at the mercy of Mr Darling as they do not have the financial clout - or the lobbying skills - of the non-doms, who are people who know people.

The latest non-dom climbdown coincided with figures showing that last year only 40 per cent of first-time buyer mortgages were for properties below the £125,000 stamp duty threshold. This compares with nearly 50 per cent in 2006. Meanwhile, these new owner-occupiers are typically paying out a fifth of their income in mortgage payments.

These statistics put pressure on Mr Darling to make some concession in next month's Budget, so giving a helping hand to those who would like to take advantage of lower property prices to clamber on to the ladder. This would allow him to take the credit for reversing the record fall in the numbers of owner-occupiers, highlighted this week by the Halifax. More Britons are renting because they simply cannot afford to buy.

But the property market slowdown means that Mr Darling has financial problems of his own, as a result of the Exchequer's dependency on stamp duty and inheritance tax.

Stamp duty revenues could be less than expected - around £7.3 billion in the 2007-2008 tax year - thanks to lower house prices and the reduced number of transactions. The departure of non-doms will also cut tax revenues. As employers - and prolific spenders in The Wolseley and other West End restaurants and in the shops of Bond Street - they indirectly cause money to flow into the Exchequer.

Mr Darling could be left with no other options but to extol the existing stamp duty relief on zero-carbon homes. He can do so, secure in the knowledge that the Treasury has made it extremely difficult to qualify for this rebate. Conveniently for Mr Darling only a handful of dwellings have, to date, met the eco-concious criteria. The inhabitants of Barnes, Bolton, Bromley, Bromsgrove would like to be greener and less heavily taxed but, just now Mr Darling is listening only to the Belgravia crowd.

OUR SURVEY SAID ...

Seldom have house price surveys been so closely scrutinised and never have they been so contentious. Who would have thought that the term “seasonally-adjusted” could ever have become associated with accusations of deceit?

Last week we commented on the anger of the online fraternities (who long for a house price collapse) over the latest Halifax and Nationwide surveys. These show prices either standing still or slipping - findings largely in tune with other surveys, such as the RICS research indicating that buyers are hesitant and that some sellers are yet to reconcile themselves to the new lower value of their homes.

This lack of realism leads to the sizeable falls being recorded by surveys based on asking prices, such as Rightmove, whose view of the current property scene is more gloomy than those based on agreed prices. This group includes the Halifax, Nationwide and the Land Registry whose figures are seen as close-to- definitive but - irritatingly - a bit out of date.

Homeowners are scanning all these numbers looking for the one that tells the truth. But the truth is that each provides a snapshot that makes up the whole picture: on page 16, we explain how that snapshot is composed. But, despite what the online house price doomsters may claim, no trick photography is involved.

POLL POSITION

The Government's plans for three million new homes for 2020 are based partly on the belief that the Eastern European workers will stay in Britain, permanently serving café lattés and cleaning floors. However, many Poles are planning to go home and spend their free time studying websites such as mandom.com for data on property in Cracow (pictured below) and other cities. A simple five-room house in Cracow costs about £150,000 - a figure that calls into question the Government's forecasts.

It's no surprise the online fraternity longs for a house price correction, as they are most likely the youger people trying to get into their first home. A correction means only that house prices come back into line with earnings. No bad thing, surely. What isn't at all surprising is the naysaying through gritted teeth of the representatives of the various branches of the industry that relies on ever increasing property prices to keep their personal good times going. That's why it must only ever be referred to as a "slowdown". Never a fall. They get plenty of airplay, not least in the Times. Let the onliners have their say too.

Phil Elmes, Terrigal, Australia

I doubt that the Government's plans for three million new homes for 2020 are based on the belief that the Eastern European workers will stay in Britain. 68 percent of migrants to the UK are from non-EU countries.

Robert, Luton,

Current house price appreciation helps those in the older generation. So, we have younger people paying much higher prices to the older generation, and then being saddled with far higher debts. Older generation die, leaving huge IHT gain for the government...that helps to pay for the immigration burden on housing, education and health care. Great country.

DC, London,

Not all first time buyers are young, my husband is 62 he's still working with industrial asthma were private tenants not social or council, its taken us a long time to get a deposit without anyone's help. Now we have the deposit were told at our age were too old for a mortgage, so for the cost of a new 4x4 we've bought a barn with electric/water etc in France we can convert into a home. This way we can work part time in the UK if we feel inclined, plus its great because our french council tax for the year is 150â‚¬'s compared to Â£1400 in the UK. My husband has worked and paid taxes for 47 years so now he's entitled to a rest and we can't afford to live in the UK anymore its just too crowded.

Suzey, Wiltshire, England

The Government's own figures show that one-third of the estimated new homes needed will be for immigrant households. Whether the numbers prove to be true or not, lower paid immigrants will qualify for "social" housing after a period of residence, rather than buy in the open market. New social housing costs the taxpayer nearly Â£3 billion each year in new capital grants and the homes are let on rents much lower than full market rents - in London, only about a quarter of a full market rent. The tenants also get full security of tenure for life. That's the real unfairness, when compared to the position of young buyers trying to get on the "housing ladder".

Michael, Aston Clinton Bucks, England

The disbelief in Seasonal adjustments usually stems from the fact that the parties in question never disclose how they reach these figures. An unusual situation considering most scientific papers have to details exactly how they reached any assumptions.

An open and honest policy is best. Figures shrouded in a mystery formula look like nothing more than some cooked books. As the parties reporting these figures have a direct interest in the public's take on those figures the need for open reporting is even higher.

John, London, Middlesex

giving help to those who want to take advantage of lower property prices?? I thought anyone who doesn't want to pay through the nose for a house is a doomster?

Mike, cheltenham,

In a bidding situation prices go up until the poorer bidders drop out through lack of funds.
Stamp duty is therefore a painless tax so far as buyers are concerned. It penalises the seller, but the seller is generally already sitting on several tens of thousands of pounds worth of appreciation.

Malcolm McLean, Bradford, UK

Nationwide and Halifax are irrelevant as are any other building society/bank surveys.

Why?

Because they do not include cash purchases or auction sales, therefore in the current market why would any sane person waste their time with them???

jim, london, UK

If you love FTB's so much, why aren't you praying for a house price crash too, Anne, like the doomsters you have so little time for?

Dean, London,

So what you are saying in 'Pole' Position is that the government should not be building new homes. What about all those young families who are living in buy-to-let rabbit hutches who would like to move somewhere bigger?

Andy Taylor, Reading,

The writer talks about a house price crash as if it would be a bad thing.

It would be a good thing. The current level of house prices means, quite simply, that the younger generation:

is going to carry massive debts all their lives to pay for the same houses that cost their parents a third as much - even allowing for (current) interest rate differences (which may not last for 25 years - or the 50 years youngsters will almost certainly owe money for)

whilst having to save for their own pension

whilst having to pay ever increasing taxes to pay for the pensions of those retiring before them who, inconveniently, have decided to live longer

whilst paying taxes to pay off 200 billions worth of PFI initiatives

We really have done our children a dis-service. And the biggest dis-service is the generational wealth transfer that high house prices entails.

A youngster buys with a big mortgage, and passes money up the chain to the older person at the top who gets their money

Mike Wilson, Winchester,

The stamp duty is a nuisance for FTB. But I would rather it was abolished for FTB AND added as a tax on BTL CGT over and above the other changes happening in April, as well as cutting the full interest rate tax allowance they get.
The reason? in the area I know it is clear that BTL (there are now To Let signs galoreâ€¦most on houses that were on sale in 2007). House prices increased from 230k to 300k+ over a last year that coincided with the To Let boardsâ€¦.the 11k stamp duty pales in comparison.
I read the govt paper that BTL haven't priced out FTB. It does not look at it from the angle of just the housing FTB is looking for, so is a sop for BTL. Banks get "help" because they have a "special role in the economy". BTL should "suffer" as "housing has a special role in society".
Your solution does nothing to remove speculators and the foolish, who pushed prices up to silly levels for no reason other than they had access to funds.

Raj, London,

Anne, its blindingly obvious you live in London!
In the rest of the UK we assess our houses first as somewhere to live. Despite owning over half a million pounds of debt free property I look forward to a serious houseprice crash making them affordable on average salaries. If mine reduced in value to zero it would not affect my life on iota as I would still be living in it as would anyone with a mortgage who continus to pay it in lieu of rent.

Tom W, Cheshire,