Stuck in negative equity? Need to move?

Macsimus

Lot's of us are now going to be stuck in properties that we need to move out of in the next few years, for a variety of reasons, e.g. starting a family, moving closer to a new job, closer to family etc.,

Would you support a tax break allowing people stuck in negative equity to offset the tax on rental income from renting their homes, against rent they pay for another property to live in?

AARRRGH

Yes, but only because I think we already pay too much tax!

danbohan

Macsimus wrote: »

Lot's of us are now going to be stuck in properties that we need to move out of in the next few years, for a variety of reasons, e.g. starting a family, moving closer to a new job, closer to family etc.,

Would you support a tax break allowing people stuck in negative equity to offset the tax on rental income from renting their homes, against rent they pay for another property to live in?

the words , made bed ,and lie in it come to mind , ill conceived tax breaks helped create the property nonsense here in first place . negative equity is a result of bad decisions , bad planning , bad luck etc. its not nice place to be,but their is no point in wishing for magic house fairy to come along with her tax wand and make the pain go away .

Macsimus

danbohan wrote: »

the words , made bed ,and lie in it come to mind , ill conceived tax breaks helped create the property nonsense here in first place . negative equity is a result of bad decisions , bad planning , bad luck etc. its not nice place to be,but their is no point in wishing for magic house fairy to come along with her tax wand and make the pain go away .

This tax break wouldn't be causing false demand as none of them would be buying a property, and it would be relatively revenue neutral as most of these people wouldn't have been able to move without it.

Treehouse72

Macsimus wrote: »

Lot's of us are now going to be stuck in properties that we need to move out of in the next few years, for a variety of reasons, e.g. starting a family, moving closer to a new job, closer to family etc.,

Would you support a tax break allowing people stuck in negative equity to offset the tax on rental income from renting their homes, against rent they pay for another property to live in?

I am sorry, you are so stuck in bubbletime thinking it's hard to know where to start. In general terms, you seem to think that the whole NE mess is a zero-sum game in which your problems (both financial and lifestyle) can be off-loaded onto someone else: in this instance, a renter to take on your house and the taxpayer to give you a tax break.

So, can I ask, where does the negative equity go in your plan? It's like it just disappears. One moment you have a mortgage that is too high for the property you own, the next a renter steps in to pay it instead while you head off to live somewhere else. Well, if that's the case, why doesn't the renter of your house simply move into the new place you are renting instead? After all, it is clearly a more desirable property to you, so presumably it would be more desirable to them too, right? Why would the renter pay your mortgage instead?

The fact of the matter is that the market will not tolerate such an anomalous situation. It would adjust itself by depressing either rents or house prices. If it's rents, then your mortgage is no longer covered by the renter. And if it's prices, then the renters would buy rather than continuing to rent.

If you think about it, those falling rents or falling prices are simply the market expressing the NE that you are seeking to get away from in a different way, but the net effect is the exact same to you as the "owner" of the NE: you lose either by getting less rent for your house or by losing the renter because they buy instead. That is the market "pricing in" your NE just the same as if you sold for less than the mortgage. All those shortfalls and drops are the same thing expressed different ways. You can't just make the NE disappear.

No, what you are advocating is not a solution but rather deckchair-shifting. It is analogous to what happened in the bubble when people thought that the act of buying and selling houses magically created money out of nowhere. You are suggesting something similar where the loses are magically covered and nobody is hurt.

Your idea for the tax break shows that subconsciously you realise there is a gap in your plan: you realise that there is a surplus amount (the original NE) that the taxpayer will in part pay for through your tax break. Again, why would the taxpayer tolerate this? Even more importantly on a practical level, there is no money in the national coffers for such a tax break. That in itself ends your plan.



Ed: Sorry for such a long and verbose post, but it is a very hard thing to describe and quite hard to get your head around until it clicks.

gurramok

Just as Colm McCarthy said to Matt Cooper's crazy plan, the country is bust and so are the banks so unless money is grown on trees...:P