'Scrapping mortgage relief could force people to rent'

SCRAPPING mortgage relief could drive people towards rental and social housing, an estate agent has warned.

Keith Enevoldsen

SCRAPPING mortgage relief could drive people towards rental and social housing, an estate agent has warned.

Martel Maides director Keith Enevoldsen, pictured, said proposals in Treasury’s budget to phase out the relief over seven years were disappointing.

‘The effect on the housing market may be that prices won’t go up as fast – but it may also have the effect of pushing people towards the rental sector or social housing,' he said

Shields Estate Agents director Tim Roberts agreed.

‘A lot of buyers rely on the mortgage relief to make their loan affordable when they are looking to either take a step up the ladder or if they are buying for the first time,’ he said.

Swoffers director Spencer Noyon said the cost of buying was high enough as it was with the relief.

Comments for: "'Scrapping mortgage relief could force people to rent'"

Vivica

Another way to scare the tax paying younger islanders away... Very clever guys.

Guern abroad

I am afraid that Estate Agents have to shelve some of the blame for the very high house prices in Guernsey.

It is wrong to base a housing market on a tax relief.

It is going to hurt and I feel sorry for those who will be hit now, but it is a relief that was bound to go at some point.

I think people have forgotten that historically mortgage interest rates went up and up, we are having such a period of grace that it is going to hurt when this relief goes and interest rates rise.

Sense

Guern abroad

I agree with your post.

In the other thread someone mentioned that the relieft was taken into account when calculating mortgages. If correct, another mistakes by the banks as the mortgage should only be based on the net income for the party.

Another post correctly states if people can not cope now how will they cope when interest rises again from this historically low position?

My personal thoughts are that Gavin has it right, yes it will affect house prices and if people relied on this for extra money, more foul them. It is a tax relief and in circumstances such as this it is the reliefs which will go first.

If this relief didn't go I am sure there would just be a GST or increase in other tax to cover the short fall. The change is needed and as phased the impact should also be phased. Personally, the people which will suffer the most are the people who pushed themselves with the mortgage to get more then they could realistically afford.

I do not currently have a home but will be looking to buy in the near future on the island and I am sure like many others it will now mean more planning and saving.

SteveyM

Properties command such a high premium not from the first time buyer, but from the 'investment property' market.

It does not matter that owners do not get mortgage relief on a second (3rd 4th or 5th) home when their asset(s) increase in value so rapidly and quickly, particularly when these are rented out too.

Removing mortage relief from first time buyers will only increase rental prices and worsen the problem, as property will become an even more solid investment.

I think the only practical approach to the problem is to introduce a more significant property tax rate to people/organisations with multiple homes and use this to offset the mortgage relief of people with just one.

That way the only people paying a higher premium are the ones contributing most to the problem of high house prices.

Even more concerned than before

It seems that this policy, however, inadvertently, is going to have the opposite effect and cause financial misery to the largest possible number of people - renters and mortgaged-backed homeowners alike - with those with tiny or no mortgages or masses of money and multiple properties (like landlords)getting the upside (even a modest windfall).

If it was 1 April, might you not think that this was a spoof story?!

I do hope, after careful reflection that the T&R Board has the stomach to change its position rather than dig in to try and not lose face. Its bigger and braver to face up to this mistake sooner rather than later.

SteveyM

My post was not in support of removing mortgage tax relief. I also hope that the proposal is dropped.

kevin

this guy is right and Gavin St. Pier knows it.

Extra demand will force rents up still further.

Lets see now .... how many members of our States are landlords?

Backchat

I think house sales might go up, investors buying the houses that no one can afford then renting them at higher rental prices, it's all going to lead to much more social housing demand, all the tax savings gone.

local lass

As a local i think the only hope of getting any property is to move from the island which a lot of younger people are doing. i am very disappointed in the states and think they are letting this island down.

Neil Forman

local lass

I agree

There is no way current and future school leavers on a median wage will be able to buy their own home.

I asked a few people today what they thought of this idea, it has not gone down well.

One couple who have bought a £400,000+ property this year were planning to have children, the cannot do this now. ( bigger demographic time bomb ).

Another was thinking of starting a campaign where everybody strikes for one day as a big F U to the States ( his words, not mine ). He wanted to do this monthly until the States started tackling their own problems, public sector pension, out of control Civil Service, overspends and general waste of money. Just close down the Island for a day a month.

Spartacus

Neil Forman

This is typical of where you shoot from the hip without engaging your brain. You are encouraging a strike as a big FU to the States when this hasn't even gone to the States for debate yet. Your "friend" wants to start illegal and undemocratic protests and you are evidently publicly supporting that course of action which would be detrimental to Guernsey. Shocking - you have done yourself a disservice.

So the couple in your example who have bought a £400,000 property have now prioritised home ownership over having a family, whereas other people with families and planning families will be helped (hopefully) by redistributing the savings more fairly, not just subsidising home owners, but by supporting home owners and others equally in different ways.

kevin

The family in question have probably given up on the idea of having kids because they know that once their kids grow up there's not a snowball in hells chance of them affording to buy a house.....

Neil Forman

Spartacus

I note the quotation marks on friend, are you questioning my integrity?

I have posted comments that were made to me, I have not made them up.

Spartacus

Neil Forman

No, the commas were because I'm just not sure whether the person you spoke to was an actual friend or just a random stranger. If it was the former perhaps you should choose your friends more carefully.

Why the hell would a person in your position post such inflamatory and stupid remarks on a public forum?

Spartacus

Kevin

Come on mate, no one's kids are guaranteed to be able to buy a house when they grow up. It's not an entitlement. Personally, if this goes through I suspect it will increase the prospects for our children to afford property in Guernsey.

Day on the beach Protest

Spartacus, actualy I am the person who spoke to neil about this and he cares for the working population. I am sure I am speaking for the minds of many people. How many times do we have to say plug the hole. If you spend more than you earn you cut back (live to your means) this you expect all families to be capable of. Surely our government should be able to get there heads around this? I voted for Gavin as he promised accoutability and no extra taxes, but as normal this did not take long for him to become another civil serice puppet. You are clearly there to stir things up, you must be involved in the press or civil service. I will look into weather the a strike falls out side the law. Maybe we should call it a one day protest? it works in france! By the way are you Mrs St Pier? you are the only one who supports this. I hope island wide voting comes in as I will be voting for Neil as he cares for the future generations for and the future of our island.

Rufus

Anything that makes the Estate Agents squeak would indicate the policy is sound.

milly

RUFUS,well said also the lawyers could drop the price of convayance,and the nod from the judge on tues and thurs could be cheaper.

a set price from start to finish will start.

TED

To little to late to control house prices.Guernsey should have adopted the French mortgage system decades ago where your mortgage payments cannot be more than a third of your net monthly income. stops house prices getting to the insane levels they are here.

Warren

Sign the petition and please share.

http://www.ipetitions.com/petition/say-no-to-guernsey-mir-reductions/

Proud in Guernsey

Well done for getting rid of this outdated and unfair relief. As someone who will never be able to afford to buy property and who lives in private rented accommodation without any support or benefits from the States it seems unfair that I should subsidize those who purchase property, see it increase in value over the years and leave it to their children without any form of inheritance tax paid. It may give me the opportunity to save and leave a nest egg to my children and not other peoples.As Gavin St Pier says ' it is a subsidy from all tax payers to a smaller group' and is therefore difficult to defend. Hopefully the States will have the moral courage to continue with this policy and Education will stop the subsidy to the Colleges as well. After all it a subsidy to a smaller group from all tax payers as well. I am very happy to pay taxes and help the very many who live on this island in true housing poverty and are less fortunate than me but to help others purchase their homes is somewhat immoral.

Graham

The problem is that your rent increases will be greater as more people are put off buying a property. These same people will need housing and as we know social housing is reserved for the less well off members of the community, so the pressure on the private sector rental market will increase. This will only make the landlords profits increase at your expense. I say be careful what you wish for and think it through to its logical conclusion. How many deputies own second, third and more properties for rent?

Backchat

I hope you can afford the increases in your rent that will surely come from lots of others wanting to rent not buy then.

bcb

So maybe those that can afford to buy their own property earn more than you in which case they most likely pay more taxes then you? are they not already subsidising you?.

You see once we start going down the road of whats fair and what isn`t it just opens up a vast array of things people will deem to be unfair to "them". Why should people who don`t have children subsidise sending your children to school when they don`t have any themselves?.

I also get the feeling (not saying your one of them) that some are just bitter towards those who have managed to own their own property and i bet those renting would soon change their tune if they become home owners.

Spartacus

bcb

Education is not a subsidy to the parents it is a subsidy of the child. Every one of us has been to school and enjoyed this subsidy. It is one of the most equal benefits there is, apart from the additional subsidy towards private education of course which creates inequality.

Zab

People who don't have kids have recieved an education at the expense of others it is only right they make a return, rightwing bull.

bcb

It was only a question and an example because what some deem to be fair and unfair, so what is fair that all can agree on? that was my point.

It would be rightwing bull if i just happened to agree with it which i don`t.

B&B

Proud in Guernsey - proud of what exactly?

Why should your taxes pay towards any minority on the island?! Am I right in assuming your mortgage is probably all paid off and now that you've benefited from MIR to do so, you don't want your taxes helping anybody else do the same?!

Are you actually one of those who thinks life is unfair and you should only pay taxes towards things you use?! That's how society works I'm afraid - everybody pays taxes and the distribution is broken down in different areas.

The real crux of the matter is that Gavin St Pier has worded his proposal in such a way that there will never be a redistribution. It will always be pocketed by the States as T&R will always deem the 'financial climate' too unstable to do so.

I'm struggling to have faith in T&R to handle the island's finances when they can't even deliver on their own savings promised!

Feduptotheteeth

So what are the benefits of living in this rubbish island then?

GM

Why not consider introducing a modest Inheritance Tax (say 10%) on Guernsey-situs real estate, net of mortgage on that property but with only £400k being allowable to offset against the property value? Even simpler, levy it on Inheritances (or lifetime gifts of Guernsey properties) and simply exempt the first £400k of value? That exemption figure could be based on the average property value.

Those dying with a £450k value property would pay £5k. Those with a £750k property would pay £35k, those with a £1.5m property would pay £110k and those with a £5m open market property would pay £460k (they would pay 4 times that in the UK). Easy to deal with by life insurance, which results in funding the tax, not avoiding it

Nothing to pay on jointly owned properties until the death of the second spouse if jointly owned. Ban or look through corporate ownership.

This would be a much fairer way to tax Guernsey property ownership and would enable the retention of £400k MIR. After all, if we retain MIR and don't have any CGT on gains made from local property, why not eventually take a modest slice for the States coffers on death?

markB

The trouble is GM The States don’t understand the word “Modest” in no time it will be becomes “Hefty”

Rocky

GM - seems like it is a proposal worth considering because there is an element of equality, i.e. you pay higher taxes on higher values. How this compares to increasing income tax tax to 25% for high earners or looking at a very low level of taxation on corporate entities registered in Guernsey would be interesting and is something T&R should be looking at rather than scrapping MIR.

The scrapping of MIR is unfair because all those lucky enough to have been born a little while ago have benefitted from massive house price rises along with the mortgage interest relief. If we are scrapping this for those currently with mortgages and for those future generations then why not also hit those that have also benefitted in the past? Tax returns state how much mortgage interest has been paid so lets go back 25 years and recoup all the lost benefits. These are the people that can now afford to pay a little extra - why target those that can't?

I know it won't happen but an interesting view when we get challenged by

GM

Rocky

A low tax on companies registered here would completely kill the fiduciary services industry, which is a crucial part of the finance industry. There are tens of thousands of Guernsey companies owned by non-residents which pay no tax here. To start taxing them even at 1% would drive the business to the many other zero tax jurisdictions. Economic suicide, and bear in mind it's precisely why a zero rate of tax here for such companies has always been sacrosanct. If we rock that boat then we will all be paying 50% tax make up for the thousands whose jobs would be lost. And no, that's not an exaggeration.

I would go for both a property-only IHT and a 25% income tax rate on earned income over £100k and leave corporate tax well alone and MIR well alone. This way, the extra tax burden falls on those who can afford it most. And let's face it, an inheritance of a property is merely a windfall - it has not been "earned" in any way, so losing 10% of it as an IHT really should be one of the easiest things to tax.

The wealthy open market sector would not suffer excessively either - UK people coming here save 40% IHT on their overall wealth, so a 10% tax on just their Guernsey real estate is no big deal.

kevin

GM,

Of the tens of thousands of Guernsey companies that are owned by non residents that pay no tax how many of them actually employ people locally?

If they don't then I fail to see how they are contributing to our economy and therefore should be taxed.

I agree with you on tweaking the income tax rates, what percentage would a mainland UK resident earning £100k+ a year be paying?

Phil

Kevin

Most companies do not directly employ staff but they do indirectly through the many employed in the fiduciary industry. This industry then creates further employment by virtue of the fact that its clients have accounts with banks, investment managers etc, plus they use auditors, compliance firms etc, so it's a pretty big player and not one that the island can afford to lose.

GM

Kevin

Those offshore companies very rarely employ anybody. They hold wealth of non-Guernsey individuals. They therefore don't use any of Guernsey's roads, schools, medical services etc. why should they therefore directly pay tax here beyond the annual £500 fee to the Company Registry? If you think that Guernsey would be better off without companies, and in the process lose (literally) thousands of jobs, then you are clearly not understanding the situation.

It's not relevant what rates are in the UK as we don't have the same infrastructure to finance, nor do we have to pay billions to Brussels to support a wasteful, useless and corrupt regime, but for info in the UK individuals pay 20% up to £34,300, 40% between £34,300 and £150,000, and 50% above £150,000. Of course they also have CGT, IHT and VAT, none of which we have. They don't have mortgage interest relief either. They also have much higher fuel taxes.

It is easy to conclude that Guernsey residents are, in comparison, far better off than their counterparts in the UK on a net after-tax basis. Of course that depends on regional variances. A family house costing say £600k in Hampshire might cost only £100,000 in the North East, but incomes in the North East are much lower and jobs are scarce.

The real issue in Guernsey surely is the in affordability of houses due to needing (these days) to find a 10% depost on a £400k house, combined with the lack of a good quality rental market. In mainland Europe ii is very common for people to rent until their late 30s. They often don't buy until they have inherited from their parents or their parents have downsized and can help them, whereas we have 20-year old newly marrieds who expect to be able to buy and service a mortgage, which is just not realistic without family help.

kevin

GM,

I'd be the first to admit that I don't understand the situation but at no point have I suggested that Guernsey would be better off without companies however basically the finance industry is running the island.

For the majority of us this is not good news.

I totally disagree that UK tax rates are not relevant to us - if nothing else they prove that if employees were charged on a similar scale( although not necessarily on those percentages) Guernseys finances would be in far healthier condition and also in a much better position to offer low or zero tax benefits to the finance sector.

You have come to the conclusion that Guernsey residents are better off than their UK counterparts - plainly those earning higher incomes (over £34,300) will be far better off as they will be paying 20% tax here rather than 40% as they would in the UK.

What you have not stopped to consider is that probably 50% (or more) of the Guernsey workforce don't even earn £35k a year yet still pay 20% tax - so think again from a low earners perspective.

These people still have to pay crippling rents or £400k mortgages, very expensive fuel and utility bills as the higher earners,maybe you would like to suggest to them how much better off they are compared to their UK counterparts, I'd put your body armour on first though!

GM

Kevin

You made reference to these companies paying no tax and not employing anybody. The inference from that comment seemed pretty clear to me.

With a UK-style tax system for individuals the overall Guernsey coffers might possibly be better off, but if the rates were anything like the UK's then very few individuals, if any, would be any better off.

The UK rate, after personal allowances, is 20% up to £34,300. The same as Guernsey. However, the UK person gets no mortgage interest relief as it was abolished a few years ago. The UK person also suffers VAT on just about everything they buy with their after-tax income, which we don't (although we do suffer freight charges as quasi-VAT). The big variable is the housing costs out of post-tax income and this is impossible to compare because of the massive variances between housing costs in London (far higher than Guernsey), the Home Counties (probably slightly lower than in Guernsey) and the rest of the UK (much lower than in Guernsey).

You seem to be ignoring the fact that many low earners in Guernsey have a second household income, although I fully accept that this may well be forced rather than desirable, but no different than in many parts of income.

By the way, I think you will find that in the UK petrol costs are much higher per litre than in Guernsey, and of course low earners pay that in exactly the same way as high earners. That eats massively into their household budgets in the UK, as do train commuting fares for many, and which Guernsey residents do not get affected by. How much does the low earner in Guernsey have to pay to get to/from work compared with his UK counterpart? On average it will be a lot less.

I maintain that a low earner in Guernsey in the region of £25,000 to £35,000 is likely to be better off than his UK counterpart in either London or the Home Counties. In many offer areas it might be different, but jobs are scarce in many areas where housing is a lot cheaper.

kevin

GM,

Lower earners in the UK at least have some choice of where to buy or rent property - in most cases they have the option of moving a few miles out of the cities to a more affordable area, those in Guernsey do not have this luxury.

As for fuel costs, yes it is more expensive than in Guernsey but it cannot have escaped your attention that the gap is coming down all the time - when I was there earlier this year the difference was less than 20p a litre as opposed to at least 45-50p a litre a few years ago. It could also be argued that those commuting to work will be achieving a far better m.p.g rate that we do on a completely urban cycle.

Most of Guernseys higher earners are considerably better off than their UK counterparts for many reasons - they pay half the income tax, no VAT, IHT and still currently receive MIR, and to cap it all our our island is giving away millions of pounds a year in tax to help safeguard their well paid jobs while at the same time expecting everyone (regardless of their income) to help fill the black hole.

In my opinion our government should certainly be looking at raising the 20% personal income tax rate for those higher earners.

No danger of that happening though, it would upset too many (rich) people!

Proud in Guernsey

In response to B&B about my earlier post. I have no mortgage and have never had one because my salary multiples would not allow a Bank to lend me enough to allow us to have a mortgage. A joint income of around £35000 does not go far! I think life is very fair - we get by and there are no sour grapes from me. I simply want my taxes to be spent on those who really need it - not the likes of me or those who can afford to purchase a house - that is not the role of the tax system. There are so many people on Guernsey who are driven by money and greed. a civilized society looks after all of it's residence. I overheard a couple discussing there monthly income of over£2500 a month - that's a huge income to me - and before anybody comments we don't get any benefits from the state and have enough without them. Live to your means and don't rely on others is my philosophy.

Ray

Proud in Guernsey

Well said and an excellent philosophy BUT ..

Can you and your family afford an off island holiday every year,can you afford to eat out and go to the cinema once a week

If you have to answer no then you are one of the 10,000 Dr Bridgeman seems determined to classify as poor in the island

guern abroad

The rot is because of people like Dr Bridgeman and their classiciations.

To be poor is not be without shelter and enough food and clothes.

To be dissatisfied is to be without eating out and cinema trips. That is a socially induced concept of poor.

Spartacus

To be poor is going without heating, doctors visits and teeth according to Dr Bridgman. I suppose these things are deemed luxuries but only by those who can afford them.

Phil

Proud in Guernsey

I'm a bit confused by your post, if your joint income is £35,000 then your net monthly income should be about £2,465 per month, so why would £2,500 per month seem huge?

raise income tax

If they scapper the mortgage relief they should at least reduce the court fees to a resonable level.

3.75% above £250k is too high

-------------------------------------------

0.75% up to £200k

1.00% up to £350K

1.50% up to £500K

2.00% up to £750k

2.50% up to £1m

3% £1m plus

would be fair

Ray

raise income tax

The maximum document duty is 3%

http://www.swoffers.co.uk/content/buying-property-added-costs

(.. other good sites available)

Sagaman

There is quite a bit of hysteria being whipped up, but putting aside the various self interest groups it seems to be a sensible initiative. True, estate agents, lawyers and the middle class have all benefited from 40 years of unprecedented house prices increases but this is not sustainable anymore and its wrong for people to rely upon a tax concession in order to get on to the housing market.

The conventional wisdom is that you have to get on the housing market as soon as possible in order to provide security for one's family. This has certainly been the case for as long as we can remember, however, it does not necessarily hold true for the next 30 years. With inflation on the increase and a likeley interest rate shock in the next 5 years there is only one way for house prices to go, and it is not up. Therefore, when prices fall so will rents, albeit not as quickly but fall they will. Good news for first time buyers perhaps although my advice to young people is to not rush into buying a house.

Local lass

I think what the solution is, is to keep mortgage relief and get some intelligent people to sort out the unemployed and scroungers in this island.

nic

why should there be mortgage relief.I dont earn enough to qualify for a mortgage according to the bank yet I still pay rent which is more than a mortgage would be so why shouldnt I get rent relief.As it is the tax get double tax on my rent money as I pay tax on it as does my landlord I say scrap the relief. If the states want to make savings how about starting up the states relief scheme again as it was years ago when you were paid unemployment for 6 weeks and then you had to work for 6 weeks on some states scheme or you recieved nothing.Another way would be use prison work paties to do such things as cleaning beaches cliff paths etc instead of paying private contractors to do the work