4月 20 / admin Why investing in any type of UK property is a bad move – MoneyWeek

***RECOMMENDEDARTICLES:Arestocksheadedfora1987-stylecrash?

HowpublicspendingishurtingtheUK

There’sbeenalotofupbeattalkonthepropertymarketrecently。

Andthelatestsurveysseemtobackitup。

PropertygroupHometrackreckonshousepricesroseforthefourthmonthinarowinMarch,by0。

5%。

Pricesroseby0。

1%onlastMarchthefirstannualincreaseHometrackhasreportedsincethestartof2005。

AndtheBritishBankers’Associationreportsthatthenumberofnewmortgageapprovalsforhousepurchasecameinat57,585inFebruary。

That’sup22%onayearago。

Soisthepropertymarketfirmlybackontheupwardpath?

Wedontthinksoandwerenottheonlyones

ThinktankCapitalEconomicspointsoutthatFebruary’s22%annualincreaseinthenumberofmortgageapprovals“isnothingtowritehomeabout,becauselate2004/early2005wasthetroughformortgagedemand。



AndBBAfiguresaren’tseasonallyadjusted–inotherwords,theydon’tmakeanyallowancesforthefactthatcertaintimesofyeararegenerallybusierforhousesalesthanothers。

Afteradjustments,CEreckon“newapprovalsactuallyfell5%inFebruary。

Moreover,theyhavefallen11%sinceNovember。



Andinfact,theFebruaryfigurewastheweakestsinceJulylastyear。

“Withaffordabilityremainingstretched,itislookingmorelikelythatmortgagedemandhasnowpeaked。



Butifmortgagedemandhaspeaked,whyhasHometrackrecordedariseinprices?

Thatseemsprettystraightforward。

ThegroupsaidthegrowthwasmainlyfuelledbyrisingLondonprices。

HousesinLondonaremuchmoreexpensivethananywhereelseintheUK。

Ifalargerproportionofsalesarebeingmadeinthecapital,thatwouldpushuptheaveragesaleprice,evenifthenumberofsalesremainedstaticorevenfell。

AndtheChristmasbonuseffectcanonlyboostthesalesofbachelorpadsinMayfairforsolong。

EvenCitybankershavealimittothenumberofglassandchromepenthouseflatstheywantintheirportfolios。

Thingsaren’tmuchbetterincommercialproperty。

AlthoughGordonBrowndeliveredaboosttothesectorwithhisrelativelybenigntaxtreatmentofRealEstateInvestmentTrusts,thecracksareappearing。

MartinAllen,propertyanalystatMorganStanley,pointedoutthat“alltheReitsprovisiondoesisreturnpropertycompaniestothepositiontheywereinpriortotheerosionofdividendtaxcreditsthatstartedin1992”,saysTheTelegraph。

“I’vebeenapropertyanalystfor18yearsandthisisthefourthpropertysharebubbleinthattime。

IknowapropertysharebubblewhenIseeoneanditdoesn’tmatterwhetherwe’vegotReitsornot。

Propertysharesareoverpriced。



ButdespitetheUKpublicsalmostsupernaturalfearoffallinghouseprices,thereareupsidestodecliningorstatichomevalues。

AndoneofthoseisthatGordonBrownmightnotgethishandsonyourmoneywhenyoudie。

HousepricegrowthhasfaroutstrippedMrBrownsmiserlyincreasesintheinheritancetaxthreshold,leavingmanymorepeoplepotentiallysubjecttothetax。

Andofcourse,astheChancellorwidenshisnet,hehasalsomadeitmuchhardertoavoidinheritancetax。

Budget2006containedmoresuchwidely-anticipatedloopholeclosures。

Hehasintroducedrulestostoppeopleusingvarioustypesoftrusttoleavemoneytotheirheirswithouthavingtogive40%ofittotheGovernment。

Thereallynastythingaboutthesenewrulesisthattheyapplytotruststhathavealreadybeensetup,notjusttoonesthatarebeingsetupthistaxyearorinthefuture。

Somanypeoplewhohavespentalotoftimeandmoneytryingtoplanfortheirchildrensfutureshaveseenitallgotowaste。

Ineffect,MrBrownhasoutlawedtaxplanning。

Bydecidingthatit’sacceptabletomakeretrospectivetaxlaws,hecaneffectivelyconfiscateanyamountofwealthhelikes,atanytimehelikes。

Thephilosophyofthelaughably-nicknamedIronChancellorseemstobethatallprivatesectorwagesgeneratedintheUKbelongtotheState,excepttheproportionwhichtheStategenerouslyallowsyoutokeepsoyoucanbuyfoodandshelter。

Soit’sonlyfairthattheStateshouldbeabletodemanditbackanytimethatitlikes,evenifthatmeansrewritingtaxlaw。

AnotherpersonwhobelievesinrewritingfiscalhistoryisVenezuela’sleft-wingPresidentHugoChavez。

ThecountryhasjustpresentedBPwithaback-taxbillof£35m,datedbetween2001and2004。

Inthe1990s,Venezuelasigneddealswithvariouscompaniesatataxrateof34%。

ButnowPresidentChavezbelievesthatthedealsshouldhavebeenmadeat50%。

Backdatingtaxescreatesanincrediblyuncertaininvestmentenvironment。

IftheGovernmentcaneffectivelyconfiscateyourpropertyatanytimeitlikesbyintroducinganewtaxlaw,thenthere’snoincentivetosaveorbuildupwealthorstartupabusiness。

It’sacertainroutetoeconomicstagnationandcollapsethekindofthingthatonlyanunreconstructed,economically-blindsocialistcouldconsidertobeagoodidea。

NorthSeaoilproducersmustbehopingthatMrBrowndoesntgetanybigideasaboutbackdatingtheirtaxes。

Theyalreadypay50%。

Turningtothestockmarkets…

TheFTSE100closed64pointslowerat5,972。

FundmanagersAmvescapandSchroderswereamongthemainfallers,amidconcernsthattheUSFederalReservewillkeephikinginterestratesfortheforseeablefuture。

Forafullmarketreport,see:Londonmarketclose

OverincontinentalEurope,theParisCac40wasdown56pointsat5,162,whiletheGermanDaxfell60tocloseat5,912。

AcrosstheAtlantic,USstocksweremixedasinvestorsstayedcautiousaheadoftheFederalReservesinterestratedecision,duelatertoday。

TheDowJonesfell29pointsto11,250,whiletheSP500slipped1to1,301。

Thetech-heavyNasdaqclimbed2to2,315。

InAsiantradinghours,oilwasedginglower,tradingataround$64。

10abarrelinNewYork。

Brentcrudewastradingataround$62。

80abarrel。

Meanwhile,silverhitanew22-yearhigh,risingto$10。

92anounce,beforeeasingbackto$10。

89,oncontinuedexcitementovertheanticipatedapprovalofaUS-basedsilverexchange-tradedfund。

Spotgoldwastradingataround$565anounce。

InAsianstockmarkets,theNikkei225gained40pointsto16,690。

MachinerymakerssuchasKubotaandKomatsuwereamongthetoprisersonincreaseddemandforagriculturalmachineryanddiggers。

AndtheUKtodayisfacingitsbiggeststrikesincethe1926GeneralStrike,accordingtounions。

Upto1。

5mlocalgovernmentworkersaresettodowntoolsoverproposedchangestopublicsectorpensions。

TheGovernmentistryingtoscrapthe85-yearrule,whichsaysthatmembersoftheLocalGovernmentPensionSchemecanretireat60onafullpensionifthesumoftheirageandyearsofservicecomesto85ormore。

Theactionwillcloseatleast70%ofschoolsinLondon,saysReuters。

Andourtworecommendedarticlesfortoday

Arestocksheadedfora1987-stylecrash?

Developedstockmarketsarehittingfive-yearhighs,commoditypricesarebooming,andhousepricesareatrecordlevels。

Butthethreatsfacingtheglobaleconomyareformidableavulnerabledollar,invertingyieldcurvesandanewFederalReserveChairmanintheUS。

Itsalllookingalotlike1987outthere,saysJeremyBatstoneatCharlesStanleytofindoutwhatthatcouldmean,clickhere:Whymarketscouldbeheadingfora1987-stylecrash

HowpublicspendingisdamagingtheUKTheBritishpublichasalongtraditionofappreciatingprivacyandrespectingindividuality。

ButthistraditionisbeingdestroyedsteadilybyNewLabour,saysBrianDurrantintheFleetStreetLetter。

ItsintheGovernmentsinteresttomakethemajorityofvotersdependentonthestateandthishasalreadybeenachieved。

Tofindouthow,andhowtoprotectyourinvestmentsinanincreasinglycentralisedUKeconomy,clickhere:HowpublicspendingisdamagingtheUK

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