Should people who make obscene profits when they sell their home donate a percentage to charity?

Question

...instead of buying ludicrous investment holiday homes in Plovdiv or Torremolinos, how about sharing their windfall with Shelter, the homeless charity, or something else fairer and more equitable to wider society? More people are disadvantaged by runaway house price inflation than those who benefit.

Answer 1

No, but we should persuade our politicians to do more about building affordable housing and stabilising the market. I find it quite shocking how house prices have rocketed.

My parents bought their first home for £300 in the 1960's. The same property would fetch £75,000 today!

In my opinion homes should not be about profit. Everyone deserves a place to live. The idea that people can play this market to make huge sums of money is criminal.

In my area people are crying out for affordable homes, yet the majority of those being built are 4 and 5 bedroom houses, beyond the means of the majority. Our Tory / "Independent" led council has been asked to do more for the general public, but they are not interested in the majority. We have the lowest wages in the UK and yet the houses being built are for commuters and the retired wealthy.

I do worry that when it all goes silly, we are all going to pay for it, regardless of whether we own a house or not. All it could take is a "Black Wednesday" type collapse.

Answer 2

Many who sell houses, of course, have to reinvest the notional profit straight back into the house they are buying. If they have died then there is the obscene Inheritance tax. Moreover, the costs of buying and selling houses is also very expensive (stamp duty etc).

I agree with you about house price inflation, it is ridiculous and properties are way over-priced. It is this Government that has pursued a policy of low interest rates (having chosen an inflation measure that encouraged this), endless amounts of cheap far eastern money, and lending agencies promoting ever larger multiples of imprudent borrowing. There is also no fear of debt these days, particularly amongst the young.

The Government should never have allowed house prices to run away like they have. Of course, it suited them didn't it? Because it encouraged further borrowing and made the economy appear strong.

With respect, I just think that you have come up with the wrong solution. Instead, we need a house price correction. Also, I don't trust charities either to spend money wisely. Many of them have become bloated and politicised.

Answer 3

Why should you suppose that the people who make profits on property are not also giving to charity? Does anyone know what YOU give to charity? Of course not. In fact, the more you earn, the more tax you pay, and the more cost-effective charitable giving is, through Gift Aid tax reclaims by the charities. So there is a big encouragement to charitable giving, for higher earners and those who make caital gains. It would be interesting to hear some statistics, if anyone out there knows how to obtain them.

Anyway, most people who are selling their homes are just doing it in order to move house, perhaps going to another area for work. So any "profit" they make on the house they are selling gets used up in buying the new one, because that has gone up too. They don't actually SEE any of the money from the increase. Sometimes they have to take out a bigger mortgage to buy the new house, depending on house prices in the various areas. And when they die and leave it to their kids, it just enables them to own a house at the increased price level; inheritance tax mops up 40% of anything over a figure that represents the value of one fairly average house. It would be difficult - and unfair - to impose a special tax on people who sell a house here and buy a new one abroad. That's the sort of thing Communist countries used to do.

There might be a way to cream off a bit more in tax from speculators who buy a house and then sell it on (in the hope of profit) without either living in it themselves or letting it out for a period. But that's done already in the capital gains tax which has to be paid on all short-term profits over about £7000 during one year. However, many property speculators are actually buying to let, and providing a useful service in adding to the available pool of houses for rent - have you noticed that rental prices have come down, as the pool of rentable houses has increased? And the standard of rental housing has gone up too, because of the element of competition to find tenants. But noone buys-to-let in the hope of rental income alone. Taking into account the expenses of insurance and upkeep, the periods between tenants when there is no income, and the element of risk, they are counting on some capital appreciation to make their investment worthwhile. They can get their fingers bitten too. House prices went down drastically soon after John Major's last government got in, for instance, and the prices did not recover for several years.

Answer 4

Well, in principle, people should - in a perfect world -give a percentage of their income to charity, full-stop. But this is not a perfect world.
But your question merely gives rise to questions of its own. When does a profit arise? Do we take the difference between what it was purchased for and what it was sold at? Would that not rather penalise older people who just happened to buy in 1974 and sell now to retire?
Is profit simply the equity?
If you sell to move elsewhere and the equity is used in buying another place - is there a profit then and if so, what is it?
However you define profit; at what point does it become 'obscene?' £50,000? £100,000? £500,000?
I agree with the premise behind your question that ever-rising house prices are the economics of the asylum but inexplicable people seem to think higher house prices are 'good' whilst higher prices of goods are 'bad'.
Both are bad and distort the use of resources to means of land-use rather than to anything which generates true value.

Answer 5

As any homeowner knows, especially when buying a so called expensive property, you have to pay the government stamp duty, council tax, home insurance, mortgage payments, utility bills etc etc. the so called obscene profit is really no profit at all, you have paid for it all over the years. I would suggest provision of homes for the homeless is a government problem, they have had more than enough of the publics money to solve this and many other problems.

Answer 6

That would hardly solve the problem that you are outlining. the price of housing is down to this government making the borrowing of money so cheap. during my mortgage I have been paying up to 15% which means that I have paid most of the present, so called profit, as mortgage payments over the last 30 years. Way to reduce house prices is to increase interest payments which will reduce the number of people who can afford to buy. Unfortunately this does not help those who just bought. The other reason for not doing as you say is that many elderly are selling to realise the equity to enable them to live, again due to this governments actions.

Answer 7

For the last 20 years we have paid a huge amount of our wages on a mortgage. Finally, next year, we will be mortgage free.
And next year our oldest will be looking to take out his first mortgage, just as we are looking to downsize.
We plan to invest some of the profit by helping our kids get on the housing ladder.
We've worked damned hard to get into this position, with the idea that we would have a little nest egg for our retirement. Why should we give it away?

Answer 8

Personally I can totally see where you're coming from and the logic makes sense. However people who 'invest' in property are generally in it for one reason and therefore the tendancy to get greddier and greedier is to tempting. Therefore charity or charity donation is right at the bottom of the list. However perhaps as a footnote to this some of the oscenely high taxes and fees that are part of the house buying/selling process should be donated to charities that deal with homelessness and housing support!

Answer 9

i believe that all and any windfall monies and profits from any source should be invested not in charities or "good causes" but in your own "family" supporting education, health and any other life enhancing actions, by doing this (following the most fortunate peoples of the world) you protect your own against any future misshap. and please don't forget for every £$E 1 donated to any charity a very small proportion actually gets through to the needy. (check out the salaries of charity managers, they are not on minimum wage, nor do they live in shelters or on the street). it is for government through taxation (they tax us at 50% ish) to provide for the less unfortunate amongst us, instead of supporting wars and other military actions world wide.

Answer 10

In a word NO. I purchased my present house ten years ago for £116,000. It is now valued at £480,000. It has nothing to do with me. The huge price difference has been caused by the rapid increase in the price of houses due mainly because supply cannot meet demand. When more homes are built, possibly the price of houses may start to move down.

Why are there so many people in this world who because of envy think that those who have worked hard and saved hard all their lives should somehow be penalised for making provision for themselves? It's just this sort of nonsense which leads to a Conservative and Tory government being elected.

Watch this space.