Wednesday, 16 April 2014

"Your home probably earns more than you"

Nothing really new, but a good headline nonetheless in The Metro:

The average property in Britain now costs £253,000, rising to £458,000 in the capital, the Office for National Statistics said.

A would-be buyer would need to be on a salary of at least £96,308 – which would put them in the top ten per cent of earners in the country – to take home £63,000 after tax each year... [to be able to buy in London]

Oliver Atkinson, from online estate agents, said: "Forget talk of house bubbles. In London, the market is well beyond that – what we’re witnessing in the capital is a super-bubble."

Heck knows if the Lib-Cons will manage to keep this going long enough to get them through the next election.

I hesitate to use the over-used and hence nigh meaningless adjective "sustainable", but whatever that means, this isn't it.

Tuesday, 15 April 2014

Killer Arguments Against LVT, Not (324)

A rich harvest of rather half-baked KLNs in City AM Forum:

[The Mansion Tax] would also be fundamentally unfair. Why should people who purchased properties that have appreciated in value be subject to an arbitrary annual penalty?

Perhaps those in all three parties who still support a classic mansion tax are also in favour of a windfall tax on owners of Apple shares, which have increased in value by 4,000 per cent in the past ten years?

And new plans for higher bands of council tax would retain many of the ugliest features of a mansion tax. Their introduction would almost certainly require a costly, full revaluation of all residential property in England.

Without substantial reform at the same time, this would push even modest properties in less desirable areas of London into higher bands and higher bills. Many of those hit by bigger tax bills would be renters.

OK, we can answer most of these questions by looking at something less contentious like beach huts.

Let's imagine the local council granted leases decades ago for £50 a year and never got round to increasing this, so hardly anybody has ever surrendered a lease, you either keep it for yourself, even if you only use it once or twice a year it's still good value, and if you don't need it, it is very profitable to sub-let.

The council maintains a waiting list with five times as many people on it as there are huts, and happens to pick up on the fact that they are being sub-let for up to £5,000 a year.

So the council finally mans up and increases the annual rent to £4,000. That doesn't require a "costly revaluation" of every plot of land in the whole town. It does not tax people on capital gains, the benefit (the rent saved/sub-letting income) is in the past and cannot be touched.

It makes no difference how long you have been a tenant, the £4,000 is demanded from those who have had a beach hut since the year dot and those who finally got to the top of the waiting list last year.

Those people on the waiting list don't mind about the charge, it is entirely their choice whether to pay £4,000 or not (which is better than having to languish on the waiting list for ever), and sub-tenants who are currently paying up to £5,000 aren't bothered either - a sub-tenant who was paying £5,000 cash in hand is not going to start paying £9,000 so that the actual tenant continues to keep the profit, because the hut is not worth more than £5,000.

The new improved beach hut charge is clearly not a "wealth tax". The local council doesn't care if the new tenants own Apple shares or not; the council is delighted that there are some people prepared to pay the new rent. If the council then levies a surcharge on tenants who own Apple shares then those tenants will disappear again (or simply not declare their Apple shares, hence and why "wealth taxes" are pointless at best.

This also illustrates the stupidity of the "disappearing homes conundrum" so beloved of the Homeys; while the Poor Widows In Beach Huts disappear off the scene, the beach huts are still there, and the chances are that anybody keen enough to pay £4,000 to rent one will visit it more regularly; keep in it good condition and have enough money to spend a bit in the local shops as well.

Readers' Letters Of The Day

From City AM Forum:

[Re: The recovery is being driven by a revolution in the jobs market, yesterday]

Have you considered that the reason for the rise in self-employed consultants is the tax system? With a good accountant, moving from PAYE to self-employment, for effectively the same job, can reduce your liability. I find it increasingly difficult to hire employees who want to be permanent.

Iain Herd

From The Metro:

I was interested but not surprised to read your article about the investigation in Poland into claims drugs firm GlaxoSmithKline bribed doctors to use its medicines (Metro, Mon).

As a nurse of 30 years, I have seen groups of specialist consultants being flown to warm European destinations for seminars and lectures at the expense of the drug companies, billeting the doctors in the finest hotels. I have seen nursing colleagues wined and dined at plush restaurants.

I used to attend lunchtime lectures at work where the drug reps would bring anything from sandwiches to gourmet take-aways while they peddled their chosen drugs. Any awkward questions asked about some of these drugs were either sidestepped or met with a fudged response.

It makes me think that morals and statutes do nothing to counter such practices and never will: drug companies have powerful lobbyists who will keep a stranglehold on the drugs market and the price we taxpayers have to pay.

Anton Clark. Essex

So which one is it then?

From City AM (August 2013):

BRITAIN'S top 30 consumer firms are sitting on a £16bn warchest, according to research out today by Deloitte, raising the curtain for renewed mergers and acquisition (M&A) activity as confidence returns to the sector.

The seven largest listed firms have amassed £13bn alone after rebuilding their balance sheets following the recession and reining back on their spending.

From City AM (November 2013):

THOUSANDS of heavily indebted firms are holding back the UK's recovery, kept above water by historically low interest rates, according to a new report published today.

According to research by the Adam Smith Institute, a Westminster think tank, 108,000 so-called zombie businesses across the country are only able to service the interest on their debt, preventing them from restructuring.

From City AM (January 2014):

RBS is acting like a "vampire," sucking the cash out of troubled firms as soon as it becomes available, Lawrence Tomlinson told MPs this afternoon.

Tomlinson caused a storm last year when he published a report into the treatment of small firms by the bank, arguing it took businesses with strong balance sheets and squeezed them hard, ultimately taking their assets and making money for the bank.

From City AM (March 2014):

REJECTED small business loan applications will be offered around alternative lenders, under plans announced by the chancellor yesterday, so the firms have a better chance of getting credit.

It comes after SMEs complained it could take a damagingly large amount of time and effort to apply to lender after lender for a loan.

From City AM (March 2014):

AGAINST a range of improving economic indicators, one metric has remained stubbornly sluggish: business investment. A well-balanced recovery requires a significant rise in corporate investment and a shift away from consumer-led growth.

Deloitte's most recent CFO Survey found that risk appetite is at a six-year high, while just 20 members of the FTSE 100 hold cash reserves worth $144bn. The desire and ability to invest appears to be there, but action has yet to follow.

Can't they just cut out the middleman, the banks, and have the profitable/cash-rich businesses take over the failing/zombie businesses and pay off their debts, or doing peer-to-peer lending/investment with promising smaller businesses, thus cancelling out a large chunk of bank balance sheets on both sides and getting them out of the bloody way of 'the recovery'?

Monday, 14 April 2014

I thought the Chinese were supposed to be good at maths...

From (a rather handy website, as it happens, it even converts figures to your home currency):

Property prices in Shanghai


Price to Income Ratio: 27.86
Monthly mortgage payments as Percentage of Income: 249.60%
Gross Rental Yield (City Centre): 3.16%
Gross Rental Yield (Outside of Centre): 3.64%

Rent Per Month Range
Apartment (1 bedroom) in City Centre - £573.61
Apartment (1 bedroom) Outside of Centre - £314.13
Apartment (3 bedrooms) in City Centre - £1,385.60
Apartment (3 bedrooms) Outside of Centre - £771.69

Buy Apartment Price
Price per Square Meter to Buy Apartment in City Centre - £4,565.91
Price per Square Meter to Buy Apartment Outside of Centre - £2,194.05

Salaries And Financing
Average Monthly Disposable Salary (After Tax) - £606.57
Mortgage Interest Rate in Percentages (%), Yearly - 6.52%

So to be able to even afford to rent one-bed flat in the city centre or a three-bed flat in the 'suburbs' you need two earners, fair enough.

This is when it gets weirder and weirder...

The I-symbol helpfully explains:

Price to Income Ratio is the basic measure for apartment purchase affordability. It is the ratio of median apartment prices to median familial disposable income, expressed as years of income. Our formula assumes and uses:
◦net disposable family income, as defined as 1.5 * the average net salary
◦that the average apartment has 90 square meters
◦its price per square meter is the average price of square meter in city center and outside of city center

Mortgage as Percentage of Income is a the ratio of the actual monthly cost of the mortgage to take-home family income. Average monthly salary is used to estimate family income. It assumes 100% mortgage is taken on 20 years for the house(or apt) of 90 square meters which price per square meter is the average of price in city center and outside of city center.

So a flat costs 27.86 x 1.5 x £606.57 = £253,000, or possibly (£4,565.91 + £2,194)/2 x 90 = £304,200, let's call it £280,000.

The simple average of the four rents is £760 a month, which is a gross yield of 3.3%, which is very much on the low side.

£280,000 on a 100% 20-year repayment mortgage at 6.52% interest = £2,121 per month, or £606.57 x 1.5 x 249.6% = £2,270, call it £2,200 mortgage repayments.

Given that the average of the four rents is £760 a month, why would anybody take out a mortgage costing £2,200 a month?

If we knock off one-third of rental income for a landlord's costs and taxes and assume that he finances the annual loss at the same interest rate as the original mortgage, rents and flat prices would have to increase by 4.6% a year compound for the next twenty years for him to even get his money back, and even if all that happened, the rental yield in twenty years' time would only be 2%.

No, really? I don't know whether to be surprised or disappointed...

From the BBC:

UK drug company GlaxoSmithKline is facing a criminal investigation in Poland for allegedly bribing doctors, BBC Panorama has discovered. Eleven doctors and a GSK regional manager have been charged over alleged corruption between 2010 and 2012...

A former sales rep for GSK in the Polish region of Lodz, Jarek Wisniewski, said:

"There is a simple equation... We pay doctors, they give us prescriptions. We don't pay doctors, we don't see prescriptions for our drugs.

"We cannot go to doctors and say to them, 'I need 20 more prescriptions'. So we prepare an agreement for them to give a talk to patients, we pay £100, but we expect more than 100 prescriptions for this drug..."

One doctor has already admitted guilt, been fined and given a suspended sentence. He said he accepted £100 for a single lecture he never gave, but only under pressure from a GSK drugs rep.

He told Panorama: "They kept tempting, and I am just a man."

See also Newsthump.

See also Poland was the only EU country that refused to order [Tamiflu] when the pandemic was announced last autumn.

Always been a bit dubious about schools "careers advice"

From the FT

Sajid Javid, the new culture secretary, was once tipped by his school careers officer for a career in the media. “I was told that I should apply for a job at Radio Rentals as a television repair man,” he recalled.

Sajid Javid is a year younger than me, and when I was 20, I bought a TV because I worked out renting was just silly (once TVs went solid state the thing that would cost you was the tube, and they had decent warranties anyway). And it was pretty obvious that the pattern was generally that renting TVs was on the way out.

It's often difficult to see what the industries of the future are, but it's often quite easy to see those that are disappearing.
MW adds, in reply to Lola's comment, there are even recruitment/employment agencies who specialise in finding career adviser jobs for people. And presumably there are other people who run training courses for people who would like to work for a recruitment/employment agency and specialise in finding people jobs as career advisors and so on ad infinitum.

Fun Online Polls: Stupid printer questions & The Girls Aloud School Syllabus

The responses to last week's Fun Online Poll were as follows:

Tray 1 Letter unavailable

Use Tray 2 A4 - 6 votes
Load Tray 1 Letter - 39 votes

Well done the 39 of you who got the right answer and whose jobs printed off; my thoughts go out to the six who got the wrong answer and spent the next ten minutes clicking through endless screens on the printer, removing paper jams, trying to delete the print job and turning things off, turning them on again etc.
This week, the Girls Aloud School Syllabus.

Which subject was not on it?

Use the widget in the sidebar!

Sunday, 13 April 2014

Captain America: The Winter Soldier

According to the posters and other publicity material, "Content advice: frequent moderate violence".


We went to see it yesterday, and that's a fair synopsis.

An even fairer synopsis would be:

"The entire plot of this film is explained through the medium of the punch-up; it is up to the viewer to try and work out who is beating up whom in any particular scene and why; expect the same protagonists to fight each other several times during the film with similar outcomes each time (both limp away to fight again another day). Includes occasional non-violent scenes which do little to advance the plot."

After half an hour or so, you sit there screaming (inwardly at least), "Just shoot him in the f-ing face already, and get on with the story!".

Saturday, 12 April 2014

Killer Arguments Against LVT, Not (323)

"I paid for my home out of taxed income!", i.e. so it's unfair to tax me again on its rental value.

Kj knocked this one out of the park a couple of days ago:

"In the parts of the world where we have mortgage interest deductions, the argument "bought my house out of taxed income" falls entirely flat, unless you bought it with saved cash of course."

We had full mortgage interest relief in the UK until the late 1980s, so anybody who bought their home before 1970 or so and/or had paid off their mortgage by 1990 or so actually bought it out of largely tax-free income (the amount of interest they paid and got tax relief on was more than the original cost of the house). If they try using the argument you can just call them lying bastards to their faces.

The relief (called MIRAS) was phased out gradually between the late 1980s and 2000 or so, but most people who bought since 2000 or thereabouts probably haven't paid off their mortgage yet.