More one-sided economics from the Home-Owner-Ists

Allister Heath talks good sense in the first four-and-a-half paragraphs of the section headed 'Capital gains nonsense' in today's Metro (except for the claim that this would be 'double taxation in the case of homes'), but then he drifts off into la-la land as usual:

Higher gains tax will throttle the private rental market, making it far less worthwhile for investors to let out property (1), as the Institute of Economic Affairs points out. It will cut the supply of homes for sale as investors will be loath to realise gains and hence pay tax (2). It will trash the investments of individuals (3) and force many to postpone their retirements.(4)

*sigh*

(1) Nope. If you own a property that you are letting out, putting CGT rates back to where they were two years ago (and had been for decades) makes it MORE worthwhile to rent out a property rather than sell it. And whatever the tax rates are, it is always more worthwhile letting it out than leaving it empty (unless tax rate > 100%, which is clearly not the case).

(2) If people are 'loath' to sell an investment property, then this might well reduce the number of homes available for sale (and if increasing the number of homes for sale is A Good Thing, then the government could just allow more to be built), but will increase the number of homes that are available to let in equal and opposite measure, without making keeping them and letting them out less profitable. So he is wrong on both counts (1) and (2) and has contradicted himself anyway.

(3) Trash the investments? Nope. The long run return on investments always levels out. CGT does not affect rental income, and might actually increase selling prices (less supply; plus people might hold out for a higher price to compensate for CGT). So yet another contradiction. In any event, if you bought a house more than ten years ago, it has at least doubled in value - far exceeding the expectations of any rational investor - and surely it's better to have a huge profit minus 40% tax than it is to have a smaller or no profit, on which you would have expected to pay, er, 40% CGT anyway?

On a personal note, I did pay 40% CGT on the flats I sold, it was my call to sell them and I took the tax into account beforehand.

(4) Woah!! Yet another contradiction. Some people have accumulated a number of properties to rent, and they want to live off the rental income in retirement. There is no reason why this would affect retirement plans. So yet another lie/contradiction.

*/sigh*

Cross-posted from HousePriceCrash.