Fun Online Polls: Panama Papers & Privatising the Land Registry

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

Have you learned anything new from The Panama Papers?

Yes - I didn't realise how concentrated wealth is or how involved the wealthy are in tax evasion. 4%
No - they merely confirm what I already knew or strongly suspected. 86%
Other - please specify. 10%

Not much to add to that.

A couple of commenters said that they had nothing against tax evasion. I don't think that's the important part, what is striking is how much money a few people have. Most of it ill-gotten.
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A couple of people have emailed me and asked me to link to the petition against selling off the Land Registry.

Please sign here or use the widget in the sidebar.

To the untrained eye, it would appear that a flat costs more than a semi-detached house.

From page 4 of HM Land Registry's December 2014 House Price Index (pdf):

Average prices by property type (England and Wales)

Detached - £279,298
Semi-detached - £167,069
Terraced - £134,226
Flat/maisonette - £170,822

The relative prices of detached, semi-detached and terraced houses are pretty much in line and as you would expect.

But why is the average price of a flat higher than the average price of a semi-detached?

Simples, it's Von Thünen's law of rent, which factors in transport/travel costs.

People make a trade-off between convenience (living near the centre) and comfort (having a nice big garden), regardless of income. So you end up with flats in city centres and houses in the suburbs, with people being prepared to pay pretty much the same in £-s-d for either.

To exaggerate this effect further, the bigger the city, the bigger the trade-off between convenience and comfort; so the bigger the city, the more flats there will be.

So most flats are in the centre of the biggest cities, where the convenience premium is highest and most houses are in smaller towns and cities and at the outer suburbs of larger cities.

Or put it this way, they are not comparing the price of a flat with the price of a semi-detached house on the same street; they are comparing the price of flats in the centre of large cities (where land is very expensive) with the price of houses in smaller towns and cities and the outer suburbs of larger cities (where land is much cheaper).

Killer Arguments Against LVT, Not (241)

One particularly spurious argument against taxing location values is that a lot of land is not registered, and it is quite true that back in 2005, HM Land Registry's Strategic Plan (which I can no longer track down online) said that half of land by area was as yet unregistered, but that they hoped to have full registration by 2012.

This is all pretty irrelevant, or else they could have opposed the introduction of the national income tax two centuries ago on the basis that there was no official register of how much people earn. Working out who owns (earns) what is part and parcel of any system of taxation of rental values (or incomes).

As it happens...

1. HM Land Registry have now completed registration of over eighty per cent of land by now, and if they keep going at this rate, they will have full registration in four or five years.

2. On an administrative level, this was pretty irrelevant, as the unregistered land was largely agricultural land, the total rental value of which is about £2 billion a year, as against the rental value of residential and commercial land which is over £200 billion a year (and would be much higher than that if earned income, output and profits were not taxed).

3. All this residential and commercial land is already registered for Council Tax or Business Rates purposes, even if it is not registered at HM Land Registry.

4. There is a parallel register for agricultural land called the Rural Land Register:

All land must be registered on the RLR in order to be eligible for payments under the Single Payment Scheme (SPS), the Environmental Stewardship Scheme (ES) or the English Woodland Grant Scheme (EWGS)."

5. So to the extent that we wanted to go to the hassle of collecting a billion or two from agricultural land (as long as they pay the full tax on the areas used for buildings, that is quite enough, actually), we can base it on what the RLR says. The subsidies used to be based on how good the land was, so the payments for owning arable land was much higher than for marginal land used for forestry. It'll be very interesting to see how many landowners start trying to explain that their prime arable land of ten years ago is now so degraded that it can only be used for forestry or for grouse shooting, for which the rental value is £5 or £10 per acre per year.

The Reality Gap

From the BBC:

House sellers have dropped their asking prices for the second month in a row, the property website Rightmove says.

Sales have been held back by the reality gap in the market, with asking prices rising for most of this year while selling prices have been flat. However, Rightmove says asking prices dropped by 2.1% this month after a 1.6% fall in July. The average asking price of £231,543 is now 14% higher than the average £203,528 selling price. That selling figure comes from the government's own monthly house price survey, produced by the Department for Communities and Local Government (DCLG).

The gap between asking prices and selling prices is even wider if data from other house price surveys is used. The Halifax puts the cost of the average home at £163,981, and the Nationwide puts it at £168,731, so sellers and their estate agents could be overpricing their properties by as much as 41%.

I must admit to being eternally puzzled by the discrepancy between the average house price of about £165,000 according to Halifax, Nationwide, HM Land Registry and HM Revenue & Customs; and the average price of over £200,000 according to DCLG and Rightmove.

For sure, Halifax and Nationwide don't include cash sales, but:

a) HM Land Registry and HM Revenue & Customs certainly do. That's joined up government for you, I suppose, and

b) Is it really plausible that cash buyers would outbid mortgage buyers by £40,000? I thought the whole point of being a cash buyer was that you can slightly underbid, but your offer is still likely to be accepted because there is less messing about.

Fun Online Polls: Paedophilia and The State

It appears that the Roman Catholic church's double strategy of openly attacking homosexuals while covering up for dozens or hundreds of paedophile priests has backfired on them most horribly.

88% of respondents to last week's Fun Online Poll though that a Roman Catholic priest was more likely to sexually molest a child than a gay adoptive couple.

Thanks to everybody who took the time to vote.
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This week's Fun Online Poll asks a more fundamental question: "Is land ownership possible in the absence of a 'state'"?.

The faux-libertarians like to rail against 'the State', and I'd agree that half of what most governments do is either a waste of money or economically or socially damaging. Some of them appear to think that 'the State' oppresses landowners or homeowners and that 'the State' can somehow be overthrown and landowners and homeowners can live freely.

This can't possibly be true - if the State shut itself down, sacked all the police, deleted all the records at HM Land Registry and shut down the court system, you'd find very quickly that land and houses would become nigh worthless. 'So what.', the faux-libertarians continue 'I'll buy myself a shotgun.' although they forget to add '...and remain physically present 24/7, thus reducing my earnings potential to subsistence farming'. So those who are most willing to use force and violence would end up in occupation of various plots of land.

We know that anarchy never prevails for long - neighbours would get together to form their own vigilante groups or share duties, so ultimately a new 'State' would emerge, and the first thing that neighbouring 'landowners' would do is to rewrite the Land Registry and agree, for the collective benefit of themselves and to the collective detriment of everybody else, that protecting their 'title' to their own plots would be paramount, which would enable them to abandon subsistence farming and pursue more profitable activities.

So it strikes me that 'landownership' and the existence of 'a State' are more or less inseparable, one is more or less impossible without the other.

Vote here or use the widget in the sidebar.

"Are securitisation companies above the law?"

Carmel B Butler has sent me a brief summary of evidence she submitted to the Treasury Committee looking at the banking crisis (submission 107, available online here, Word Doc), as follows:

The Land Registration Act 2002 provides that a transfer of a mortgage charge must be registered at H.M. Land Registry. Therefore, when a securitisation company buys mortgages from the banks, the law requires that the securitisation company register as the new owner of the mortgage. Given that 80% of recently issued UK mortgages were securitised* and therefore up to 80% of UK mortgages are owned by securitisation companies, have you ever wondered why no securitisation company is registered as owning a UK mortgage and why the banks incorrectly remain the registered as the owner of the mortgages?

The banks have received billions from the public purse because they say, they are the victims of bad borrowers. The Government have asked the banks to declare the extent of the bad debts on their books and the banks are apparently unable to answer that simple question. It is possible that the real reason that banks do not answer the question is because that would require admitting that the banks do not own the mortgages which are the allegedly bad debts on their books and, they would have to admit that they are falsely registered at H.M. Land Registry as the owner of the mortgages.

If the Government insisted that securitisation companies register their ownership of the mortgages at H.M. Land Registry in compliance with section 27 of the Land Registration Act 2002, the banking crisis would be seen in a whole new light and the Government would not have to ask the banks how much bad debt they have on their books.

The politicians like to mutter darkly about "the shadow banking system" as if there is lots of stuff that is hidden away; whereas it turns out that the reverse is probably true - in the specific case of Northern Rock, it appears that auditors misapplied International Accounting Standard 39 and treated securitisation vehicles as subsidiaries, even though under the terms of the agreement between NR and the SPVs, most or all of the potential losses accure to the SPV and NR is actually just the day-to-day administrator and (incorrectly), the registered legal holder of the mortgage at HM Land Registry.

The terms of all the different SPVs that UK banks set up are all slightly different of course, some may be recourse and some non-recourse, and in turn, the investment arms of banks may have invested in SPVs holding mortgages from other banks and so on, but it does support my overall theory that banks are not just wildly overstating their assets/liabilities, but, now that the taxpayer tap has been turned on, are wildly overstating their losses in the hope of filling their boots.

I asked a chap who works in the business, and he reckoned that Carmel's theory is perfectly plausible, the only question is, what sort of overall proportion of UK mortgages have been securitised?

* The 80% figure is taken from Paragon's written evidence, which ought to be here somewhere. It stands to reason that as house prices rose, mortgages became riskier and riskier and more and more were securitised, so the chances are that of the really bad mortgages, the vast majority are securitised.

Shock! Horror! Official statistics misleading!

Via RR:

The Government's official house price index, produced by the Land Registry, has been accused of misleading homebuyers and policymakers after it emerged that it excludes repossessions and auctions on the grounds that they do not reflect the 'full market value' of the sale" gasps The Graun "The latest Land Registry figures, published on Friday, showed a 10.1 per cent annual fall in prices across England and Wales, a considerably more benign figure than the indices from Halifax and Nationwide, which reveal prices falling by 15 per cent and 13.9 per cent respectively."

*sigh*

That HM Land Registry compiles figures this way has been common knowledge for ages, at least among those who take an interest in these matters. They focus on consecutive sales of the same property ('Repeat Sales Regression') and exclude repo's and auctions for a good reason. Repossessed properties sold at auctions usually sell for less than they otherwise would, so it would overstate price rises if you compared the price that developers pay for a quick sale at auction with the amount that they sell if for later on once they've tarted it up and marketed it. Now that property prices are plummeting again, to include repo's and auctions would overstate price falls.

AFAIAA, they also exclude the first sale of new builds as there is no earlier comparative. Thus the new builds that are now being sold at auction for half their original selling price haven't influenced the official figures at all.

In other words, if you are thinking of selling or buying at an auction, HM Land Registry figures are absolutely irrelevant. I'm sure that people who buy and sell at auction would be dimly aware of that. All that "policymakers" care about is propping up house prices, facts and logic don't matter to them anyway.

As to the second contention, that HM Land Registry's figures show smaller falls that the Halifax or Nationwide, that's mainly a two-month time lag thing, as I have pointed out before.

Quick check: HM Land Registry's October figures (released at the end of November) show year-on-year fall 10.1%, month-on-month 1.5%. Nationwide's August figures (released at the end of August) showed year-on-year fall 10.5% and month-on-month 1.9%, so that two-month rule still holds.

*/sigh*

HM Land Registry versus Nationwide House Price Indices (3)

As we established back in May, HMLR's figures for a month (released at the end of the next month) tend to be in line with Nationwide's figures for two months previously (released at the end of that month). This rule still held in July but since then the two had diverged - HMLR's figures showed much smaller falls.

HMLR now seem to have caught up again: their September 2008 figures are month-on-month fall 2.2%, year-on-year fall 8%.

Nationwide's July figures, for comparison, were month-on-month fall 1.7%, year-on-year fall 8.1%.

HM Land Registry versus Nationwide House Price Indices (2)

The MSM has duly regurgitated HM Land Registry's announcement that "house prices in England and Wales edged ahead by just 0.1% during the 12 months to the end of June"

*yawn*

As explained before, HMLR's figure for the y-o-y change for any month (in this case for June, published end July) more or less tracks Nationwide's figure for two months previously (in this case April, published end April).

Nationwide reported a y-o-y fall of 1% for April 2008, so while HMLR's figure may be more scientifically accurate, it is woefully out of date.

HM Land Registry versus Nationwide House Price Indices

HM Land Registry's April figures published today (end of May!) show:
average price £183,626; monthly price-fall 0.2%; and annual increase 2.7%.

As Growler at HPC points out, this is much the same as the Nationwide's February figures:
average price £179,358; monthly price-fall 0.5%; annual increase 2.7%.

To check this, let's compare HM Land Registry's January figures:
average price £186,045; monthly increase 0.9%; annual increase 6.4%; with Nationwide's November 2007 figures:
average price £184,099; monthly price-fall 0.8%; annual increase 6.9%.

Going back a further three months (just to be absolutely sure); HM Land Registry's October 2007 figures:
average price £184,346; monthly increase 0.1%; annual increase 8.1%.
Nationwide's August 2007 figures:
average price £183,898; monthly increase 0.6%; annual increase 9.6%.

Yup, by and large, this is just a time lag thing. Nationwide publishes the month's selling prices at the end of the month; HM Land Registry then takes two months to update their register. And then takes a further month to publish them.

There must be some messing about with seasonal adjustments - HMLR's average price has fallen by £720 over six months, but Nationwide's by £4,540. The monthly changes are all over the place, of course, but the year-on-year change is pretty much the same for either index, and that's the most important statistic.