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1710RE: [LandCafe] Baby Steps - Was: No land price with full land tax - simply is not true

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  • Neil Gilchrist
    Nov 10, 2006

      Sean,

       

      Reasonable comments.  I am not sure they are correct though.  I don’t have any actual data to hand though, so I can’t disprove them.  I think your estimate of the land portion at 30% may be off the mark.  In some areas the land value is closer to 100% of the property price.  In other words it is a knock down build again situation.  I expect there is a rule of thumb for new developments for capital to land value.  The ratio may change depending on the value.  In other words it may be desirable to put it a higher proportion of capital for a valuable site than a marginal site.  However, the moment the development is complete the improvements depreciate.

       

      An example:  I bought my home for $82,000.  After about 10 years I sold the house on the land for 80 cents.  It was taken away on a truck which was cheaper than demolishing it.  I built again on the same property.  It cost me about $200,000 to build the new house 12 years ago.  At the time I build I think the bank valued the land at about $300,000.  The property is probably worth about $850,000 now.  That suggest the land value is at least 70% of the property value.  In fact, it saddens me to think that developers might pay that amount and knock down my magnificent house that I designed, and built with my own hands.  A developer could profit by building townhouses or apartments on this land.

       

      I don’t see the point of annualising the value.  If you do it with land, you should do it with all assets.  Labour is not an asset so it is not relevant to my assertion.  While the improvements generally depreciate, the land appreciates so regardless of the contribution to current value I expect owners would see the land portion as the more significant investment.

       

      Finally, there is a matter of perception.  Opponents of LVT will apply any comments about zero value to the whole property and the scare campaign will have an effect.  The fact that is untrue will not matter.  Many homeowners will have difficulty separating the land and the improvements.

       

      I disagree with the statement that increasing LVT will benefit the vast majority.  I think it will ultimately benefit everyone, including landowners.  Getting people to believe this is another matter.

       

      Neil

       

      -----Original Message-----
      From:
      LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of Sean Brooks
      Sent: Friday, 10 November 2006
      8:33 AM
      To:
      LandCafe@yahoogroups.com
      Subject: [LandCafe] Baby Steps - Was: No land price with full land tax - simply is not true

       

      1) it's a mistake to say that land is the most valuable asset people have:
      (US figures)
      Median home price is ~$220,000.
      Land portion of this is probably 30% - $66,000 - or less.
      So already, their home, at $154,000 is worth more than their land.

      2) Their land, at $66,000, might have an annualized value of $6,600/y.
      The median 4 person household income in the U.S. $65,000/y, 10x the value
      of their land.

      So we have their labor, and their house, which are already worth more than
      their land.

      Furthermore, the initial steps towards LVT, a dual rate property tax,
      financially benefits more homeowners than it hurts.

      Likewise, an increase in LVT collected, concurrent with a reduction in wage
      taxes, should benefit the vast majority of the population, who pays far more
      than $6,600 in taxes on wages.

      Sean


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