An Increase in Property Value isn't always Beneficial for the Home Owner.

Thanks to Blade of Truth for suggesting such an interesting topic"one that will be very hard fought considering the burden of proof that is laying on Con"s side. There are a considerable number of beneficial outcomes that can result as a consequence of the increase in the value of a homeowner"s property as my opponent has alluded to in his introduction. These include, but are not limited to: 1)Increase in the equity that you have in your home 2)Decreases the loan value ratio of your mortgage 3)Enables you to use the value of your home for security for borrowing for business or personal purposes. 4)Protects your wealth from being eroded by inflation 5)Is a form of retirement savings enabling you to down size in later years leaving surplus cash to finance living expenses. 6)It gives you more financial flexibility during times of financial hardship. That being said, the above are not really in question for the purposes of this debate. What is in question is if the ultimate outcome of a rise in property value negates the benefit that is derived from it. To this end I will be concentrating on potential unfavourable outcomes and demonstrating that these outcomes do not outweigh the combined benefits derived by rises in property values and indirect benefits received by home owners from some of these outcomes. Argument 1. " Taxes on capital as a rule are not regressive and tend to be lower than income taxes Individuals that generate wealth through owning capital versus supplying their own labour are treated favourable in western democracies. Increases in capital values of assets are often not taxed at all as they rise, or alternatively they are exempt from capital gains tax upon disposal if they are a considered a principle place of residence. So a rise in the value of a home owner"s property will on the whole be free of tax, or at a much lower rate than other forms of income. (1) Argument 2 " Local Council Rates (Taxes) are relative. The way in which municipalities generate their income from property owners is not driven by the values of properties " rather the values of properties are used as a proxy to equitably allocate costs. Municipalities determine their budget for the year first and then allocate rate charges by the relative proportion of each property"s value. Through this revaluation process it ensures that the eighty year old that bought their property sixty years ago for $5,000 is not paying disproportionately less rates than the new home owner that has built or bought their new home for $300,000 in the current year. (2) Argument 3. " Homeowners still benefit from payment of taxes. Even if rises in property values gives an impression of an increase in taxes, the services provided via these taxes come at a much lower cost due to economies of scale. If each home owner had to organise their own garbage collection, water, sewerage, library, school, law enforcement, fire services, roads, public and sporting grounds services it would come at a much higher cost than the small incremental increase caused by the rise in property value. Taxes are a cost, but they still provide the home owner with a benefit through these services. (2) Argument 4 " Financial risks can be managed. As property values increase, home owners are at risk of losing a greater proportion of their wealth through mishap - eg fire, natural disaster and the like. The costs of replacement can be often larger than the cost of the original house purchase. Fortunately financial markets have developed insurance products for a variety of potential events that can have impacts on the ability of individuals to retain their assets. Products also extend to mortgage, health and income protection insurance to assist during times of sickness and unemployment to ensure the home owner"s greatest asset is not put at risk. Increases in insurance premiums that ensure that the replacement value of properties is factored in come at a cost of only a very small fraction of the total value of the property. (3) So there is absolutely no question that increases in the value of homes has a knock on financial effect in other areas of a home owner"s cash flow and balance sheet. These downstream effects though in no way fully negate the benefit of increases in home values and only serve to slightly reduce the net benefit enjoyed by home owners. (1) http://taxes.about.com... (2)http://home.howstuffworks.com... (3)http://en.wikipedia.org...