David Cameron’s decision to publish his tax return has sparked all sorts of debate about whether it was a good idea for the sake of transparency, or a terrible idea that sets a dangerous precedent. However, while the debates raged on, the tax return quietly made an interesting revelation – David Cameron’s housemakes more money in a year than he does.
According to The Guardian, the tax return revealed that in the tax year 2014/15, he had a total taxable income of £200,000 or there abouts. He made £141,000 of this through his salary as Prime Minister.
In addition to this, he has been renting out his Notting Hill property since moving to Downing Street, and in the past year that brought in an eye-watering £47,000. This, it’s worth highlighting, is a half share of the total rental income from the property. It means that the property has made £94,000 in rental income alone.
It looks on the face of it that a Prime Minister could just about be worth as much as his house. However, that overlooks the increase in the value of the property in that time. The Jules Birch blog points out that the average price of a semi-detached house in Notting Hill in May 2010 was £2.3 million. By April 2015 this was £3.6 million. This means the value is up £1.3 million in five years – or £260,000 a year.
Cameron’s house, therefore, has earned £350,000 a year. Even if you were to divide that into two – to account for his share of the property – it still made far more than he did in a year.
This is far from an unusual situation. A report for the Centre for Economics and Business Research for the Post Office recently found that property makes more than two in five workers – and that’s just through capital appreciation. It reflects the fact that the average house in the UK increased in value by £18,119 – which is more than two fifths of people earn in a year – including salespeople, care workers and cleaners.
In London, the East and South East, rises in property prices actually outpaced average earnings for each area. The typical value of a London property rose by over £46,000 – while in the capital the average salary is just over £36,000. Meanwhile, in the East, the average house made £27,596 and the average worker £24,500; and in the South East the average home gained £39,690 while the average salary was £27,596.
Does it matter?
With the trend so entrenched across much of the UK, you might wonder whether it matters that David Cameron’s house is such a money-spinner. You could argue that this is just a fact of life.
Of course it demonstrates how out of touch he is likely to be with anyone struggling to get onto the property ladder, but then again there are few people nowadays who would expect him to be terribly in touch with the needs of normal people. How many multi-millionaires from wealthy backgrounds, with two properties know the first thing about what it’s like to worry how you’ll be able to afford to get to the end of the month?
However, you could also look on this as a demonstration of just how out of hand property price rises have become. The government has become concerned about how they are outpacing people’s ability to afford them, but at the moment its efforts at solving the problem have been through measures such as the Help to Buy ISA – designed to try to drag people up onto the housing ladder, instead of lowering any of the rungs.
If those at the top of government hadn’t done so well from house price rises, you have to wonder whether the issue of making houses fundamentally more affordable wouldn’t be further up the agenda.
But what do you think? Let us know in the comments.