Death of buy-to-let: landlords wake up to Osborne's 150pc ta
Discussion
PurpleMoonlight said:
The number of homes available is only part of the issue, the number of homes available to the owner occupier is a significant factor. The more available the lower the price. BTL landlords have driven up the price because they have a significant tax advantage over the owner occupier.
Rents won't necessarily go up. Not every landlord has a mortgage. Not every landlord will be subject to higher tax rates. Rents will have to continue to be affordable.
exactly Rents won't necessarily go up. Not every landlord has a mortgage. Not every landlord will be subject to higher tax rates. Rents will have to continue to be affordable.
taking the fire out from under the price pressure pot will be positive
Toltec said:
Slightly different, but related question.
If you buy a second property with a mortgage, between purchase and sale pay £20,000 of interest and gain £30,000 would your cgt liability be £10,000 or £30,000?
http://www.theguardian.com/money/2014/feb/12/how-calculate-capital-gains-tax-sell-homeIf you buy a second property with a mortgage, between purchase and sale pay £20,000 of interest and gain £30,000 would your cgt liability be £10,000 or £30,000?
98elise said:
But to make those properties a available you have to make the current tenant homeless, who now needs a house. Prices will only come down when there are less buyers than available properties.
Perhaps if you can explain where the displaced tenants live then I would understand where all the additional capacity comes from.
From what you are saying we get cheaper houses, low rents, and extra tax revenue?
many of the 'displaced tenants' in BTL properties are the people who before the BTL bubble would have brought these self same properties but were priced out by the powerfully built be -goatteed fPerhaps if you can explain where the displaced tenants live then I would understand where all the additional capacity comes from.
From what you are saying we get cheaper houses, low rents, and extra tax revenue?
Edited by 98elise on Thursday 3rd September 23:09
k-yous who having had massive value growth on their own hosues started hoovering up FTB properties during the 'abolishing boomand bust years ' mph1977 said:
98elise said:
But to make those properties a available you have to make the current tenant homeless, who now needs a house. Prices will only come down when there are less buyers than available properties.
Perhaps if you can explain where the displaced tenants live then I would understand where all the additional capacity comes from.
From what you are saying we get cheaper houses, low rents, and extra tax revenue?
many of the 'displaced tenants' in BTL properties are the people who before the BTL bubble would have brought these self same properties but were priced out by the powerfully built be -goatteed fPerhaps if you can explain where the displaced tenants live then I would understand where all the additional capacity comes from.
From what you are saying we get cheaper houses, low rents, and extra tax revenue?
Edited by 98elise on Thursday 3rd September 23:09
k-yous who having had massive value growth on their own hosues started hoovering up FTB properties during the 'abolishing boomand bust years ' Going back to my original point can you explain in simple figures where more properties are available on the market, but demand has not increased? Without that prices will not fall.
BTL is not the main driver for price rises. That is simply down to increasing demand, with a low supply of new stock.
98elise said:
Perhaps if you can explain where the displaced tenants live then I would understand where all the additional capacity comes from.
You are mistakenly assuming that all these tenants want to be tenants all their lives. They don't. The majority probably want to be owner occupiers which they may be able to be if housing is more affordable.A current mortgaged landlord currently only has to cover their costs with the rent, which they get tax relief on so no tax to pay. The investment potentially costs them nothing, the tenant pays the mortgage interest and the costs of the property maintenance (included in rent but tax deductible). The BTL landlord then creams off the increase in property value at effectively someone else's expense (the tenant and the tax payer).
I have no fundamental objection to private landlords, I am in fact a tenant of one, but I do object to the tax relief advantage they enjoy over owner occupiers. If they want to buy an investment property it should be for cash with no mortgage and the maintenance cost should not be tax deductible just as it isn't for owner occupiers.
TheLordJohn said:
Surprise surprise.
Why haven't you bought, then?
Is it the mean, nasty, land lords fault you don't own or yours?
Personal choice.Why haven't you bought, then?
Is it the mean, nasty, land lords fault you don't own or yours?
I have rented my current home for 10 years. My landlord lives next door. I have no issues with landlords as such, only the advantages they have over those that wish to be owner occupiers or investors in other types of investments.
PurpleMoonlight said:
98elise said:
Perhaps if you can explain where the displaced tenants live then I would understand where all the additional capacity comes from.
You are mistakenly assuming that all these tenants want to be tenants all their lives. They don't. The majority probably want to be owner occupiers which they may be able to be if housing is more affordable.A current mortgaged landlord currently only has to cover their costs with the rent, which they get tax relief on so no tax to pay. The investment potentially costs them nothing, the tenant pays the mortgage interest and the costs of the property maintenance (included in rent but tax deductible). The BTL landlord then creams off the increase in property value at effectively someone else's expense (the tenant and the tax payer).
I have no fundamental objection to private landlords, I am in fact a tenant of one, but I do object to the tax relief advantage they enjoy over owner occupiers. If they want to buy an investment property it should be for cash with no mortgage and the maintenance cost should not be tax deductible just as it isn't for owner occupiers.
BTW owner/occupiers get very nice tax breaks if they rent out a room. Thats completely tax free profit.
Ade07 said:
I can assure you that most BTL landlords do not have mortgages, the majority of investors are cash buyers. Also, there are an awful lot of people who still want a BTL investment, and are still actively seeking more properties to rent out.
More fool them then , you can claim tax relief on the interest therefore it is currently much more tax efficient to have a mortgage on a rented property, its this "perk" that is being stoppedI'm not suggesting by having a mortgage they are somehow over extended financially , most landlords that I know use this borrowed money elsewhere often matching or exceeding the cost of the mortgage or using it as cash to purchase another property.
But if most of your BTL landlords aren't doing this then they aren't interested in maximising the income from the investment and will be unconcerned by the changes.
liner33 said:
More fool them then , you can claim tax relief on the interest therefore it is currently much more tax efficient to have a mortgage on a rented property
Think about that for a minute.It means you can offset the interest paid against your income when it comes to tax. You're still paying the majority of the interest, though... So if you have the funds to invest without borrowing, it still works out a chunk more expensive to borrow money than to use your own.
Yes, you could invest that money elsewhere at a higher rate than the mortgage, and effectively "stooze", but that opens up a whole extra world of risk and complexity.
liner33 said:
Ade07 said:
I can assure you that most BTL landlords do not have mortgages, the majority of investors are cash buyers. Also, there are an awful lot of people who still want a BTL investment, and are still actively seeking more properties to rent out.
More fool them then , you can claim tax relief on the interest therefore it is currently much more tax efficient to have a mortgage on a rented property, its this "perk" that is being stoppedI'm not suggesting by having a mortgage they are somehow over extended financially , most landlords that I know use this borrowed money elsewhere often matching or exceeding the cost of the mortgage or using it as cash to purchase another property.
But if most of your BTL landlords aren't doing this then they aren't interested in maximising the income from the investment and will be unconcerned by the changes.
That actual benefit of mortgaging a BTL is that the investment is leveraged, which is fine if the interest rates you pay are less than your yield.
Typically a 70% LTV at around 7% yield would give you a 14% ROI on cash invested. As with any leveraged investment it carries risks.
Willy Nilly said:
98elise said:
PurpleMoonlight said:
98elise said:
We have short supply regardless. Thats the problem.
It is, but people owning multiple properties and receiving a tax advantage to do so only serves to increase prices.As I stated, if every BTL were converted to owner occupier overnight the number of available properties would be exactly the same.
The only thing that has changed is the ownership.
Addition taxation will just push rents up as it adds additional cost to the provider. That's simple economics.
What happens is, you fave band come to town amid much hype. Tickets go on sale at 9am, by 9:30 you manage to get on to the web site to find they have all sold out. Then at 9:45 there are 10,000 tickets on sale at £110 instead of £55 on various resellers websites. You reluctantly buy one, then the day comes for the concert only for you to find the place half full.
It's much the same as first time buyers find. Mr and Miss Firsttime-Buyer go for their first house together and end up bidding on a house Mr P.H. Powerfully-Built also wants as a rental. He out bids them, what with his huge mass of wealth, so they end up paying £1,100/ month as rent to Mr Powerfully-Built when they could have paid £700 as a mortgage if they bought it. The whole BTL thing where people speculate on the property markets looking for capital gains is a self fulfilling prophecy. They take a load of houses off the market which forces prices up and rents so they clean up while getting a tax break in the process. Win and indeed win.
Houses should be firstly and fore-mostly a home, not an investment
As I said before, I bought all mine on the open market through normal EA's. I never paid more than the asking and never got into a bidding war. Anyone was free to offer whatever they wanted on those properties.
Edited by 98elise on Sunday 6th September 00:19
TooMany2cvs said:
Think about that for a minute.
It means you can offset the interest paid against your income when it comes to tax. You're still paying the majority of the interest, though... So if you have the funds to invest without borrowing, it still works out a chunk more expensive to borrow money than to use your own.
Yes, you could invest that money elsewhere at a higher rate than the mortgage, and effectively "stooze", but that opens up a whole extra world of risk and complexity.
In reality it really isn't complex but yes there is an element of risk as per any investment It means you can offset the interest paid against your income when it comes to tax. You're still paying the majority of the interest, though... So if you have the funds to invest without borrowing, it still works out a chunk more expensive to borrow money than to use your own.
Yes, you could invest that money elsewhere at a higher rate than the mortgage, and effectively "stooze", but that opens up a whole extra world of risk and complexity.
While interst rates are as low as they are its a no brainer
98elise said:
Have you ever walked into an estate agent and found they have sold out of houses?
As I said before, I bought all mine on the open market through normal EA's. I never paid more than the asking and never got into a bidding war. Anyone was free to offer whatever they wanted on those properties.
But surely you understand that the EA will have pithed the price higher due to the demand from BTL investors adding pressure to a certain segment of the market? Its not about getting into a bidding war, but general upward pressure on what would have been first time buyer properties from people buying second or third properties. As I said before, I bought all mine on the open market through normal EA's. I never paid more than the asking and never got into a bidding war. Anyone was free to offer whatever they wanted on those properties.
Is it just the amount of profit that is the issue here?
If I had a buy to let and the income covered the mortgage and interest but I still needed to pay £50 out of my own money to the tax man then I'm still getting a mortgage paid off effectively for free. A nice lump sum asset for the future.
And for those complaining there aren't enough houses. Me and the Mrs have been together 2 years and still have a house each. One or the other sits empty for good chunks of time. Whoops!
If I had a buy to let and the income covered the mortgage and interest but I still needed to pay £50 out of my own money to the tax man then I'm still getting a mortgage paid off effectively for free. A nice lump sum asset for the future.
And for those complaining there aren't enough houses. Me and the Mrs have been together 2 years and still have a house each. One or the other sits empty for good chunks of time. Whoops!
TooMany2cvs said:
liner33 said:
In reality it really isn't complex but yes there is an element of risk as per any investment
While interst rates are as low as they are its a no brainer
That bit there... Across the life of a 25yr mortgage...While interst rates are as low as they are its a no brainer
If you have the capital invested elsewhere you can pay off the mortgage if the rates were to go up that's the point , a flexible portfolio and not putting all your eggs in one basket and using property ONLY as a long term investment.
Use all your capital to buy a BTL is not good advice. ONLY investing in property is not a great idea either
Its lack of return from more traditional investments that have driven the BTL market , put £200k in a bank and get .5% or put it in a house and get 5%
Condi said:
98elise said:
Have you ever walked into an estate agent and found they have sold out of houses?
As I said before, I bought all mine on the open market through normal EA's. I never paid more than the asking and never got into a bidding war. Anyone was free to offer whatever they wanted on those properties.
But surely you understand that the EA will have pithed the price higher due to the demand from BTL investors adding pressure to a certain segment of the market? Its not about getting into a bidding war, but general upward pressure on what would have been first time buyer properties from people buying second or third properties. As I said before, I bought all mine on the open market through normal EA's. I never paid more than the asking and never got into a bidding war. Anyone was free to offer whatever they wanted on those properties.
As I keep saying the main driver is lack new supply to meet demand, existing stock canont meet demand no matter what way you dress it up. If you made all BTL's into owner occupier properties overnight then we would still have exactly the same upward pressure.
98elise said:
The 1 BTL property will also have housed 1 family, removing 1 person from the demand side. If that family bought the property then we would still be in the same situation.
As I keep saying the main driver is lack new supply to meet demand, existing stock canont meet demand no matter what way you dress it up. If you made all BTL's into owner occupier properties overnight then we would still have exactly the same upward pressure.
Can you really not see that BTL's are part of the problem as they remove purchasable properties from the housing supply chain for those who desire to purchase?As I keep saying the main driver is lack new supply to meet demand, existing stock canont meet demand no matter what way you dress it up. If you made all BTL's into owner occupier properties overnight then we would still have exactly the same upward pressure.
Lets make it simpler huh. One person owning 5 BTL's potentially denies 5 owner occupiers. The pressure on the remaining housing stock for owner occupiers to buy is therefore greater than it otherwise should be, and that increases prices.
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