Death of buy-to-let: landlords wake up to Osborne's 150pc ta
Discussion
The houses won't disappear.
If a levered landlord is now cash flow negative they will sell.
The buyer will either be a landlord or an owner occupier.
If a landlord, they will buy at a price reflecting the new tax regime.
If an owner occupier, they will buy at a price reflecting current mortgage availability (MMR, deposit requirement etc.).
Current landlords can't just raise the rent. That is dictated by market forces (as evidenced by no one being made homeless by the Hammersmith and Fulham housing benefit reduction - landlords just accepted lower rates).
Also, a lot of portfolio landlords are sitting on significant capital gains liabilities. They could be in serious trouble if they don't have the cash to pay up.
If a levered landlord is now cash flow negative they will sell.
The buyer will either be a landlord or an owner occupier.
If a landlord, they will buy at a price reflecting the new tax regime.
If an owner occupier, they will buy at a price reflecting current mortgage availability (MMR, deposit requirement etc.).
Current landlords can't just raise the rent. That is dictated by market forces (as evidenced by no one being made homeless by the Hammersmith and Fulham housing benefit reduction - landlords just accepted lower rates).
Also, a lot of portfolio landlords are sitting on significant capital gains liabilities. They could be in serious trouble if they don't have the cash to pay up.
otolith said:
bigunit00 said:
Is it the plight of the FTB that should be driving the national tax regime? Is £400-450k really the budget of these types to get an "average small house in a cheap area"? ........maybe they need to set some realistic expectations for their first house.
Sounds like London-centric ideas of pricing. You can get a 2-bed new build in Swindon for 140k-ish.
t. I'm finding it hard to look past the hope that he gets thoroughly screwed. Sorry, honourable buy-to-letters.RWD cossie wil said:
The housing crisis is down to the government not allowing enough planning for new homes & a huge population spike.
Part wrong, because the government don't allow/disallow planning for housing.The govt. have been telling Councils for years to build more housing: easily since 2007 when I was Head of Finance for a Planning & Transport department in London, and before that too I remember increases inregional plan housing targets hitting the local headlines (boosts local rag sales to NIMBYs no end)
Councils will have been setting large housing targets in their local development plans, with specific sites being identified to provide many year's worth of future housing development needs.
And certainly since the coalition, cramming those god awful new build housing developments into every nook and cranny (sandwiched between railway lines and industrial estates seems to be the favourite in my area) is the only way Councils have to hang onto their revenue govenrment grant (in the form of "New Homes Bonus").
I agree about the population spike, though would urge people to resist being told what to think by the Daily Mail / Channel 4 documentaries and blaming leaky boarders for it. If your politics are against immigration: yes, you can hang this particular argument on your axe whilst you're grinding it, but there's more factors at play to explain why demand for housing is increasing.
So, where should we focus our blame for the lack of ability to build houses?
Well, according to my colleague at work, who has 25+ years in Local Authority Housing supply, it's quite simple: developers.
If your job is to make money from selling a product, are your finanical interests going to be served by:
a) building as many as you can, thereore increasing supply and reducing price? or:
b) keeping supply restricted, so prices remain bouyant?
Clue: it's not (a).
I can't blame them though: developers are in business to make money (just like buy to let landlords)
Still, the whole point of the thread is about the merits (or not) of BTL: whether additional house building would "solve" the housing crisis is a side issue.
IMHO: Building "x" million housing units won't help FTBers if the units are systematically hovered up by BTL landlords (not that it's really fair to class them as one homogenous group, as I'm sure they're not).
If the housing crisis is defined as a generation being utterly priced off the property ladder, we (the UK, not PH) need to consider other things alongside whehter BLT landlords should be targeted, such as:
- the huge SE vs rest of country inbalance in the economy
- the whole aging population issue (a whole new can of worms)
- immigration is a part of it (as you can hardly have a housing strategy without a population strategy)
- lets also add the whole UK love of home ownership, (given home ownership is such a big part of political sucess) and availability of social housing
The end game is interesting though, as the baby boomers will all pass away at some point. Where will the wealth go? Maybe BTL landlords should sell and buy private care homes instead...
Ian
nct001 said:
grumbledoak said:
Inevitable, indeed long overdue. With the comedy interest rates set to continue we have two entire generations being tucked by each other's grandparents.
It is not as simply as that. Where I work there are loads of 25 year olds getting married or whatever and frankly have aspirations beyond their financial reach. If you can't afford what you want, look at a different location.When you buy your first house, make do and mend as previous generations have done. Not buy a part rent part buy / over priced shiny flat on an A road five miles from town next to a designer outlet. These are all over the UK and it's funny how the prices are all similar regardless of location.
My house was sold for £87k in 1997 I bought it aged 25 for £287k in 2007 and have just sold it in 2015 for £463k. It has increased in value at exactly the same rate since the mid 90s. And if you look at all the other houses in the area they a have all risen at the same rate. 1990 new build semi sold for £110k, 2003 worth £200k now worth £300k.
jdw1234 said:
Also, a lot of portfolio landlords are sitting on significant capital gains liabilities. They could be in serious trouble if they don't have the cash to pay up.
Don't understand. The CGT liability doesn't crystallise until the landlord sells-up, at which point he's clutching a much bigger pile of cash than any potential tax liability.Ozzie Osmond said:
jdw1234 said:
Also, a lot of portfolio landlords are sitting on significant capital gains liabilities. They could be in serious trouble if they don't have the cash to pay up.
Don't understand. The CGT liability doesn't crystallise until the landlord sells-up, at which point he's clutching a much bigger pile of cash than any potential tax liability.It would be an issue for the muppets who used the model of equity release to increase their portfolio.
I.e. House increased in value (CGT liability) and the landlord chose to remortgage (equity release) to put a deposit on another BTL property. These people are proper f****d.
jdw1234 said:
Apologies, not clear.
It would be an issue for the muppets who used the model of equity release to increase their portfolio.
I.e. House increased in value (CGT liability) and the landlord chose to remortgage (equity release) to put a deposit on another BTL property. These people are proper f****d.
How? CGT only payable if you sell and the property has gone up in value. You would settle up then or put it aside come tax time. Remortgaging to release equity is irrelevant It would be an issue for the muppets who used the model of equity release to increase their portfolio.
I.e. House increased in value (CGT liability) and the landlord chose to remortgage (equity release) to put a deposit on another BTL property. These people are proper f****d.
anonymous said:
[redacted]
You could argue that pretty much any capitalistic pursuit is immoral. How is that relevant though? The grandparents should help them out then. Pretty immoral of them
It probably will for those who are paye tax payers who need a mortgage to complete a purchase
otolith said:
liner33 said:
Mind you ultimately the tenants will pay for this , if BTL landlords do sell up there will be less houses up for rent thus increasing demand.
If the overall housing stock remains the same, all you get is a shift from BTL to owner occupied. The reduction in rental stock mirrors the reduction in tenants.How about the MILLIONS of benefit tenants in private rented accommodation? What happens when the owner behind it decides that it's just not viable & boots the benefits tenant out & sells up?
All that's going to happen is that people will be forced to increase rents to cover the shortfall... No one wins.
bigunit00 said:
jdw1234 said:
Apologies, not clear.
It would be an issue for the muppets who used the model of equity release to increase their portfolio.
I.e. House increased in value (CGT liability) and the landlord chose to remortgage (equity release) to put a deposit on another BTL property. These people are proper f****d.
How? CGT only payable if you sell and the property has gone up in value. You would settle up then or put it aside come tax time. Remortgaging to release equity is irrelevant It would be an issue for the muppets who used the model of equity release to increase their portfolio.
I.e. House increased in value (CGT liability) and the landlord chose to remortgage (equity release) to put a deposit on another BTL property. These people are proper f****d.
The Telegraph article is essentially a press release from a forum called Property118 who are lobbying to get this proposal changed. If you go on their site lots of members have run the numbers and will be made bankrupt
jdw1234 said:
phib said:
Presume you need to pay stamp duty again if you transfer from personal name to ltd company ? ( as well as cgt if applicable)
Phib
Correct on both counts. Phib
But something that must be borne in mind is that most BTL mortgage companies won't allow incorporation. Most commercial lenders (who will) won't be very interested in lending to many BTL borrowers.
Reading back through your posts here and in the last thread, however, you seem to have the notion that all of this is good and all that will happen is property will be liberated for consumption by owner occupiers. I don't think that IS what will happen. I believe that it will push prices down in a hurry and we will have some sort of a property price crash. Would-be owner-occupiers will struggle to borrow in an environment where lenders are cautious and valuers positively paranoid.
I have been in dialogue with the gubmint about this and the most recent response I have had suggests that they really don't know what they are doing, or what they are doing is something other than what they claim to be doing. I don't plan on extending the dialogue, however, because bigger fish than I are pursuing it and I will be largely unaffected either way.
Rowley Birkin said:
jdw1234 said:
phib said:
Presume you need to pay stamp duty again if you transfer from personal name to ltd company ? ( as well as cgt if applicable)
Phib
Correct on both counts. Phib
But something that must be borne in mind is that most BTL mortgage companies won't allow incorporation. Most commercial lenders (who will) won't be very interested in lending to many BTL borrowers.
Reading back through your posts here and in the last thread, however, you seem to have the notion that all of this is good and all that will happen is property will be liberated for consumption by owner occupiers. I don't think that IS what will happen. I believe that it will push prices down in a hurry and we will have some sort of a property price crash. Would-be owner-occupiers will struggle to borrow in an environment where lenders are cautious and valuers positively paranoid.
I have been in dialogue with the gubmint about this and the most recent response I have had suggests that they really don't know what they are doing, or what they are doing is something other than what they claim to be doing. I don't plan on extending the dialogue, however, because bigger fish than I are pursuing it and I will be largely unaffected either way.
You are correct that I think it is a good thing. I see what you are saying about finance being restricted, but banks have been preparing their balance sheets for a long time and banks are obviously interested in transactions volumes going up.
FYI I am on the wrong side of the trade as I bought a house in 2012. I will stil be happy to see a significant market adjustment however.
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