Btl is a fools game these days

[DyslexicScientist]

It seems clear that the gov are targeting this, with removing the interest tax relief, charging 3% extra stamp duty on second homes.

Its no surprise as they will care less about someone with 10 btl then 10 people who want to buy.

I know a lot on here have portfolios, are people buying more? Selling? Or keeping steady?

I find I am most reasonable when the moon is waxing in gemini and in a square aspect to mars
But that's only to be expected with my first house Saturn mercury conjunction

I don't think it's putting us off. We are looking to invest in btl as a retirement plan.

TBH I posted on HPC for many years - they banned me for querying their maths.
Must see if my ID works again : my name is the same everywhere as I'm lazy.
Their "most overpriced sh&&hole thread" is most excellent.

The point is that BTL was a way to keep returns and the property market up while all around was crashing out
now there is little need for that prop
and the Tories want to look after their own
( the top 0.1% net the top 10% )
so the changes are coming in to force hobbyists so sell out to corporates.

I just bought a 10 bed HMO. I may rent t back to the local authority or turn it in to two family homes.

There is a glut of 2 bed flats in our town but family houses are in very short supply as all large numbers have been converted into HMO for students.

Large corporates will inevitably become the main LL because the stamp duty rules will not apply to corporates with over 15 properties and they can still offset interest payments against corporation tax.

That said I don't see how the new stamp duty surcharge rule can be practically imposed. Wont people just say the house they are buying is their principle residence and let out their old house? What about people who have to have a second home for work or who get stuck with an inherited house but they want to live elsewhere for work.

Tracking who owns which house and deciding if it is a second home or BTL will be a nightmare.

Do you got a real long spoon then purple?

The knives are out
The writing is on the wall

Surely your tax return will show if it's your own house or no. or a second home. They must track if someone is selling their own home or not for capital gains reasons.

In Scotland landlords must register with the council. So any ownership should be checkable there.

People who get stuck with an inherited house will sell instead of hording property.

As I said before, this isn't about stopping BTL, its about stopping people who are playing at it and keeping others out of the market.

If you are only able to make your BTL profitable or serviceable by using the tax exemptions you're not really doing it properly, its an amateur game that you've been able to join because you got lucky, no skill or pride in the job involved.

l

sargasso
Scotland and England are very different.
For a start the population of the whole of Scotland is less than London.

I think its also about appeasing renters by bashing btlers

I really don't think so Suz, if you own a BTL property outright the rules don't really apply to you. If you own a large amount of property it doesn't. It just means that people like friends of mine who bought second and third houses to run as BTL, with big mortgages are going to be put off buying houses.

This sucks some of the demand from the market and means that maybe, just maybe some first timers are going to be able to buy properties at the cheaper end rather than somebody who is already on the ladder with a bit of spare cash and a good credit rating.

Surely it will be the large btl companies that buy these houses though. I really don't see it helping first time buyers much.

I'm not sure larger corporations go for the cheaper end of the market as much as amateur BTLs really. They have a whole different way of working out whether their investment is going to be worth it and a lot of the properties that FTB would get won't actually give them that much ROCE by the time they do all of the saftey upgrades etc.

Or at least that's my experience of it, watching people out bidding younger couples by 5 k because they can make 1,500 a month on a two bed flat, with a mortgage of £1000. The same people are the ones that whine when the oven needs replacing, or they get slapped with a bill for the roof etc.

Freeworker: it's useful to forget the btl angle as it applies to ANY second property. I think you are muddling it with the concept of electing a property as your main residence for the purposes of cgt when selling etc. 'flipping' etc. this new stamp duty removes much of benefit of flipping in those circumstances. All crafty exit routes will gradually be withdrawn to make avoiding tax from unearned income 'property inflation' punitive.

Any property bought, other than your principal residence, is affected by the new stamp duty. Hopefully to discourage further people piling into btl in future - thus reducing potential pool of buy to let landlords bidding up prices with their current access to cheaper interest only loans.

So going forward anyone buying another property whilst owning one, will incur a hefty stamp duty, hopefully to discourage people pulling up the ladder behind them is further first time buyers can't access property ladder and provide a home for themselves at retirement - forget trying to provide a pension for themselves.....

Lots of people don't seem to understand the removal of tax relief and currently believe, for instance, that as a lower tax pay it doesn't affect them.

The new rule will mean that the rent is counted as income so lots will find themselves as of 2017 becoming higher tax payers.

Lots of amateur landlords will find heir properties costing them thousands a year just to stand still( without repairs , voids, non paying tenants ie all the risks associated with this type of investment.

I believe anyone with half a brain would look to get out and invest in something else. That doesn't mean that lots won't stay until the bitter end (ie as prices dip).

It's clear the policy is to discourage amateur landlords and more and more changes will occur over the next few years. Can't feel sorry for those ignoring all the signs and clinging to the idea there is anything ethical in hoarding property from other people's childen.

Oldzebra you have a misunderstanding here too! I don't see prices falling a great deal at all, the pool of waiting entrants to the market is just too big, there will be competition between them to get on the ladder which will keep the market bouyant.

What will happen is that reasonably priced properties will go for their asking price, not several Ks over it as seems to be happening at the minute.

I have no sympathy what so ever with people bemoaning this, or those who will be burned by it. You've been subsidised by the state for too long.

Homes will sell for what people can borrow or are prepared to borrow. The market is over inflated by people borrowing their own equity in their home to gamble on status quo in tax laws re property.

Gamble has risks - the risks just changed in July and November budget. If people can't take hints to take a fresh look at what their investment choice is doing to the younger generation and exit, then the tax will get them over next few years anyway.

Another change on the way is that CGT on btl will become due within 30 days of sale rather than the next tax year etc there are so many things heading the btl way over the next few years to hammer it home that it isn't good for future of our country (ie younger generation).

Btl market will substantially shrink and prices will have to fall because a first time buyer is looking at eventually paying off every penny they borrow.

Lots of btl style investors have interest only mortgages and no vehicle to pay if off - instead relying on inflation to eventually take care of it or, in some cases they imagine passing the property to their children.

New entrant btl over coming years will become more scarce. Who will current btl sell to? Fewer potential investors clamouring to snap up properties.

Good quality renters will be able to buy own home due to reduced competition from buy to letters.

Being a landlord will become less desirable as the more reliable renters buy their own home to live in.

Landlords will have to get hands dirty with the more gritty style of renter who comes with social issues hence government herding those style of multiple landlords into becoming a business.

Prices will flat line or fall. Flat line is same as falling in effect anyway.

Ive had a bit of time to think more about this and I am struggling to see how these changes are going to benefit society.

We have a problem of a shortage of housing and high HB rents which is driving up rents in the private sector. Outside of London once you get to £350k for a single family home buyers are using the house as their principal residence. It's the prices below that where BTL is an issue. London is a different market and the high house prices are driven by overseas money.

I really do not see how these changes in policy helps renters. It doesn't change the lack of supply nor the issue of houses in the entry level price brackets being purchased by landlords.

In my town here in the US we have strict rent control rules. This year I was allowed to increase the legal rent by 25% because my tenant moved out. If the new tenant wants to stay for another year, which they have the right to, the rent is only allowed to be increased by an amount specified by the township. If there is a large increase in property taxes (6 years ago my place went from $6k to $11k) you can apply to pass on the allocative increase in costs to your tenant. It's all regulated and if you break the law they will put a lien against your home. If your home fails to meet safety standards (code violations) the town give you 3 months to fix it. If not fixed the town hires a contractor to fix it and puts a lien against your home for the cost of this. These are the sorts of policies that need to be implemented, along with the removal of stamp duty for any purchase of a primary residence. They also need to look at applying capital gains taxes to increases of all property over a threshold of £500k.

Oh and for overseas property owners who have zero ties to the UK in form of citizenship, there should be an annual charge applied of approx 5% of the property value. If the lien gets to 15% of the property value the property is sold by the government at auction. If you want the benefits of the UK you need to contribute to them.

Interest only mortgages provide benefit if rents are inflated and property rises in value. So much of the changes will only affect London.

Likewise CGT, I have properties which have moved little in value over 10 years. But have paid off the mortgages so no probs.

It must surely help those at the lower end get on the property ladder in London as sales increase due to changes and prices drop at lower end.

Well in London prices won't flat line, maybe outside of it, but in London we still have a chronic shortage of propery for sale.

Too many people talk a lot of rubbish about the housing market, the amateur BTL landlords who this counts against are a small part of it and certainly not as major an influence on it as the lack of housing.

The chronic lack of supply in demanded areas is the problem. We haven't built the houses the country has needed to deal with things like net migration, growing population and the changing nature of demand for households for around 30 years. 30 years of under building have caused the issues that we find today.

The determinents of demand, the foriegn buyers, amateur BTL are responsible for some of the surplus demand, but no where near as much as the number of young professionals who have well paid jobs, able to afford £1 K plus a month rent with some kind of deposit built up, who are all competing for certain properies. Namely the starter kind of flats, one or two beds etc.

Tis why there will be no flatline in London. Also people should stop praying for a house price crash, if that happens, new buyers won't get on because people won't sell, they will sit tight and wait it out if they can. What will also occur is that the rising number of people in negative equity who have to move will cause more bankruptcy cases, banks will write off some of these debts. This means that lending will become scarce and the amount needed for a deposit will go up. It works to noones advantage!

The problem is that the policies are driven by the London market yet will impact the rest of the uk which on average is nothing like the London market. So house prices and relatively reasonable rental markets where proves aren't ridiculous will be impacted.

oldzebra - I guess we will have to wait for the HMRC rules to be published but I just have a feeling it might be delayed until 2017 or put off for ever as designing rules will be more difficult than the Chancellor envisaged.

I know what the objective is but the reality is people own two homes for all sorts of reasons.

ALSO - the conspiracy theorist in me cant help but notice that 'institutional sized' investors are exempt. I just wonder if that has been done to allow big investing institutions to warehouse defaulted residential mortgage property off bank balance sheets. A lot of banks have put defaulted property into special purpose vehicles and sold off to institutions which they then lend the money to a very low rate in order to buy the property along with a side latter guaranteeing to buy the property back in 5 years time.

Whatever the Govt does to BTL it will still do everything it can to stop a property crash as it would destroy the banks. Yet lower prices is precisely what first time buyers need to get on the property ladder.

The property market is very distorted indeed.

my guess is that letting agents deal mostly (if not exclusively) with small private landlords, so if they drop out of the game and institutional landlords move in then letting agents will see a big drop in business.

Not sure I follow your logic that sellers will sit tight if prices fall. The falls will be caused by the investor style of buyer being forced to sell because they could no longer service their mortgage after April 2017. Once several properties go at cheaper prices it sets the sentiment - and expectations of buyers. As you say, this won't affect you (unmotgaged landlord) because you won't be selling and you can choose to believe your property is worth whatever you like, however the people actually selling properties and buying will be the ones setting the prices.

It's the people who are just about meeting the Mortgage on the buy to let property and have no room for manoeuvre that tax changes will affect. Unfortunately these are precisely the type of investor that doesn't quite grasp full impact will be burned; partly, I believe, because they are heeding the landlord with no debt saying 'don't worry won't affect things'.

I do hope landlords with mortgages speak to accountants ASAP rather than listen to landlords without mortgages. It is very much in debt free landlords' interest to talk market up -they are a different species with different set of problems.

The problem for the debt free landlord going forward will be fewer buy to letters pushing up demand and prices and having to sell at whatever a first time buyer can pay.

The mortgaged landlord however is going to be taxed until they get the message that this system is f*** and invest elsewhere - probably with earned income rather than investing borrowed money on an asset that would take months to unburden yourself from.

Once several properties sell cheaper that becomes the going rate.

It was good while it lasted, smart investors are either debt free now or selling off currently and quietly- certainly not considering buying another- they will wait for distressed landlords to sell. That's how investments work - certain amount of luck - but mainly ahead of curve - not something I have noticed amongst many btl, seem to follow crows without much thought. Get informed - see an accountant - even if you are currently a lower rate tax payer - you probably won't be after April 2017 due to changes in mortgage relief. Learn about all the changes being mooted to come your way and you won't doubt the writing on the wall.

If you choose not to believe this, then look at landlord forums - panicking about bankruptcy, and so struck with inertia that their time to offload properties is running out as various tax efficient option doors are being closed and will continue to be closed until they get the message.

I don't think small private landlords will dry up either, plenty of people who have the cash to buy will still do so, offsetting the stamp duty against long term potential raises.

What will stop is people who release equity in their own home to put a deposit down on a BTL property, and essentially get the tennant to pay the mortgage. These kind of Landlords are actually dangerous in the market, they often pay interest only mortgages and are currently able to claim the tax relief, and rely on price increases to deflate the value of their debt.

Sadly, unless they are good landlords like the majority on here claim to be, they are often ill equiped to deal with the needs, they take long periods of time over repair (DS was a private renter for years and had more issues with small timers than big firms).

They compete with FTB for the flats that they can buy, and then end up letting to them and to be quite frank are only able to do so because they are subsidised, get rid of it, asap.

As I've said above big firms tend to buy higher value flats, especially in London, rather than the kind of starter thing a FTB could buy because of the huge returns you can get on them.

For example, someone I know who has been a property developer and landlord for eons, would say that you would only invest in something that would give you both a high yield and would certainly increase in value. To that end his firm now only buys properties in high demand areas that they can charge exorbitant rents on. His latest purchase is a place in an old gin factory in Camden, where he is able to charge his tennants about about £8.5 a month in rent for a furnished flat. This covers the huge service charge too!

Now there would have been a significant cash deposit, and his firm will get fairly low interest rate. It means that in less than 15 years (probably less with rent increases) the entire cash outlay on the flat will have been covered, and the assett will have appreciated in value. That is the only sort of deal that the big timers look at, no point piddling around with something that is going to pay you £1,500 a month rental, but cost you £350,000 to buy, which would take you 233 years to be in profit!

I think the main reason for the tax relief change is financial stability. The Bank of England want to limit the extent cheap borrowing inflates house prices, and reduce the risk of a crash. Lots of people are complaining that this hits "ordinary" landlords and not richer ones who don't need a mortgage, but from a stability point of view that's a good thing. There's nothing wrong with landlords owning lots of property, there are things to worry about when a lot of people are gambling with borrowed money.

People who are using their own money to fund their business aren't a problem for two reasons: if there's a down-turn, lower borrowing means they are less likely to be forced to sell, and secondly, even if they do lose money, it's their own, and not that of banks, that will have to be bailed out by the taxpayer.

Not sure about the stamp duty change. Maybe the main motivation for that one is to advantage home-buyers at the expense of landlords.

I do think it would be good for both tenants and stability if large professional landlords were more common, but I don't agree with the conspiracy theorists that the tax changes are a plot to help large corporations. The Economist has run articles in the past explaining why large corporations don't run residential property portfolios. To do property well, you have to have local knowledge, two identical properties in slightly different locations are not the same. Small landlords can focus on a small area they know, a large landlord does not get any economies of scale because they have spread their properties across different areas.

Oldzebra, I don't actually think that in the London property market there are that many landlords who are just about making the mortgage, they would be a small percentage of the market.

What happens when prices fall is that your average seller (who isn't a landlord) doesn't move, if they can help it. They sit tight and they wait for prices to rise if they can. This restricts again the amount supplied on to the market.

Anyway, due to the chronic under supply of the past 30 years you would need a massive amount of property to become available on the market over a short space of time to have a significant effect on prices, as this won't happen, its likely that prices will either plateu for the moment, before continuing with much more modest raises in future.