To worry about falling house prices

[Ll81]

They say prices in central London have been falling for a while and this is rippling out to the rest of the country. Also lots of talk about raising interest rates and they could also be another downward pressure on prices along with lots of EU nationals leaving.

Anyone else worried that falling prices may mean many that have bought in the last few years maybe stuck in ne?

I saw prices in my area nearly double since 2012, then stall after Brexit. Realistically priced properties are still selling, but the "hold an open day and sell shite at 110% of asking" that we had just before Brexit has ended. Thank fuck.

"accidental landlords"

The market won't be supported by "accidental landlords" this time as it stutters.

Some still don't know that from this tax year the rent is added to their income total and taxed accordingly by HMRC.

Gone are the days of just deducting the rent payments plus wear and tear and presenting no gain and no tax to pay.

Not to mention the extra Stamp Duty required by "hanging on" to a property.

Very recently the rules on remortgaging a property for rent have become much stricter. Borrowers are beginning to find out as they try to remortgage going forward that they don't meet criteria for the "two year fixed deals" anymore.

Those that chose this option previously will find the tax hit together with "reduced" signs everywhere may sharpen their mind to accept the going rate someone can afford to pay.

Clearly, I am not a fan of the "accidental landlord" that have taken on the very risky venture of btl (ie borrowing huge amounts of money against the family home) rather than sell the property - they wish to gamble on potential future gains - well the potential future losses are now on the scene too.

I'm a home owner and I hope they fall. The Government shouldn't have interfered and printed money in 2007 which bailed out all those reckless mortgagees.

They are going sideways at the moment where I am but I imagine falls will follow. Good if you are selling because whatever you are buying will also fall. win win.

"Some still don't know that from this tax year the rent is added to their income total and taxed accordingly by HMRC. "

I didn't know that didn't happen before.

in theory my area has gone to "realistic pricing" - in practice it's still insane. If I was 10 years younger I'd not have been able to buy.

I think that we should stop focusing on the need to own a house, and concentrate on getting a better deal for tenants - secure tenancies, lower rents (could there be a legal limit on how much rent can be charged), and more social housing. If this happened then there would be less incentive for buy to let landlords, so house prices would probably gradually fall anyway?

River:
To clarify it is a tax relief which has been withdrawn.

That tax relief made it an attractive option for people willing to take the risk of borrowing large amounts of money to rent a property to other people, however the withdrawal of the that tax relief will sharpen the mind on whether they have the funds for servicing debts/tax/assessing risk/reacting to market and other tax changes.

Lower rate taxpayers think won't affect them - however the entire rental amount is added to their salary/income for the year - so will push them into the higher rate and that's where the withdrawal of tax relief comes into effect.

Previously btl could deduct the mortgage interest, wear and tear and then present a figure that they'd made from renting out a property after those tax reliefs were applied.

aRespectable That isn't quite how it is working - the ability to write off all the mortgage interest is being phased out over the next few years, and you get a credit as opposed to the whole lot. You can still deduct allowable expenses and afaik, carry forward losses from previous years.

This explains it: www.themortgageworks.co.uk/support/new_tax_system

and here:
www.themortgageworks.co.uk/support/tax_relief_changes#examples_-_how_your_clients_profitability_could_be_affected

If you are mortgage free, then that won't affect you anyway, or you only have a small amount of annual mortgage interest to pay.

Negative equity has happened before, and you just ride it out unless you have to move. It makes you think of your house as your home as opposed to a money generator.

Tax relief on morgage interest is being passed out gradually. General wear and tear allowance has been replaced with a like for like scheme. For better or worse you are still better off renting your home out rather than living in it. I was really taken aback the first time I became an accidental landlord and although the paybacks aren't as generous this time around they are still stacked in your favour compared to most income you can raise particulary as a basic tax payer.

ARespectable I*f you co-own the property however, you will only get your half of the rent added onto your income, and can use your half of the tax relief and any costs to lower any liability. It depends where you are income wise as well; as you have tax allowances, you may well not be pushed into the higher rate band.

Also, if you are maintaining the property - I've had about £1.5k of work done on mine last tax year, you can still claim that to reduce your overall liability.

yes scary the system does encourage good house maintence and repair.

I hope they drop, my kids are looking & the prices are ridiculous.

Our house has more than quadrupled in value in 16 years & I certainly wouldn't pay that much for it!

It's only Negative Equity if you're going to sell.....

Scary : the phasing started last year so we are one year in - tax due by January 2019, just some don't even know that yet.

The fact that lower rate tax payers will be taken into the higher tax bracket is what I've posted - which is correct and is the reason so many ex-btl properties are now on the market. The wear and tear was used as a straight deduction by landlords as I'm sure you know - now it has to be for actual work carried out, so it is very different.

Some landlords that have taken advice are offloading - the ones who are reading on the internet and "think" they've grasped it will be in for a shock.

Link: 1 in 5 landlords are quitting sector due to tax changes and because interest rates will be going up.

www.propertyindustryeye.com/more-landlords-looking-to-quit-sector-as-mortgage-relief-changes-start-to-bite/

Lots of BTL owners are pensions, as DH and I are. Would love it if our combined income was over £90k but unfortunately it isn't, even with the rent, so we will continue to enjoy the low tax rate. We never did wear and tear, always ofset what we actually spent, well maintained properties that have been improved over the years so we get decent rent and value increased. We also have a mortgage on one house so offset the interest we are paying. Most accidental/small time BTL owners aren't going to be paying higher rate tax.

I thought the wear and tear was for fully furnished properties only?

The landlords staying in the "business" have another problem at remortgage - the btls who are financially compelled to sell and have sold at a lower price set the new "sold" price for that type of property in that area.

So the loan to deposit ratio for all landlords in that area will change - because the value is not set by what you think it is worth, but the local last sold prices.

Just as all the people remortgaging to the hilt based on a flat that sold somewhere 1/4 mile away - it works on the way down too...

Grannie - Higher rate starts at £45,00, so yes if the rental income added to your pension is under £45,000 that then all is fine and dandy, that's assuming that no other tax benefits are withdrawn, changed, increased etc - which is possible of course.

However, you're not everyone - which is why 1 in 5 landlords are getting out and selling to first time buyers as the "investors" are thin on the ground.

In time the potential pool of renters will recede as they can afford to buy and will mean that potentially more "risky" tenants have to be considered (the professional bunch beloved by so many landlords for paying the rent on time - they will just buy themselves a home).

I earn a higher rate tax salary but still couldn’t afford to buy until recently. We’ve just bought a 5 bed Victorian house with an acre of land in Scotland! It’s absol beautiful. I’d the place were in the south of England, it would be well over a million. It’s absurd!

Forgot to add, here it was 200k!!!

aRespectableBureaudeChange, depends on the property, where it is, who the target tenants are.

It isn't only negative equity if you sell. It's negative equity if you remortgage. There are a tonne of people who won't be able to stomach big interest rate hikes. Especially lots of young families who took H2B out.

I don't understand the logic that if house prices come down it will be easy to get on the ladder. If people's LTV plummets they'll sit tight, they won't be able to afford to move and then none of the FTB homes will be up for grabs. It's not as if house builder's are going to reduce the prices of new builds out of sync with older houses, they'll still be out to make all the cash they can.

Prices need to come down. I recognise that leaves some people in negative equity. Shit for them, but it is what used to happen before prices just started going up and up.
Glad to hear that tax has changed for landlords.

I don’t agree. Prices are too high for “going down” to make any difference. My house is currently worth £500k. What would make it affordable? £250k? Do you really think there is any chance that would happen?

Because you know, a 10% crash would make it £450k. That really isn’t much mote affordable than £500k

*much more affordable

House prices are being propped up by buy to let. If that is no longer attractive, house prices will fall a lot more than by 10%

The UK national obsession and feeding frenzy re house prices in the UK bewilders me.

If you buy a house for 50k and 10 years later its worth 100k,,so what?

It doesnt really make much difference. If you decide to move you will sell your 100k house and have to go buy one that has risen by a similar amount. Nett gain? Not much really.

What has happened in the uk is that vested interests i.e speculators, evil estate agents and assorted other leeches have created a situation from which they alone can benefit.

The leeches at estate agencies seek to control the market,taking profit from it and doing all sorts of deals to suit themselves.

The best thing to do is buy a home that suits you and stay in it. That way your mortgage stays pretty much the same and over time, shrinks as a proportion of income.

The other thing of course that is happening a lot is a massive con job re apartments, otherwise known as flats if they were social housing.

Younger people are being sold this faux lifestyle of the cult of the "young professional". Uts total bullshit,. They are just workers like everyone else ! But the young professional must live in a certain area, in an apartment in the city centre.

Here in Manchester Chinese money and other foreign investment is being allowed to flood the city centre,building huge blocks of flats to be sold to mugs for a lot of money.

Most of them of course are not available to individual mugs to buy and are sold en block even before built to investment companies/letting agencies to rent out to other mugs.

Foreign money allowed by Government to flood the country so that houses can be bought and left empty and vast blocks of flats can be built and turn youngsters into lifelong renters.