Not looking good for buy to let after this afternoons announcement... 3% rise on all bands for second properties. So on a 300k property it'll increase from 5k to 14k....
Presumably to promote a soft landing for housing prices...
Rents will just rise to reflect it.
Will they though? This won't impact those who currently own properties just people entering the market / expanding what they own.
Rents will just rise to reflect it.
good luck with that. Wages aren't moving enough. Anyway, that's just stupid - the more people pay in rent, the less they have to spend in the real economy and the longer we stay in stagnation... low growth, deflation, low-paid jobs, no money left over to pay for pensions, lower tax take making it harder to pay of the debt/fund the NHS etc etc etc
BTL is doing huge amounts of damage to UK economy - hence it's being undermined slowly and steadily. BoE have it as one of the major warning signs to keep an eye on in terms of stability of the economy. It's a very unstable/risky 'business' model - essentially a leveraged bet on ever-increasing house prices...
It's sad that people are happy to screw the younger generation over so thoroughly, just to try and make themselves richer
What it will create is a mini stampede and price inflation running up to April
and the cheapest properties will be impacted the most - hurting anybody in the buy to live sector .
Either landlords will push rents up across the board or the supply of rentable property will gradually diminish and prices will rise as a result.
Only people to gain likely to be first time buyers with £60k+ income and a deposit who will, be competing with landlords who have to spend 3% more to buy same property.
I can see some advantage in the rural/seaside second home areas but, again, lot of these are rented durign the summer months and will just absorb the extra in that.
It'll all get offset agsinat tax anyway 🙁
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[i]good luck with that.[/i]
supply and demand - in the south east (which is only market I really know) the availability of rental property can't meet demand - it's a sellers market. If rents rise 5% people will be forced to pay. There will be a few for whom it makes it easier to move into ownership but £300,000 'affrodable' homes aren;t for many people that affordable...
It's sad that people are happy to screw the younger generation over so thoroughly, just to try and make themselves richer
Someone has to own rented property, unless you think we should outlaw the rented sector entirely?
Most people buying to let are in effect cash buyers
All they will do is ask for that extra 3% off the asking price.
Imagine most sellers will still say yes to not have a chain below.
supply of rentable property will gradually diminish and prices will rise as a result.
Assuming demand stays the same. Which it won't - a lot of tenants are only tenants because the BTL landlord has bought the house the tenants wanted to buy for themselves. Or you do what a lot of people I know are doing in London and SE (including myself) and just leaving - going elsewhere where salaries are lower but living costs proportionally cheaper... Demand for housing is NOT price inelastic.
The point of killing BTL is too many ill-informed 'investors' have poured into it, thinking it's easy money/guaranteed, without understanding the risks (which include personal bankruptcy) hence BoE calling it out as a systemic risk.
Someone has to own rented property, unless you think we should outlaw the rented sector entirely?
to the extent it's got to now - yes. A leveraged bet on ever-increasing prices - it'll go spectacularly bust and bring the banks back down if we don't get control over it. I have no problem at all with institutional build to let - high quality, managed property built specifically to rent - which also has the benefit of increasing supply which is badly needed.
[i]Demand for housing is NOT price inelastic.[/i]
I agree but 3% will not make a material difference.
It's good for tax revenue and will maybe have some marginal effect but for those pouring their pensions into BtL it's not a significant factor.
If the government ever manages to convince house builders to release their banked land and build on it then an increase in the supply of housing will have a far greater effect than a fairly small price increase for a certain type of buyer.
3% is less than 3 months house price increases round here...
Well I'm saving to buy one, likely to be a 3 bed semi priced at about £80k, for a family with kids, rental about £500pcm. This puts an additional upfront cost of £2400(previously below the stamp duty threshold). I'll do some serious sums now to decide whether it can be done by April, but I doubt it, 18 months away was what I was planning. It won't force me out of BTL, as this is my pension investment, but you do wonder what will come along next. In terms of rental rates, they have been edging up, so maybe I can price towards £550 and still attract decent long term tenants. I doubt the LHA will change any time soon though.
[i]It's sad that people are happy to screw the younger generation over so thoroughly, just to try and make themselves richer [/i]
That's a sweeping generalisation and an uneducated view of why many people become landlords.
[i]a lot of tenants are only tenants because the BTL landlord has bought the house the tenants wanted to buy for themselves[/i]
Not in my experience, it's generally people on short term contracts moving around the country to take up a new contract.
he lost on tax credits and needs to find money elsewhere. BTL is rel soft target!
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[i] likely to be a 3 bed semi priced at about £80k[/i]
A lock up garage with hard standing for 3 cars sold for £66k (plus auction fees) round here a couple of weeks ago.
Where are you buying at that price midlifecrashes - I think my kids will never be buying round here.
what gary m said -
around here last time i tried to rent , demand outstripped supply and we were competing with 90 other viewings for the flat....
her in doors sister had a similar experiance last year looking for a new rental in the same area....
The markets seem to think it's bad for anyone trying to make money from BTL
Patricia Mock at Deloitte told fastFT:The £625m the tax will raise in 2016/17 is quite large in the grand scheme of things. It will reduce interest in the buy-to-let market and dampen lettings. But the whole point is to free up houses for other buyers, so the overall impact on house sales shouldn't be too great.
Shares in Foxtons, which has a large exposure to London where buy-to-let is particularly prevalent, have fallen 3.7 per cent since the chancellor unveiled the extra stamp duty, and are down 0.2 per cent on the day.
Countrywide shares have dropped 2.6 per cent since the announcement and are now off 1.3 per cent on the day.
Shares in Aldermore Bank, a lender heavily involved in buy-to-let mortgages, slid 9.8 per cent after the measure was revealed, and are now off 5.4 per cent on the day.
Same round here. Some friends are looking and they can't even get a viewing on rentals as they are snapped up straight away.around here last time i tried to rent , demand outstripped supply and we were competing with 90 other viewings for the flat.
a lot of tenants are only tenants because the BTL landlord has bought the house the tenants wanted to buy for themselves
You're forgetting about approx 1m students, all the people on temporary contracts, people just starting out who don't want the commitment etc.
A good rental sector is important for a dynamic economy as you want the workforce to be flexible so the skills can relocate easily to where the need is. High percentage ownership is a restriction on labour flexibility.
Most of the BTLs in my street are students (undergrad, postgrad, visiting post docs from overseas etc). All people who couldn't and/or don't want to buy as they're only in Cambridge for 6 months to 4 years.
Watched a two room flat sell at £127k last week. Neither of those rooms were a bathroom/toilet so it needed a little work. Not London, but Bristol, and not one of the posh bits.A lock up garage with hard standing for 3 cars sold for £66k (plus auction fees) round here a couple of weeks ago.
[i]Not even London. [/i]
Not here either, we're suburban south coast.
A good rental sector is important for a dynamic economy
Agreed. But large numbers of inexperienced retail investors playing a leveraged bet on ever-rising prices, which only works at historically low interest rates, and produces poor quality, insecure accommodation is not really "good".
I don't know how many times I have to point out that BoE have repeatedly stated that the current situation is a threat to stability of the whole economy... this isn't just opinion...
[url= http://www.theguardian.com/business/2015/sep/25/bank-england-buy-to-let-scrutiny-china-mortgage-lending ]Article here[/url]
Institutional build to let would be a much better model for the country as a whole...
I don;t disagree there's a problem I just don;t think that, round here the 3% will make a material difference to the market when prices are rising by that every 3-4 months.
But large numbers of inexperienced retail investors playing a leveraged bet on ever-rising prices, which only works at historically low interest rates, and produces poor quality, insecure accommodation is not really "good".
Not all BTL accom is poor quality, the biggest mistake amateurs make it doing it up to too higher spec and not being objective about it.
As for the low interest rates etc, that only applies to properly bought with large mortgages, which is only a fraction of BTL.
Plenty of BTL owners pay cash and have no exposure to interest rates e.g.I own a BTL outright and the wife has her old house rented out, which she's not sold since moving in with me.
As far as I can work out these recent measures are going to push a large portion of the BTL market into the hands of large investment funds owned through offshore vehicles that pay little tax on income and who are not the most user-friendly landlords.
Not entirely convinced this is going to be beneficial for anyone save for the fund managers and their US/Arab funders.
The only people who will benefit from this stamp duty increase are the lenders.
An additional levy will require comparable additional funding and whilst there may be some BTL purchasers who are cash rich and do not require a loan to complete their purchase, my guess is that the majority will still require finance.
So in short, George has given his mates in the lending business a little extra this time round.
Where are you buying at that price midlifecrashes - I think my kids will never be buying round here.
Doncaster, gateway to the world. Either commute to Sheffield or Leeds, or get a job locally with national pay rates, and it can be a comfortable place to be.
It's sad that people are happy to screw the younger generation over so thoroughly, just to try and make themselves richer
So if/when I move in with my partner am I supposed to sell my place to make you feel better?
I'll probably end up renting it out as there is no point in selling it when there's a chance I would have to move back (hopefully not) or we might decide to keep it as a London mid week place and move her property to the countryside.
Either way I'm not looking to screw a generation over, just organise my life and property to suit my needs.
I don't think it'll make a massive difference to be honest (maybe to sentiment, but not to actual figures).
If house prices rise even at the rate of inflation (~2% annually) then in under 18 months the 3% is made back. If they rise faster (prices in my area (south east) have risen on average at ~ 5% a year over the last decade, including the 2008 crash), then its a drop in the ocean.
Anyway, you can write SDLT off against CGT when you come to sell, so its not even as large a figure as it seems.
It will make the first time buyer more competitive against the BTLer. But I wouldn't want to be either buying over the next 6 months, as there's sure to be a mini-bubble till the rules kick in
I personally think the latest increase in stamp duty on BTL and the previously announced tax changes for BTL income are both good things.
Aided by weak regulation and cheap credit from 2000 onwards, it was Gordon Brown's tinkering with private sector pensions that really stoked the BTL bubble in the first place just as the critics at the time warned it would - final salary schemes closed and money purchase pensions have achieved lower returns care of the dividend tax....both of these encouraged people to look at property as an alternative investment and reduced investment into equities which has undoubtedly made it harder for companies to expand.
We can't have a housing sector where massive speculative buying often by overseas investors causes price bubbles and lack of supply for those who actually want to own their own home.
The only change still required is to reduce stamp duty at all levels for non BTL property - the stamp duty is now causing a distortion in that on many properties the cost of moving is now so prohibitive it reduces labour mobility -there's no point taking a job paying £10K more a year when it means moving house and finding £20K up front in stamp duty. The stamp duty threshold also means that those who do move for jobs are less likely to sell and more likely to rent - creating artificial demand along the way.
It's sad that people are happy to screw the younger generation over so thoroughly, just to try and make themselves richerThat's a sweeping generalisation and an uneducated view of why many people become landlords.
So why do people become landlords if it isn't to make themselves richer, either now or in the future..?
Educate me.
Someone has to own [s]rented[/s] property
FTFY
Not in my experience, it's generally people on short term contracts moving around the country to take up a new contract.
indicating that they are renting, therefore the house they are investing in is not a second home.
So if/when I move in with my partner am I supposed to sell my place to make you feel better?
No, but being in a fortunate enough position to own two properties between you, gives you the opportunity to profit from people who dont have enough money to own one property between them, and perpetuate the reason they cant afford to buy the house they want. But i'm alright Jack
That's a sweeping generalisation and an uneducated view of why many people become landlords.
Very true, and people become landlords for a wide range of reasons and under a wide range of circumstances. That being said, my work takes me to domestic properties all around the SW, and i am yet to meet a landlord, who isn't a ****
Im not saying all landlords are, and im not saying all private owner arn't, but my own experience leads me to a conclusion.
And at the end of the day, when the poo hits the prop in the work, there comes the inevitable claim for money they are not due. You can set your watch by it.
No, but being in a fortunate enough position to own two properties between you, gives you the opportunity to profit from people who dont have enough money to own one property between them, and perpetuate the reason they cant afford to buy the house they want. But i'm alright Jack
You're blaming the wrong people. We have had a succession of governments who are very happy to use housing bubbles to boost the economy to make them look good. They have done everything they can to maintain high prices and reduce access to social housing.
Blaming those who already have houses, might make you feel better, but it's pretty pointless. Vote for a political party who doesn't base their economic plan for the uk on housing equity based consumer booms.
The devil will be in the detail with this one... it's not an increase for BTL, it's an increase on the purchase of 'additional properties like buy to lets and second homes'
There's lots of 'accidental' buy to let investors, people who want to move on, and have ended up with a property that they couldn't sell, so have just kept it, and rented it out- will the new main residence attract the second home tax?
People who buy properties to refurbish them?
Tory's looking after their own - if you've a portfolio already, largely mortgage free, you're not really going to be affected by this, or the changes in the budget.
Not really in the spirit of entrepreneurship is it.
There's lots of 'accidental' buy to let investors, people who want to move on, and have ended up with a property that they couldn't sell, so have just kept it, and rented it out- will the new main residence attract the second home tax?
Pretty much everyone I know with a BTL fits into this category - mainly moved house and kept the old one or married and kept the 'spare' house. I inherited mine (or rather it was gifted as a inheritance tax minimisation scheme - could hardly say no to a free house).
If you want to know why prices are so high...
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Political parties used to campaign on how many council houses they'd build each year, with Labour and the Tories trying to out do each other....
We now build less houses in total than we used to build council houses each year. Add in a modest rising population, smaller family units, rising divorce rate, job migration to the SE and you have a perfect storm. It could be solved in a under a decade, relax the green belts, and have the government fund 100k council houses every year for two parliaments.
Well I'm saving to buy one, likely to be a 3 bed semi priced at about £80k, for a family with kids, rental about £500pcm
That really is a stonking yield!
All up to Donnie...
I've noticed the area where I live go down the shit pan as it has been turned into a rental ghetto, with all the cheapest property bought up for BTL, not by young families starting out! and the added bonus of scum bag tenants who like the landlords don't give a flying **** about the state of the houses (bare minimum crisis maintenance) or the area.
Then I see my brother who works seven days a week and can't afford a basic house for his family because the prices of the cheapest have been pushed through the roof by BTL pensioners effectively buying them all up.
Oh and I know through my working life all the tax avoidance, CGT avoidance, mortgage fraud and Housing Benefit scams landlords pull, won't be sharing those with the prying eyes though!
Housing Benefit
Good point this. With so little council housing available, a massive proportion of our taxes that go to housing benefit go straight into the pockets of private landlords rather than to the state.
It's a hell of a scandal. I have no problem with my taxes being used to help give someone a home, but when that home is a BTL for some private individual to enrich themselves by taking advantage of someone else's inability to afford their own place it's another thing entirely.
Ultimately, that landlord is paying back a massive loan to the bank. So my taxes go to housing benefit, goes to private landlord, goes to bank...
I don't think many BTLers realise that they're just vassals for the banks to make themselves richer by finding another way to lend them money and then charge them interest on it...
Not only did social house building grind to a halt back in the 80's, they sold as much stock off for peanuts, as low as 2k and upto 25K was the highest I saw with rental discounts (North-West) another publicly funded asset sell off for peanuts shocker! They also sold land packages from estates to bent as a nine bob note hosing deals/their mates.
ah so finally you get it, its not the BTL thats the issue - its the system , the goverment.
its the voted in government thats failed you brooess not the BTL investor.
its the voted in government thats failed you brooess not the BTL investor.
Sorry, absolute toss. We're free agents in this world and we make our investment choices freely. No-one holds a gun to our heads and says 'buy another house'. Same as the driver who holds back and then overtakes when safe rather than doing a punishment pass - it's entirely voluntary to do the negative thing... same as a cyclist running a red light...
I've got a deposit saved up to buy in London/SE but it's still not enough to make a mortgage affordable. I could use that deposit to get a BTL in Manchester or another cheaper city as has been suggested to me by many people. But I don't because I understand the damage that BLT does to the younger generation by creating scarcity of property for sale, especially those that want to get some stability and start a family - it would be just putting my own self interest above theirs...
There's plenty of places to invest your money if your pension's not performing... sticking into a leveraged punt on property is entirely free choice... and a pretty stupid one given the historical instability of housing. Anyone remember how 2008 started? Anyone thought about how they're going to access the ££ in their BLT to spend in their retirement? Selling it. What happens when a whole generation of BTLs sell over the same 5 year period to cash in their gains...?
There's plenty of places to invest your money if your pension's not performing... sticking into a leveraged punt on property is entirely free choice...
Broess, what you, and others, are missing is that the vast majority of rental properties aren't owned by people looking to supplement/replace pensions, but by corporates and individuals who own hundreds and thousands of properties.
These aren't going to be affected by the changes announced previously and in the budget- they can buy mortgage free, and as businesses won't pay the SDLT change.
Vinney is absolutely right. And these changes will make this worse. Instead of a small investor that takes some pride in their asset it will be investment vehicles interested only in yield / IRR. This has no impact on them. Those taking a hostile line to small investor BTL landlords in this thread seem to just have a gripe against high house prices. This is not caused by the small minority of such investors that will be affected by the govts recent changes.
Also referring to property being a high risk investment - it is not - it has historically always outperformed virtually every other form of investment
Give us a clue then as to these alternative investments? Bear in mind I've personally experienced the Equitable Life flushing our pension, B&B/GA selling us an under-performing endowment, so I'm not a big fan of suggestions from the marketing teams of the financial services industry.
