Buy to let – sell now before you get into deep poo.

Do I deserve to be punished

Speaking as a homeowner myself, we’ve no right to demand protection from the vagaries of the market. If prices drop then so be it. It happened before to other people. If you didn’t bail them out then why expect protection for yourself now? Whether it’s a punishment we somehow deserve doesn’t come into it.

because voter demographics are changing

Not yet. The young are the least likely to vote (43% vs 78% turnout for 18-24 vs 65+). Also getting worse 18-24 men down by 8% since 2010, women up by 5%.

https://www.ipsos-mori.com/researchpublications/researcharchive/3575/How-Britain-voted-in-2015.aspx?view=wide

We have a housing bubble, particularly in the South East

And so once again we have a national policy to sort a South East issue. Remind me again why SNP did so well at the elections?

as a voting bloc the young eternal renters/living with parents folks (this now extends to people in their 30s) are becoming increasingly important.

Again, this is a looming ‘bombshell’. Those who have benefited from all the housing price rises and culture since 1970’s are viewed with jealousy by a younger group of voters, who want to find a way of wrestling the properties that the baby boomers occupy into their hands, at reasonable cost. As that older generation die off, what will happen to the gap between expectations of what a house is worth vs what can be afforded by the next generation? Will there be enough wealthy first time or Gen X/Y’ers to keep the prices up?

Whenever this buy-to-let tax comes up it staggers me the number of people (including financial journalists and representatives of big accountancy firms) who seem to have forgotten their first ever lesson of supply/demand economics.

Prices are not based on costs so Landlords simply can’t put up prices because their costs have gone up. The idea that they’re not already charging (in most cases, there will always be edge case exceptions) as much as the market will bear is ridiculous.

This^. I’ve made a lot of sacrifices to buy my place (which I live in), bikes not bought, holidays not gone on etc. Do I deserve to be punished for that because I have the temerity to earn over 40k?

Why are you being penalised for earning over 40k?

If you are buying a home to live in at a price you can afford then you are pretty shielded from the market changing. That said this new legislation will have zero impact on house prices.

I’ve made a lot of sacrifices to buy my place (which I live in), bikes not bought, holidays not gone on etc. Do I deserve to be punished for that because I have the temerity to earn over 40k?

Just run us through how you’re being punished exactly?

Why is it that some people presume that the government has some kind of moral obligation to set economic policy so that homeowners have an asset that must endlessly appreciate in value way, way beyond rates of inflation, pay rises etc?

It seems to be regarded as some god-given right nowadays. It isn’t. Its a deliberate perversion of The Market, in that governments have consistently artificially propped up prices for political reasons (home owners borrowing money they don’t have, against their ever-appreciating ‘asset’ to buy shiny things they don’t need).

It needs sorting out, before it once again becomes another major contributory factor to another potentially catastrophic, but predictably familiar boom and bust cycle

“If you are buying a home to live in at a price you can afford then you are pretty shielded from the market changing”

Kinda- unless you need to move and paid top dollar and then lost all your equity

Exactly^. I’m not in favoir of prices rises, jsut against price falls, stagnent prices seem to be the least worse option, stopping the moving goal post problem.

I don’t understand the problem with negative equity as applied to people moving house.

If you buy a house for £200k, but then need to sell at £150k in order to buy elsewhere, it’s probable that the house you want to move to has also lost the same proportion of its value, eg it’s also priced at £150k but was previously £200.
So what is the difficulty, unless you’re moving to a region where prices have risen or remained stable?

That works both ways and plenty of people benefit, I.e. Move from a SE conurbation to a grim coastal/faded industrial area where prices have stagnated for years and homes are difficult to sell.

you bought a house with 20k deposit of 200k.

the market drops and your house now only worth 150k.

you have paid in say 20k over 3-4 years …..

you still owe the bank 10k + have no equity to get a deposit on your new 150k house……

And in that scenario the couple saving hard for 3-4 years for their £200k home have a decent deposit and cand get an affordable mortgage as the property they want to buy is now 50k cheaper.
This frees up a bit more money and they start a mini buy to let empire. 🙄

Whats to stop people setting up / moving their property into a Ltd company to take profit as dividend (and offset expenses against tax etc)?

@Moses – trail_rat has it. Negative equity means you cant move.

yes mr smith – edit – i read it wrong i thought you were having a go ;). Got what you meant now !

the bit i find funny is all the accidental land lords who say they couldnt sell their flats – no one wanted it – but apparently demand out strips supply for first time buyers (usually flats)- clearly it doesnt OR they have overvalued their house in their own mind.

Whats to stop people setting up / moving their property into a Ltd company to take profit as dividend (and offset expenses against tax etc)?

Cost of setting up and managing a company – in my case it would not save anything over the extra tax bill.
Taking a house into a company incurs Transaction Tax (Stamp Duty) costs.
Selling a house from a company means you incur capital gains at a much larger rate, and without an allowance.
You would pay yourself dividend, rather than PAYE, and I cannot see that lasting much longer… 🙄
This means only those with a number of highly profitable properties will benefit from a company for property.

matt_outandabout – Member

@Moses – trail_rat has it. Negative equity means you cant move.

No it doesn’t. It just means you can’t move, and expect to buy another house (or perhaps, not of the same standard). But that doesn’t stop you, it just puts you in the same position as all the other people who can’t buy a house.

the bit i find funny is all the accidental land lords who say they couldnt sell their flats – no one wanted it – but apparently demand out strips supply for first time buyers (usually flats)- clearly it doesnt OR they have overvalued their house in their own mind.

I bought my place when we had a ‘tied’ house to my work. The flat was a ‘if the job goes wrong, we have somewhere to live’ approach to life.
We paid £104k in 2008. It needed £4k on roof and we did small renovation of £2k. Cost £110k + puchase cost.

We tried to sell in 2012/13 for £110k ono – not one offer (even below), and barely any interest in it. Remember this was mid house prices falling stage. I make a net profit on my regular costs, overheads and (current) tax of less than £800 a year. The washing machine died a few months ago, so this year I am now down to £600 profit this year. One void month, and I am in negative.

We needed our own home, not where the flat is, so last year re-mortgaged to withdraw deposit for our own home (three beds with five of us in it). I wish I could get rid of the flat, it is a stress and time consuming – but the market is not there yet, and with these changes is unlikely to be.

I am not asking for sympathy – it is the choice we made, and I should have left my money in the banks(!). However, to be in a situation where you think things are stable and sustainable, only for the government to pull the rug, is deeply frustrating.

I will sell before 2020, but I suspect I shall loose every penny of capital that I had. I expect there will be many thousands in the same position as me. Anyone want a cheap flat in a Highland town?

so you then go to rent northwind….. and find that the goverments **** that industry over and now demand outstrips demand and you cant find a house to rent….. and you cant afford to buy.

rock and hard place.

what are similar properties selling for.

just because you spent 6k on it doesnt mean its worth that extra 6k remember.

Im under no illusion that rewiring my house / replumbing and putting a new boiler on my house has raised its value by even a penny.

HOW EVER id hope its raised its desirability at its valuation.

MEanwhile i get to live in a house where i know the wiring and plumbing are done right.

doing work on a house doesnt always value

trail_rat – Member

so you then go to rent northwind….. and find that the goverments **** that industry over and now demand outstrips demand and you cant find a house to rent….. and you cant afford to buy.

rock and hard place.

The point I’m trying to make is, this isn’t a negative equity problem, it’s a countrywide problem and most people who’re affected by it, have never had a chance to own one home never mind a second or third. So no it doesn’t stop you moving but also frankly it’s not the biggest issue we have.

i agree we have big issues – i just dont think stripping back the rental market to the big guns only is a viable answer –

have you ever rented off one of the big corporate rental agencies –

ill never do it again. absolute horror fest of lying cheating bastards.

what are similar properties selling for.

When we bought, it was at a price where the roof and renovations were ‘accounted for’ – most other properties the same at the time were on £120k+.

Currently, three properties of similar type have sold in the last year, three more the year before that.

There are a number of properties for sale locally of similar size and value, that have been on the market for 2+ years. There are some of similar size, brand new developer renovations, that have been on the market for 4 years without sale.

Being able to rent the place is not an issue – when we advertise I will have 5-10 people look round, and the last couple of times have had to refuse 3-5 of them as someone had got there first.

Maybe I should push the rent up? But then I am greedy landlord apparently, and would get hit for even more tax. 😉

matt – im all in favour of renting from someone with a face – which is why im oppose to the “tax the small fish out the game”

i just dont believe “we couldnt sell it” – its a ” we dont want to sell it for that”

And its the same situation – for any of us who will end up in negative equity – i probably wouldn’t do anything different to you if i was at risk of not getting enough to fund my next house(not that i see my self needing another any time soon) but was in a strong rental area where people need mobility – which i “currrently” am but increasingly less so…..with the depressed oil price.

Just run us through how you’re being punished exactly?

Why is it that some people presume that the government has some kind of moral obligation to set economic policy so that homeowners have an asset that must endlessly appreciate in value way, way beyond rates of inflation, pay rises etc?

It seems to be regarded as some god-given right nowadays. It isn’t. Its a deliberate perversion of The Market, in that governments have consistently artificially propped up prices for political reasons (home owners borrowing money they don’t have, against their ever-appreciating ‘asset’ to buy shiny things they don’t need).

It needs sorting out, before it once again becomes another major contributory factor to another potentially catastrophic, but predictably familiar boom and bust cycle

you bought a house with 20k deposit of 200k.

the market drops and your house now only worth 150k.

you have paid in say 20k over 3-4 years …..

you still owe the bank 10k + have no equity to get a deposit on your new 150k house……

Exactly^. I’m not in favoir of prices rises, jsut against price falls, stagnent prices seem to be the least worse option, stopping the moving goal post problem.

The brick took the words out of my mouth. Cash terms stagnation would seem to be the least worst option. Given time and rising wages (try not to laugh) this makes housing more affordable, both for new entrants and mortgage holders, without hitting those of us who bought after the boom with negative equity.

Binners, re-read my post. I’m not asking for an endlessly appreciating asset, I live in my house and I borrowed what I could afford, still (just!) the case after getting divorced. I just don’t want to be trapped in it by negative equity. I was lucky enough to be able to afford to buy out here in the Shires. I’ve worked hard and made sacrifices to pay the mortgage down. There are a lot of us! A tad unfair, don’t you think, if Government policy wipes out the tens of thousands of pounds we’ve paid in to our mortgages? Granted, worse things happen at sea, but still not a great situation.

I don’t understand the problem with negative equity as applied to people moving house.

If you buy a house for £200k, but then need to sell at £150k in order to buy elsewhere, it’s probable that the house you want to move to has also lost the same proportion of its value, eg it’s also priced at £150k but was previously £200k.

I’m guessing you’ve never been in this position… Basically you can’t sell, unless you’ve enough cash (or equity) spare to pay off the mortgage. Therefore if you need to move then you’ll need a bridging loan or rent the new house.

FWIW the house we bought in 1989 only came out of negative equity in 1997, luckily we didn’t need to move.

i just dont believe “we couldnt sell it” – its a ” we dont want to sell it for that”

This you are correct with.
We are now locked into a mortgage until next year. When this ends, I will sell, and likely for well below what we paid.

I still find it funny that everybody replying believes home ownership is their right, prior to the Thatcher years (I guess) it was a privilege not a right. Just saying.

ti_pin_man

The ‘problem’ we had was:
To buy – £750 a month mortgage, and we cannot be moved on.
To rent – £1k a month, and we could be kicked out.

WWYD?

“I still find it funny that everybody replying believes home ownership is their right”

Not at all – how ever i feel those that have done the hardwork to own there own house should not be policied out of that position.

Anyway . thatchers regime knew what they were doing….. get a noose round their neck (mortgage) stops them striking so quickly and so often 😉

Oh and what matt said – where i live it was 1200 a month for a 3 bed semi on a rental and put up with other peoples choices re kitchen/decor/bathroom etc.

or 700 quid a month to buy a more suited to me place that i can make a home of and not live in fear of being kicked out with a couple months notice.

Did I, as a landlord, just complain about the high rents? 😆

Don’t believe it’s a right, I bought something I could afford. I just don’t want to have flushed tens of thousands down the proverbial!

the world has changed a lot over the last 100 years, we take it for granted and I see no reason that it might not turnaround back to 1918.

So who is going to own these properties then, if we do revert to 1918?

faceless conglomerate tax dodging regimes based outwith the uk perhaps…..

1918 – largely estate/Crown/council owned.

2020 – Who ?

the same type of person who owned them back then, the landed rich.

the worlds changed.

i know that even in the 1960s – if you were a farmer/worked on the estate/were a fisherman/woodsman a.nother production industry in scotland you quite often got a house tied in with the job and it formed part of your wage.

I cant see you living in a dorm next to your office. can you?

You missed the bit on your own infographic about 31% Social Landlords (Council Houses) by 1981…

If you buy a house for £200k, but then need to sell at £150k in order to buy elsewhere, it’s probable that the house you want to move to has also lost the same proportion of its value, eg it’s also priced at £150k but was previously £200k.

I’m guessing you’ve never been in this position… Basically you can’t sell, unless you’ve enough cash (or equity) spare to pay off the mortgage. Therefore if you need to move then you’ll need a bridging loan or rent the new house.

Yep. We can’t move anywhere, no matter how cheap the house.

Actually that’s not quite true since prices have recovered a bit in the last 6 months or so. And we have a repayment mortgage too.

most house given with a job / role were duly lost once they died or lost their jobs. Thats not ownership.

Should have linked, graphic came from gov website for national statistics. I’ll ping them an email and ask them to correct. 😉