What if a load of Landlords decide to sell ?

Shakethedisease

Just read this quote from Paul1964 re a Rightmove report

Miles Shipside, commercial director of Rightmove, comments: “They say that troubles come in threes. The continuing mortgage famine has now been joined by a surge in sellers following the abolition of HIPs and investor reticence driven by rumours of CGT increases. Together, these factors are likely to put an end to this year’s recovery in house prices. It is an unfortunate concatenation of events that disrupts what was sort of passing as normal service, where investor appetite provided an uneasy balance to the first-time-buyer-starved market. A surge of HIP-free properties has come to the market, and mortgage-reliant buyers and wary investors are failing to match the increased supply. That spells tougher times for sellers and tenants, with more properties for sale and fewer finding their way into landlords’ hands”. Having seen average asking prices rise for ten out of the last 14 months, and a 7.4% increase in the first six months of 2010, we forecast that new seller prices will fall during the second half of 2010 to give an overall price standstill for the year.

Now there are good landords and bad landlords, we all know that. But most are in there, certainly the last few years anyway, for investment purposes.

If house prices are not looking like a good investment anymore, re-mortgaging on a good rate is prohibitive given the LTV rates and CTG goes up..

Where do the tenants go ? ( Yes Hamish I know you've been going on about a housing shortage.. but I'm talking specifically about a rental one ). Great news for FTB's at last, at least, those with deposits, clean credit ratings and safe jobs.

What about the rest ? This has always worried me. I've seen loads of posts on this site incandesant about the LHA rates involved in housing a family that has ( for talking's sake ) fallen on hard times and needs this in order to be housed by a private landord.

What if there is not enough social housing AND not enough private landlords to go round ? There's already a 'surge' on with properties coming to the market...

I just worry that's all. The whole 'houses as investments' thing has always irked me personally.. and has skewed a lot of the numbers those on benefits 'get'. 25-15 years ago 99% on benefits got Housing benefit on a council house. The rents were low, but there were loads of them to be had for anyone that needed.. and that really did mean anyone. There was even an 'engaged couples' list at one point.

If a load of accidental landlords and those that have given up hope since 2008 of ever flipping and hpi, cgt increasing etc simply just give up and decide to sell ( with FTB's as above wahooing in the wings and rightly so ! ) as the investment doesn't add up anymore.

What will the government do about 'surge' in tenants with nowhere to rent ?

Am I the only one that thinks there may be a problem coming to a head here ?

smamst

Cheap houses for everyone.

When I mean cheap I mean prices that people can actually afford so that they can live in and not people who fantasise about making money and securing their pension pot.

Generali

If a load of landlords decide to sell, prices will fall. Then, presumably, some would change their minds about selling and decide to hold on instead.

headcone

smamst wrote: »

Cheap houses for everyone.

When I mean cheap I mean prices that people can actually afford so that they can live in and not people who fantasise about making money and securing their pension pot.

Well i`ll just hang on untill Tories like you starve.

pjread

if a load of landlords sell, sale prices go down (and presumably market liquidity increases as a result). Personally I feel that would be a huge boon for anyone who over the last 5-10 years has been essentially blocked from buying.

You never know, the increase in liquidity might even offset the completion price decrease for developers & actually boost the new build end of the industry.

HAMISH_MCTAVISH

Shakethedisease wrote: »

What will the government do about 'surge' in tenants with nowhere to rent ?

There's nothing they can do.

If this budget creates circumstances that provoke a mass sell-off of rented accomodation, then house prices will fall and rents will rise. Supply and demand always find a way to balance. Only the prices of houses and rent change.

There is a sting in the tail for potential FTB's though.... Because it is probable house prices won't fall that much, but rents will rise a lot.

To put it in perspective, the great BTL boom of the last couple of decades resulted in roughly a million houses/flats changing from owner occupation to rented accomodation. That translates to a decrease of housing available for owner occupation of around 5%. However that was also a 100% increase in private rented stock.

And as should be obvious to anyone, if you now reverse that situation, and put just 5% of housing back into use for owner occupiers but decrease the amount available to rent by a massive 50%, the impacts on house prices and rents will be very different indeed.

Although as generali points out earlier, the system will probably balance itself before any of that happens. Landlords looking to sell to avoid capital gains tax will probably decide not to sell if prices drop significantly.

HAMISH_MCTAVISH

pjread wrote: »

if a load of landlords sell, sale prices go down (and presumably market liquidity increases as a result). .

Actually the opposite is likely to happen. Market liquidity would also likely decrease in the event prices fall significantly, as the lenders become more risk averse.

The gains in rates and LTV's seen over the last year would reverse quickly, most FTB's would remain locked out of the market and unable to take advantage of falling prices. Landlords would then take their houses off the market, as there is no point in selling at a loss, supply would drop, and prices would recover.

Pretty much a repeat of the last 18 months. :cool:

Generali

HAMISH_MCTAVISH wrote: »

There's nothing they can do.

If this budget creates circumstances that provoke a mass sell-off of rented accomodation, then house prices will fall and rents will rise. Supply and demand always find a way to balance. Only the prices of houses and rent change.

There is a sting in the tail for potential FTB's though.... Because it is probable house prices won't fall that much, but rents will rise a lot.

To put it in perspective, the great BTL boom of the last couple of decades resulted in roughly a million houses/flats changing from owner occupation to rented accomodation. That translates to a decrease of housing available for owner occupation of around 5%. However that was also a 100% increase in private rented stock.

And as should be obvious to anyone, if you now reverse that situation, and put just 5% of housing back into use for owner occupiers but decrease the amount available to rent by a massive 50%, the impacts on house prices and rents will be very different indeed.

Although as generali points out earlier, the system will probably balance itself before any of that happens. Landlords looking to sell to avoid capital gains will probably decide not to sell if prices drop significantly.

There's no point in selling to avoid a capital gains tax if there is no capital gain!

Also, if rents were to rise quickly, people would find solutions other than renting, eg sofa surfing or kip in the car. Alternatively, more people would share houses either to buy or rent.

Clearly the best thing is to have a healthy, competitive market for rented and purchased accomodation.

princeofpounds

These 'shortage of rental property' arguments always really annoy me when I hear them on the TV, because they just have no economic sense. Anyone living in the real world will be aware that the property does not just disappear.

What happens is that prices adjust. There is always a process of price discovery ongoing in the market in order to try to balance supply and demand. If lots of landlords sell (and importantly are willing to sell at a lower price - for demand and supply are always functions of price, not permanent truths!) then house prices will adjust, and a proportion of people will move from renting to owning.

If there is a shortage, it will only be a frictional shortage. In the sense that instead of 1% of houses being up for sale (at a guess), the amount might become 3%. Perhaps half the incremental properties will be cleared of tenants, the others might remain tenanted.

Overall the cost of housing might go up or down, and that will largely depend on other factors than the physical supply of property (which we have seen is not really a problem). Credit available for mortgages is one big one - at what cost and what availability. Real wage growth is another.

chucky

people are assuming way too much here for a change.

if you're going to be liable to CGT you've obviously made a profit on the property which means that you should have a large amount of equity on your property.

if you have a large amount of equity your mortgage is going to be a small LTV which means that your yield is high - why would you need or want to sell if you have a high yield property?

pjread

chucky wrote: »

people are assuming way too much here for a change.

if you're going to be liable to CGT you've obviously made a profit on the property which means that you should have a large amount of equity on your property.

if you have a large amount of equity your mortgage is going to be a small LTV which means that your yield is high - why would you need or want to sell if you have a high yield property?

Because a fair few (not all admittedly) landlords go empire building by raising the max LTV they can get on each property, with some napoleonic world domination complex that works well on the ridiculous assumption values will *always* rise.

So a minority of landlords, who hold a greater than average number of properties, might well not have a great yield to begin with & just be playing the quantity game.