Get ready for more taxes on BTL

pickles110564

thelawnet wrote: »

I could buy a house tomorrow. I choose not to because of absurd overvaluations. If this situation changed, I would buy a place. And in reality the properties I rent (large houses)
.

You say that basicly people who are buying at the moment are mad,maybe, but least they are not flushing their hard earned money down the toilet.
Even if there was a correction and they bought at the top it would not be a problem because they could afford to hold on to their asset for as long as they like. They must be able to afford today's high prices otherwise they would not have been able to purchase.

Gorgeous_George

A price correction is long overdue.

People who own a home that they wish to stay in will be ok providing it is not interest rate increases that cause the correction (most likely catalyst IMO).

Those who wish/need to move will be hurt. They will not be able to move and, if interest rates became unaffordable, they may well end up in a financial mess. Negative equity of £50K may be normal.

I hope Gordon Brown releases more land for houses to be built upon. I'd rather see a cooling of the housing market due to over supply than because of IRs. At least this way, those who have bought recently will be able to get on with their lives with only the burden of a high but (importantly) affordable mortgage.



GG

Graham_Devon

thelawnet wrote: »

If an asset has lost value, then you don't have much option about selling at a loss. If I buy shares for £2 and then they fall in value to £1.50 due to adverse market conditions, then there's no reason not to sell them for £1.50 - due to new information/circumstances, the shares are clearly no longer worth what they were, so it would be stupid to say "I'm not going to sell these for a loss"

And with shares there's no cost to hold; otoh, a big monthly loss on a BTL is costing the owner money that he might not be able to afford, or might not want to afford, and seeing that the asset had lost value, if he had any sense he would likely sell at the new price.

And I didn't suggest all renters would buy, as I pointed out, BTL will be just as viable with taxes on reducing the capital value thereby maintaining post-tax yields (and of course professionals would likely seek out tax shelters), so there would not be a supply problem for people looking to rent.



Indeed, you are quite right, those people would be very happy to see the value of flats/starter homes fall.



I have no idea why you are mentioning this, nowhere did I suggest that the landlord would sell to the sitting tenant, merely that your suggestion that a mass sell-off off BTLs due to tax problems would cause prices to rise is absurd.



I am not sure where you imagine all these people are living. Most first-time buyers ARE tenants (somewhere). And whether or not the fall would be 40% is hard to say - while yields would fall by not more than 40%, falling prices cause buyers to panic, driving prices lower, so it's hard to say what the net effect would be.



As well as what? I haven't requested any laws be passed. I was merely pointing out the absurdity of your wishful thinking, by illustrating that selling off BTLs cannot possibly increase demand for housing.



Why would the FTBers be clambering over you to buy a property when they are not at the moment? Ah yes, because the price has fallen because of the drop in yield for BTLers. Hmm, yes. I think there might just be a flaw in your logic there.



I would be paying nothing. I could buy a house tomorrow. I choose not to because of absurd overvaluations. If this situation changed, I would buy a place. And in reality the properties I rent (large houses) tend to have very small mortgages relative to their values, because nobody in their right mind would buy such a house for BTL, so any tax increase would have minimal impact on their yield (which I see often below 3%). The property by tax changes that would be affected would be the flats bought by BTL investors where the rent barely covers the I/O mortgage.

And as to supply, flats are being put up all over the country, there's a glut of supply, and they are the least desirable form of property (compared with a house), so their value is ripest for a fall.

I find it totally absurd, that you can't see that not everyone will be able to by a house if there are no rental options left.

I find it ludicrus that you think all FTB's are in rental at the current time.

I find it even more worrying that you think house prices will just drop 40% and there will be no one fighting to buy them, putting the prices up again.

A crash has been forecast for the past, what...3 years?!?!

tr3mor

pickles110564 wrote: »

You say that basicly people who are buying at the moment are mad,maybe, but least they are not flushing their hard earned money down the toilet.

Rubbish, I'm getting a new rental next week. Costing me £750pcm, to buy it would be £250k.

If I bought the same place with a 100% mortgage at a rate of 5% (simple numbers for calculation) then I'd be paying the bank £12500 a year in interest.

So, what would I rather pay? £9000 a year in rent or £12000 a year in interest?

tr3mor

My two cents...

Real prices are heading for a tumble, whether it's enough of a tumble to effect nominal prices only time will tell.

Over the next few years we'll either suffer from high interest rates or high inflation. High interest rates will cause prices to fall nominally, high inflation will push wages up and hence houses will feel cheaper.

To be honest, I'm hoping for a huge crash. I want to buy a house, but it makes no sense considering prices at the moment. Pity I've only just graduated and found work, otherwise I'd have done it sooner.

If anyone fancies offering me a house near Warrington at half the valuation PM me

Ad

tr3mor wrote: »

Rubbish, I'm getting a new rental next week. Costing me £750pcm, to buy it would be £250k.

If I bought the same place with a 100% mortgage at a rate of 5% (simple numbers for calculation) then I'd be paying the bank £12500 a year in interest.

So, what would I rather pay? £9000 a year in rent or £12000 a year in interest?

Its a no brainer at the moment.

meanmachine_2

I LOVE how the landlords and recent BTLers on this thread now think any paper questioning the wisdom of becoming a buy-to-letter must be "crackpot".

By that definition, the greatest cheerleader of house price inflation, the Daily Express, must be the sanest, most brained up organ ever conceived.

Duuuh.

lynzpower

Ad wrote: »

Its a no brainer at the moment.

YES IT IS.

Its an option that I have purposely chosen.

therefore, what you propose would be that the rent will go up. And in the current climate the mortgage will also be high too.

Even if the property where I live crashed onto the market at 50k less than what its worth now, I can tell you right now, that most FTBs who have been renting would have to have combined salaries of minimum 75k salary to be able to afford it.

However, we can rent it for 758 a month. PUshing tax on that up will either mean that cost is passed on to me the tenant, or another house comes onto the market thats not quite affordable for these masses of FTB who you reckon are sat in thier rented places counting up thier Ks week in week out waiting for a bargain.

I sold my flat as I believed the values were topping, and I was correct. Whether this is a full scale crash- no course it isnt.

Somerset

I can't really see the point of this argument. I can actually see both sides and believe the following :

- Btl's have affected the market, but not massively. I heard on the radio it accounts for about 10% of property. A chunk then but not huge.

- It is harder now to Ftb. When I first bought 18 years ago, it was 4.5 times my salary at 12.4 % interest. Today it would be ( present salary ) 7.3 times salary.

- I think the market is over-valued. It will correct itself. By how much and when I have no idea. I had negative equity after I bought my first home and I didn't buy at the top either. I rode it out - I needed somewhere to live !

- Btl's to do now, today, do not stack up. The return isn't there. You would be losing money i.e. nursing them along with your own cash, gambling on capital appreciation. People getting into it now, may come a cropper if they don't have the ability to ride out any corrections.

- Having said the above, property has always been a good 'long term' investment. You need to be just that, in it for the long haul, not just looking for quick profit.

- Btl's have been a valuable resource in the rental market. For decent people who are decent landlords, it's often the only option for people who need to rent. As I said before, Councils and HA's just do not have the stock needed for the demand. If the monies from the 'right to buy' Council sales had been ploughed back into new housing stock, maybe this situation wouldn't have arisen.

- Not everyone will be able to buy a property. That might sound harsh in today's aspirational society ( I heard Gordon Brown rabbit on about it ) but it's a fact. Not everyone can afford a Porsch or Greek villa etc. It's just life. If you are a road sweeper in Central London ( no offence to road sweepers ) it just isn't going to happen, whatever market correction happens. That's where social housing comes in ... or should.

Gorgeous_George

meanmachine wrote: »

I LOVE how the landlords and recent BTLers on this thread now think any paper questioning the wisdom of becoming a buy-to-letter must be "crackpot".

By that definition, the greatest cheerleader of house price inflation, the Daily Express, must be the sanest, most brained up organ ever conceived.

Duuuh.

There's not many arguing that BTL makes sense at today's prices. You would have to pretty confident and/or go in with a 20-year plan.

BTLers who can afford at least 2% more on interest rates and who are sheltered from a 40% reduction in house prices will be fine. Others may well get their fingers burnt.

Come on Gordon Brown, free up some green belt land. My kids want to buy a house (or two )



GG