BTL tax changes to cost London Landlords over £1B a year

padington

CLAPTON wrote: »

have you sold, with a view to buying back, somewhat cheaper?

I was going to pull the trigger on buying a second property, now i don't think I will ... Unless the seller accepts a 10% post budget haircut.

ruggedtoast

PasturesNew wrote: »

Don't worry - they will just put the rents up if they feel hard done by.

The pips are already squeaking. Housing benefit cut, tax allowances for taking in lodgers, not a good time to be getting into buy to let.

lisyloo

PasturesNew wrote: »

Don't worry - they will just put the rents up if they feel hard done by.

I sometimes mis-interpret posts as serious when they are meant in jest.

I don't believe that renters have inexhaustible supplies of money (inelastic demand). I'm a renter and if rents went up we'd have to reconsider our situtaion e.g. longer commute, less desireable area etc.

The ability of lanlords to just unilaterally put up rents also implies that they are charging less than the market would withstand. Why would they do that in competitive areas?

I don't see that lanlords can put up rents at will to cover their costs. They have to be competitive if they don't want voids.
Many of the successful landlords on here e.g. chucknorris, charge less than they could so that they can have their pick of good tenants. I'm sure this strategy works out well long term.

Many renters do have options e.g. commuting, lodging, hotels, working from home etc. so I for one don't believe demand is inelastic.

cells

lisyloo wrote: »

I sometimes mis-interpret posts as serious when they are meant in jest.

I don't believe that renters have inexhaustible supplies of money (inelastic demand). I'm a renter and if rents went up we'd have to reconsider our situtaion e.g. longer commute, less desireable area etc.

The ability of lanlords to just unilaterally put up rents also implies that they are charging less than the market would withstand. Why would they do that in competitive areas?

I don't see that lanlords can put up rents at will to cover their costs. They have to be competitive if they don't want voids.
Many of the successful landlords on here e.g. chucknorris, charge less than they could so that they can have their pick of good tenants. I'm sure this strategy works out well long term.

Many renters do have options e.g. commuting, lodging, hotels, working from home etc. so I for one don't believe demand is inelastic.

lots of people already compromise into situations that they are not 100% happy with and those who cannot or will not set the price. Currently 3 bed flats in inner london are around the £2,000pm mark which is expensive!

Landlords cant just increase rents, however tenants will outbid each other to not be in situations that they don't like.

And with +500,000 population growth a year there are many more tenants to compete with each other and push rents up. On an annual timeframe its hard to see but on a longer timeframe eg over a decade rents will probably track GDP and likely beat it as the UK population growth outpaces house building.

cells

Generali wrote: »

I believe there are some decent German residential REITs. I haven't investigated though so can't claim any expertise here.

having just had a quick look at one of Germany biggest REIT its interesting just to compare the huge differences. wish we had something like that in the UK

They own 350,000 properties.
average book price is just 60k euros (~£43k)
average rent for 2014 on a 70sqm property = 390 euro per month


However im not keen on German housing vs the UK, a static to soon falling population while at the same time adding ~2 million homes a decade.

Crashy_Time

chucknorris wrote: »

I agree there will be some making a loss, but they can carry the loss forward, and offset it against tax in future profitable years.

You were doing well up to then.

chucknorris

Crashy_Time wrote: »

You were doing well up to then.

Says the man who keeps ALL his cash in savings accounts for decades, the worst part is that you don't even know how dumb that is, especially for a young person to do. Savings accounts do of course have a place in every portfolio, but not as the entire portfolio in the long term (and in your case we are talking the very long term) and especially when you were young. It would be more understandable if you were elderly, and wanted to avoid a downturn.

lisyloo

lots of people already compromise into situations that they are not 100% happy with

I totally agree and I'm personally very familiar with the dilemma which basically boils down to a compromise between time (commute), space (property size) and money.
What I dont' agree with is that we're at a point where people have no choices and landlords have carte blanche.

If my rent went up a lot we'd reconsider options e.g. getting a job elsewhere, commuting from home, travelodge, serviced appartments etc.

And with +500,000 population growth a year there are many more tenants to compete with each other and push rents up.

What sort of jobs are these +500,000 taking?
Are they well paid surgeons/dentists/stockborkers or will most them be working in kitchens/hotels on low wages? I propose the majority will be the latter.

Central London (my definition is zone 1) will always be very competitive.
For everywhere else there has got to be a top price set by wages. If you like an absolute top if that people can't pay >100% of their wages in rent - obviously in reality it's less, but I'm just proving that there is a top figure.

I do think rents will rise but I don't think landlords have carte blanche.

On another thread you said you'd want £27K for a £500K property. Well chucknorris (landlord) and myself (renter) have told you the going rate in Vauxhall/Battersea is £21.6K and if you want the pick of excellent tenants then you should charge below market rent e.g. £18K. This is anecdotal proof from well known regulars that you can't just charge whatever you want.

So where do you think the money will come from to pay extra rent? (beyond inflationary type increases) if these +500,000 influx keeps unskilled labour prices low?

cells

lisyloo wrote: »

I totally agree and I'm personally very familiar with the dilemma which basically boils down to a compromise between time (commute), space (property size) and money.
What I dont' agree with is that we're at a point where people have no choices and landlords have carte blanche.

If my rent went up a lot we'd reconsider options e.g. getting a job elsewhere, commuting from home, travelodge, serviced appartments etc.

I think it works the other way around.
Tenants drive rents rather than landlords.

I think it works something like this.
say 500,000 immigrants arrive. They don't just go into a rental the same day, they most likely arrive and go and live in their existing friends rentals (or friends homes) temporarily. They then need to find their own rentals and move out as two is company but three is a crowd. So rental demand is very high but new builds are not meeting this demand. The result is that price needs to go up so people on the margin compromise and there is no homelessness.

lisyloo wrote: »

What sort of jobs are these +500,000 taking?
Are they well paid surgeons/dentists/stockborkers or will most them be working in kitchens/hotels on low wages? I propose the majority will be the latter.

There will be a large range but yes you are probably correct.
But even hotel or shop workers can afford rents due to housing benefits. Those not entitled to them often just live more dense. eg 4 lower paid people sharing one house and spilling the bills

lisyloo wrote: »

Central London (my definition is zone 1) will always be very competitive.
For everywhere else there has got to be a top price set by wages. If you like an absolute top if that people can't pay >100% of their wages in rent - obviously in reality it's less, but I'm just proving that there is a top figure.

but there are lots of people in London who pay more in rent than they earn in wages.

lisyloo wrote: »

I do think rents will rise but I don't think landlords have carte blanche.

yes i agree, tenants are pushing rents up not landlords

lisyloo wrote: »

On another thread you said you'd want £27K for a £500K property. Well chucknorris (landlord) and myself (renter) have told you the going rate in Vauxhall/Battersea is £21.6K and if you want the pick of excellent tenants then you should charge below market rent e.g. £18K. This is anecdotal proof from well known regulars that you can't just charge whatever you want.

you can only charge what renters are willing to pay
my observation is that they are willing to pay more and more because there are more people in need of housing and not a lot of new housing coming forward

lisyloo wrote: »

So where do you think the money will come from to pay extra rent? (beyond inflationary type increases) if these +500,000 influx keeps unskilled labour prices low?

a chunk of the rental market is quota driven not price driven.

if there are 10 renters in 10 homes and 5 of them are families on HB and 5 of them are normal renters paying their own way. say a new family arrives and the government says they are entitled to a home on HB. well the 5 families who were paying their own way need to make way for the new family. so the 5 families in 5 homes paying their own way need to become 5 families in 4 homes paying their own way. clearly none of the families want to share one house with another family so they bid a lot more in rent to try and avoid that situation. at some rent level one of the families can not afford to bid higher and that sets the price and they are regulated into sharing a house

this is the occupancy rate and in London its been growing every year since around ~2000 (while in most nations the occupancy rate has been falling since that time)

Thrugelmir

cells wrote: »

On an annual timeframe its hard to see but on a longer timeframe eg over a decade rents will probably track GDP and likely beat it as the UK population growth outpaces house building.

If you think that rents have any correlation to GDP then you shouldn't be in business. As simply put they don't and never will do.