They Go Up-diddly-up-up

cells

chucknorris wrote: »

There will not be a max exodus, the most significant result of the forthcoming tax changes, will be that the number of new landlords entering the market will reduce dramatically, secondly some highly leveraged landlords will leave the market, and thirdly there will be some upward pressure on rents.

Whatever the impact its going to be greater and bigger on London than the rest of the UK

I think that the reaction of the BTL mortgage lenders will be important. If they increase the rental cover from 125% at a notional 5% towards 8% to try and factor in this tax change then a lot of mortgage lenders will simply price out all but their 50% LTV products.

So BTL could go from a 15-25% down game to a 50% down game which will surely slow the growth of BTL

With some +250,000 rentals added to the stock a year its going to be interesting to see how far down that figure goes. Maybe towards +100,000 a year. The loss of 150,000 marginal buyers sounds very significant but I cant figure out how significant it will be to prices.

Generali

chucknorris wrote: »

There will not be a max exodus, the most significant result of the forthcoming tax changes, will be that the number of new landlords entering the market will reduce dramatically, secondly some highly leveraged landlords will leave the market, and thirdly there will be some upward pressure on rents.

That's just conjecture though. Why couldn't there be an exodus? (I'm not saying it will happen but it could).

wotsthat

I'm writing two books 'how to catch a falling knife (and failing)' and 'how to sell out way before the top'. However, if my wealth was concentrated in a couple of London houses and I'd just seen my net yield half whilst sat on a bundle of HPI with prices at a level never seen I'd seriously consider selling.

The investment has been nothing short of spectacular but there are still plenty of people who think it's worth the risk so a nice pool of 'greater fools' to help liquidate the investment.

chucknorris

Generali wrote: »

That's just conjecture though. Why couldn't there be an exodus? (I'm not saying it will happen but it could).

Yes it is only my opinion, but it is very strong opinion, the reason I expect this is:

1. Most prospective landlords will tend to be 40% tax payers, especially in the South (where prices tend to be higher). The combination of the loss of offsetting 20% of the mortgage interest and the wear and tear allowance is particularly significant to new landlords, who would have had a higher LTV ratio, typically profits are low in the first few years, those low profits will become losses which need to be endured for quite a few years with high gearing. This will become a barrier to entering the market with a lower deposit.

2. Existing landlords who have been in the market for some time will tend to have much lower gearing than landlords who recently entered the market, the effect on these landlords will be much less.

3. Property yields are not huge, but they do tend to be better than the alternatives, especially if there is some capital gains tax to pay, which means that the alternative return is reduced further as the equity invested elsewhere is reduced.

4. There will be some upward pressure on rents as the number of new investors reduces, combined with natural wastage and some recent landlords having to lave the market.

As some will know I haven't invested in property for years now, I have been investing in equities (and to a lesser extent additional pension in the teachers pension scheme), for a number of reasons. Mainly for portfolio diversity, because property is a long term investment and I am now in my late 50's and property isn't a passive investment (at least not for me, I like to be 'hands on') and as I approach retirement I want more leisure time to enjoy my life.

gadgetmind

We're lucky to have a 7 figure sum in property and ditto in equities, bonds, etc. (pensions, ISAs, unwrapped). If I was 100% in property, or 100% in other investments then I wouldn't sleep as well as night. Both have their roles, both have their ups and downs, but I've seen more people stuff it up in property than in equities due to gearing.