What do you think will be the imapct of B2L tax rises?

CKhalvashi

cells wrote: »

Or of course if they want fewer renters and more owners the lands biggest landlord (the state) needs to sell more of its rentals

This, however, needs to be balanced with the social need for social housing.

I lived briefly in a HA property a number of years ago (for about 2 years), before moving into private ownership (on a 95% mortgage if I recall) when I'd saved the money to do this.

The above should be the place for social housing, and whilst I agree on principal with the way it's run, I don't agree with lifetime tenancies, don't agree with the right to buy/acquire and I also don't agree with the raising of rents to ridiculous levels for moderate earners.

caronoel

Conrad wrote: »

+ The proportion of LL's that rarely / never raised rents (I've met this type - they cant bare to risk unsettling a long term tenant and are happy with rent) are now forced to increase them

I've never understood the logic of this. Rents, certainly in the corner of south west London that I know best, have risen 25% over the past five years.

Landlords not keeping rents at market levels are being unfair to their tenant, who may really struggle to find a comparable home as and when they need to move.

I tend to keep my rents in or around market levels and have been increasing rents by 3 to 5% each year, with not a word from the tenants

caronoel

Conrad wrote: »

I've spent a few weeks talking to LL's about this and the main points coming out thus far;


+ Some small time Landlords (particularly the 1 off person that let her place due to moving to a new place of work) will be forced to sell


+ Big LL's, property funds, foreign property funds and LL's banding together setting up holding companies will buy up this stock and more as they are not going to be subject to the new taxes. 'Lets kick out the small LL's and buy up the Monopoly board'


+ Rents will definitely rise to accommodate the extent of tax rises and the big investors (above) will want to cash in on this general rent rise to, only they wont be paying the new taxes, win win


+ LL's are busily dreaming up new 'costs' to help offset the tax.


+ The proportion of LL's that rarely / never raised rents (I've met this type - they cant bare to risk unsettling a long term tenant and are happy with rent) are now forced to increase them

To be honest, this is a disastrous and purely populist policy from the government.

In a growing economy, any market wide cost increase such as a tax rise, will be passed on directly to consumers. Just look at how quickly tax rises on booze, petrol or fags are passed through.

They tried removing interest relief for landlords in Ireland in the early 2000s. Result was a rise in both rents and in tax evasion from landlords and tenants agreeing under the table arrangements. The policy was quickly reversed.

In summary, the likely effect will be more upward pressure on rents and a move by landlords to acquiring properties through more tax efficient vehicles such as companies.

wotsthat

There's a lot of excitement about this on HPC but I would've thought the effects would be muted. The number of landlords affected is pretty small and they've been given plenty of time to transfer to tax advantaged spouses where appropriate.

For a higher rate taxpayer with a property they've held for a long time CGT is going to be a disincentive to sell anyway. Is part gifting to non-spouses still allowable to use up CGT allowances - some early planning could pay dividends.

Or they could just look at what other assets are earning and work out if it would be better to just pay off large chunks of mortgage.

chucknorris

caronoel wrote: »

I've never understood the logic of this. Rents, certainly in the corner of south west London that I know best, have risen 25% over the past five years.

Landlords not keeping rents at market levels are being unfair to their tenant, who may really struggle to find a comparable home as and when they need to move.

I tend to keep my rents in or around market levels and have been increasing rents by 3 to 5% each year, with not a word from the tenants

Most of my properties are also in (at least one of) your areas too, i.e. Battersea. For about the last 24 years I have rented under the market by about 10% (it varied over the years). There are a number of reasons that I have done this:

1. Tenants stay much longer, I see that as good because:
a) They really do look after the property and play their part by staying in for contractors, eventually when they are leaving show prospective tenants around (that doesn't sound like much but I live about a 100 minute round trip away from the property, so I really do value this a lot).

b). I'm sure you know yourself, every time tenants vacate all sort of work crops up for the landlord, so if they stay longer this is reduced.

2. I get a much larger choice of tenant, compared to if i was sweating the property by charging the maximum rent.

3. At times when rent has surged I have genuinely been caught out, but pleasantly surprised that I can raise the rent and still be a margin below the market.

chucknorris

wotsthat wrote: »

There's a lot of excitement about this on HPC but I would've thought the effects would be muted. The number of landlords affected is pretty small and they've been given plenty of time to transfer to tax advantaged spouses where appropriate.

For a higher rate taxpayer with a property they've held for a long time CGT is going to be a disincentive to sell anyway. Is part gifting to non-spouses still allowable to use up CGT allowances - some early planning could pay dividends.

Or they could just look at what other assets are earning and work out if it would be better to just pay off large chunks of mortgage.

I think by far the largest impact will be for new landlords entering the market with a high LTV mortgage. They will no longer be able to do it without a long lead in of annual losses, if they are higher rate tax payers. Higher rents may offset this to some degree.

IronWolf

As a prospective ftb I would hope it would reduce competition for buying houses but I'm not that optimistic.

Generali

IronWolf wrote: »

As a prospective ftb I would hope it would reduce competition for buying houses but I'm not that optimistic.

I'm not sure it will reduce competition among buyers but I think there will be a one-off boost to supply.

Conrad

caronoel wrote: »

They tried removing interest relief for landlords in Ireland in the early 2000s. Result was a rise in both rents and in tax evasion from landlords and tenants agreeing under the table arrangements. The policy was quickly reversed.

There is a significant propensity to avoid tax in the B2L community, this will be just another extension of that behaviour. Lots of LL's don't use managing agents, they are more or less off radar. I owned 2 places in Germany and avoiding tax was far harder, they are much more sceptical and inquisitive and link everything together, for example the land registry and the tax man.


And people wonder why some choose to buy at auction with supposedly clean cash...

chucknorris

Conrad wrote: »

There is a significant propensity to avoid tax in the B2L community, this will be just another extension of that behaviour. Lots of LL's don't use managing agents, they are more or less off radar. I owned 2 places in Germany and avoiding tax was far harder, they are much more sceptical and inquisitive and link everything together, for example the land registry and the tax man.


And people wonder why some choose to buy at auction with supposedly clean cash...

I will bend over backwards to avoid tax, we even looked at a possible move to the Isle of Wight. (only joking, read Isle of Man).
But I draw the line at evading tax, which is of course illegal.