Not a time to be a buy-to-let landlord

lush_walrus

Graham_Devon wrote: »

As I keep saying, if it's so easy to charge more in rent, why are BTL's not doing it already?

As for your bread analogy, you may have noticed that many food products, including bread were quite innovative in how they continue to sell their products and maintain their profits as a result of price rises.

Bread for example suddenly started turning up as "half loaves", but at 75% of the price of the normal loaf. You won't find any half loaf that's half the price of the full size loaf. This is how they maintain profits.

Many food products reduced in size while staying the same price.

The inability for food manufacturers to simply increase prices is well documented.... so it's not all that great an example of where people will just "pay", as they didn't, and don't.

Year on year landlords are charging more in all the areas I know. Perhaps this is not the same throughout the UK but I can say on Surrey, Kent, Essex, Hertfordshire, Suffolk, Berkshire, Hampshire, Sussex and other counties near London each year they rise.

And why would Landlords not also be able to be innovative if required? I can tell you that in recent years few landlords I know include parking with flats, as they were generating less income through the main let so most now rent these out separately.

Garethgrew

Graham_Devon wrote: »

As I keep saying, if it's so easy to charge more in rent, why are BTL's not doing it already?

As for your bread analogy, you may have noticed that many food products, including bread were quite innovative in how they continue to sell their products and maintain their profits as a result of price rises.

Bread for example suddenly started turning up as "half loaves", but at 75% of the price of the normal loaf. You won't find any half loaf that's half the price of the full size loaf. This is how they maintain profits.

Many food products reduced in size while staying the same price.

The inability for food manufacturers to simply increase prices is well documented.... so it's not all that great an example of where people will just "pay", as they didn't, and don't.

There will come a breaking point if rents go up anymore while benefits are squeezed there will be mass defaults on rent.

wotsthat

Graham_Devon wrote: »

As I keep saying, if it's so easy to charge more in rent, why are BTL's not doing it already?

That's not how a market works.

A landlord increasing rents in anticipation of increased costs won't be competitive because other landlords won't try to increase rents until the costs increase or even absorb the costs into their own margin.

If every landlord was taxed a £100 licensing fee (or whatever) then the market changes and the market will decide how that £100 is shared out between landlord and tenant but clearly it's not looking great for the tenant in this case because an alternative landlord is also looking for an extra £100.

What's interesting about the recent BTL changes is how they impact certain parts of the rental market i.e. 40% taxpayers with higher LTV's so it'll be fascinating to see how the market reacts because landlords who own outright have just been handed a competitive advantage. On top of that the SDLT changes are going to deter new entrants - another competitive advantage.

Maybe there will be a rush to incorporate - that's what I'd do and over the longer term gift shares to my children.

Generali

lush_walrus wrote: »

Year on year landlords are charging more in all the areas I know. Perhaps this is not the same throughout the UK but I can say on Surrey, Kent, Essex, Hertfordshire, Suffolk, Berkshire, Hampshire, Sussex and other counties near London each year they rise.

And why would Landlords not also be able to be innovative if required? I can tell you that in recent years few landlords I know include parking with flats, as they were generating less income through the main let so most now rent these out separately.

The plural of anecdote is is anecdotes not data.

The value of off street parking is generally c. £0. It's only really in the centre of large cities that it has a value substantially greater than that due to scarcity. Outside London I'd be amazed if there were more than 2-3% of houses that had parking that had any real value and probably not even that.

wotsthat

Graham_Devon wrote: »

The inability for food manufacturers to simply increase prices is well documented.... so it's not all that great an example of where people will just "pay", as they didn't, and don't.

It's a perfect example.

If a product decreases in size but the price stays the same and people keep buying it then they've accepted a price rise.

It's worse than that because in many cases the reduction in size isn't accompanied by a similar reduction in packaging so you end up paying more per kg of food and a higher proportion of the price on packaging. Of course, during the exercise the supplier and retailer increase their margins.

Consumers (and retailers) are more sensitive to price point than cost per unit. More so in the UK I'd say.

buglawton

From an article in Howtogermany about how Germany solved it's housing shortage since WW2:

"Germany offers interesting tax incentives for investors buying residential property to let... input costs can be written down ... can include the interest on a loan attached to the property as well as notary, estate agent or management-fees ... also a large incentive in the form of a depreciation write down..."

The above encouragement for investors to create supply has resulted in some of the lowest rents per sq. m. in the EU. It also means there are a lot of investor-pensioners to be who will have a secure income and won't be expecting so many state benefits in the future.

Looks like Germany treats housing like any product who's manufacture needs to be as efficient as possible.

mwpt

buglawton wrote: »

From an article in Howtogermany about how Germany solved it's housing shortage since WW2:

"Germany offers interesting tax incentives for investors buying residential property to let... input costs can be written down ... can include the interest on a loan attached to the property as well as notary, estate agent or management-fees ... also a large incentive in the form of a depreciation write down..."

The above encouragement for investors to create supply has resulted in some of the lowest rents per sq. m. in the EU. It also means there are a lot of investor-pensioners to be who will have a secure income and won't be expecting so many state benefits in the future.

Looks like Germany treats housing like any product who's manufacture needs to be as efficient as possible.

Yes, but Germany also has actual civilised tenancy laws and civilised allocation of land. Land is released for building at efficient rates. Here in the UK with have the most expensive rents in Europe, maybe the worst (most constricted) planning laws and the worst tenancy laws.

Since we've moved to a more renter based housing system, it is just astounding to me how regressive our policies still are in this area. Before any taxes on BTL, here is what I would change immediately on becoming supreme leader.

I'd start from the point of view that housing is a human need and bringing up a family in a home with memories is actually a great thing. We'd start treating homes as homes instead of a money extraction investment.

- The property is first treated as a home for someone, and secondly as a long term investment. Landlords who get into the game will be fully aware that this is the case. It will not be an investment they can easily liquidate by evicting a family.
- Tenancy agreements become very much in favour of optional long term tenancies. Every tenancy agreement is by default indefinite (*).
- The landlord has no rights to evict a tenant on a whim, but can only do so if they are moving in themselves, or possibly close family. Edge cases can go to arbitrage.
- Rent rises will be constrained by x% in line with wages or possibly some other inflation measure.
- Tenants may choose to leave the property after the initial fixed period, with a notice of two months.
- It will be much easier to evict tenants for either non payment, anti-social behaviour, or property damage.
- The property may be sold but must be sold with sitting tenants. (not 100% sure about this)
- (*) Professional landlords complying with the above retain tax incentives. People leaving their own home and wanting to rent it out only short term may do so with a certain type of tenancy agreement but do not gain any tax incentives.
- Laws will be made such that lenders must comply to the above.

cells

mwpt wrote: »

Yes, but Germany also has actual civilised tenancy laws and civilised allocation of land. Land is released for building at efficient rates. Here in the UK with have the most expensive rents in Europe, maybe the worst (most constricted) planning laws and the worst tenancy laws.

Since we've moved to a more renter based housing system, it is just astounding to me how regressive our policies still are in this area. Before any taxes on BTL, here is what I would change immediately on becoming supreme leader.

I'd start from the point of view that housing is a human need and bringing up a family in a home with memories is actually a great thing. We'd start treating homes as homes instead of a money extraction investment.

- The property is first treated as a home for someone, and secondly as a long term investment. Landlords who get into the game will be fully aware that this is the case. It will not be an investment they can easily liquidate by evicting a family.
- Tenancy agreements become very much in favour of optional long term tenancies. Every tenancy agreement is by default indefinite (*).
- The landlord has no rights to evict a tenant on a whim, but can only do so if they are moving in themselves, or possibly close family. Edge cases can go to arbitrage.
- Rent rises will be constrained by x% in line with wages or possibly some other inflation measure.
- Tenants may choose to leave the property after the initial fixed period, with a notice of two months.
- It will be much easier to evict tenants for either non payment, anti-social behaviour, or property damage.
- The property may be sold but must be sold with sitting tenants. (not 100% sure about this)
- (*) Professional landlords complying with the above retain tax incentives. People leaving their own home and wanting to rent it out only short term may do so with a certain type of tenancy agreement but do not gain any tax incentives.
- Laws will be made such that lenders must comply to the above.

Your trying to make long-term renters better off renting than they are now. The problem is most people are short or medium term renters 3 months to 3 years and the current system is largely fit for purpose for them.

For the long term renter buying will be the better option. So what is stopping a 50 year renter from becoming a buyer? Lending into retirement? Too high mortgage restriction? Or they live in one of the very expensive bareas of the country?

Helping long term renters by making renting a bit more secure is a disservice they and us would be better off if they bought so work on that

purch

wotsthat wrote: »

it'll be fascinating to see how the market reacts because landlords who own outright have just been handed a competitive advantage. On top of that the SDLT changes are going to deter new entrants - another competitive advantage.

Maybe there will be a rush to incorporate - that's what I'd do and over the longer term gift shares to my children.

We've always had a competitive advantage.

These changes will only amplify that, whilst also removing some of the "dead wood"

The-Joker

purch wrote: »

We've always had a competitive advantage.

These changes will only amplify that, whilst also removing some of the "dead wood"

Punch, what happens to the property market affects you regardless of if you have equity or up to your eye balls in mortgage.

When the cycle turns and property enters the next bear market, it will affect those with or without mortgages.

The increase tax grab from property is bearish for property market in general no matter how you spin it.