What will happen to House Price/Demand with new BTL Tax in April?

MoneyEM

I'm currently looking for my first home (in Kent), I have seen a few and they seem to be snapped up anywhere from 1 day - 1 week. My question is; is it worth waiting until April (or even Mid Feb, as BTL investors will then not be able to complete in time) to look for a house? Will prices drop or level off? In my chosen area in Kent the prices have gone crazy, 2 bed terraces sold for 147k in September but are now being sold for £185k - £210k!

I put an offer in on a property yesterday after attending an open day, another guy was viewing at the same time (estate agent told me he was an investor) and had offered quite a bit over the asking price. I'm really worried as another 23 people had yet to see it.

I know we have a chronic lack of supply of houses in this country which won't be solved anytime soon, unless 250,000 houses are built per year... but is this enough to keep prices inflating at crazy prices or is it just investors rushing around?

HappyMJ

MoneyEM wrote: »

I'm currently looking for my first home (in Kent), I have seen a few and they seem to be snapped up anywhere from 1 day - 1 week. My question is; is it worth waiting until April (or even Mid Feb, as BTL investors will then not be able to complete in time) to look for a house? Will prices drop or level off? In my chosen area in Kent the prices have gone crazy, 2 bed terraces sold for 147k in September but are now being sold for £185k - £210k!

I put an offer in on a property yesterday after attending an open day, another guy was viewing at the same time (estate agent told me he was an investor) and had offered quite a bit over the asking price. I'm really worried as another 23 people had yet to see it.

I know we have a chronic lack of supply of houses in this country which won't be solved anytime soon, unless 250,000 houses are built per year... but is this enough to keep prices inflating at crazy prices or is it just investors rushing around?

Not all BTL investors will not disappear from the market. Far from it.

Property investment is a long term investment....at least 10 years. 3% extra SDLT divided out over 10 years is very little. Assuming a reasonable BTL property is priced at £150,000 the extra tax divided over 10 years would be £37.50 per month. Due to lower supply of rental properties gross yields will increase and rents will go up keeping property prices high.

At least that's what I see in my crystal ball.

MoneyEM

HappyMJ wrote: »

Not all BTL investors will not disappear from the market. Far from it.

Property investment is a long term investment....at least 10 years. 3% extra SDLT divided out over 10 years is very little. Assuming a reasonable BTL property is priced at £150,000 the extra tax divided over 10 years would be £37.50 per month. Due to lower supply of rental properties gross yields will increase and rents will go up keeping property prices high.

At least that's what I see in my crystal ball.

From my experience of househunting though, is that investors are rushing around trying to get anything that comes on the market. We asked the estate agent how many were first time buyers out of the 25 booked for the open day, and she said only a handful... The guy who was viewing the same time as us didn't even take much time to check everything out, just quick walk around then made an offer! Just seems a bit rushed to me. Maybe not everyone will see it as a long term thing and panic buy..

HappyMJ

MoneyEM wrote: »

From my experience of househunting though, is that investors are rushing around trying to get anything that comes on the market. We asked the estate agent how many were first time buyers out of the 25 booked for the open day, and she said only a handful... The guy who was viewing the same time as us didn't even take much time to check everything out, just quick walk around then made an offer! Just seems a bit rushed to me. Maybe not everyone will see it as a long term thing and panic buy..

Depends on what area you live in (Kent is high demand and always will be), what property you're looking at - 2 bedroom flats/terraces are excellent BTL investment opportunities...and how much gross yield those properties will get. I would guess £800-£900/month for the properties you mentioned earlier would be about right.

I'd be looking to rent in the short term and buy a larger house when you're ready.

When interest rates increase property prices should start to fall in real terms as putting money in the bank will get a higher return than investing in property. If all someone can get is 1% in the bank buying a BTL with a gross yield of 5% is attractive.

cells

HappyMJ wrote: »

Not all BTL investors will not disappear from the market. Far from it.

Property investment is a long term investment....at least 10 years. 3% extra SDLT divided out over 10 years is very little. Assuming a reasonable BTL property is priced at £150,000 the extra tax divided over 10 years would be £37.50 per month. Due to lower supply of rental properties gross yields will increase and rents will go up keeping property prices high.

At least that's what I see in my crystal ball.

stamp duty in London has gone up dramatically.

Five years ago a flat for £250k would have seen £2,500 stamp duty. In april the same flat which is now closer to £500k will have a stamp duty of £30,000

So same flat has gone from £2.5k stamp duty to £30k stamp duty in the space of about 5 years

Also its an up front cost so if you do not have the £30k on top of all the other costs you can not buy. It does not matter that spread over 15 years it is 'only' £167 per month

cells

My advice would be to hedge your bets.

You could put an offer in and it takes a while for the process. If you see prices soften or you find somewhere else you would rather buy then you can just say sorry to that seller and go to the new one

MoneyEM

HappyMJ wrote: »

Depends on what area you live in (Kent is high demand and always will be), what property you're looking at - 2 bedroom flats/terraces are excellent BTL investment opportunities...and how much gross yield those properties will get. I would guess £800-£900/month for the properties you mentioned earlier would be about right.

I'd be looking to rent in the short term and buy a larger house when you're ready.

When interest rates increase property prices should start to fall in real terms as putting money in the bank will get a higher return than investing in property. If all someone can get is 1% in the bank buying a BTL with a gross yield of 5% is attractive.

I already rent in London, but I'd rather be paying my own mortgage than someone else's... I've already given my landlord more than £15k over the last 2 years! I don't really want to wait until I'm ready for a bigger house because that could be years! I'm 23, single, no dependents, I was thinking of getting a lodger in for the two bed terrace as it's too big for just me! As I have just started work for a rail company I get quite a good discount on my commute too, so it seems like the right time for me now.

MoneyEM

cells wrote: »

My advice would be to hedge your bets.

You could put an offer in and it takes a while for the process. If you see prices soften or you find somewhere else you would rather buy then you can just say sorry to that seller and go to the new one

I could, but I know that their chain is already completed so everything is ready to proceed so I can't hold it off for too long. I am tied into my rental in London until August but I'm paying £200+ pcm under the current market rents and it would not be hard to re-let at all.. so maybe my landlord would release me early.

westernpromise

MoneyEM wrote: »

I'm paying £200+ pcm under the current market rents

According to crash trolls this is impossible. All landlords screw every last £ of rent out of all tenants all the time.

MoneyEM

westernpromise wrote: »

According to crash trolls this is impossible. All landlords screw every last £ of rent out of all tenants all the time.

Haha. Well it's possible for me. I have been living here for 2 years (stratford) with no price rises to the rent in 2 years £1300pcm, only just changed this month to £1420, there is an identical flat in our building with an asking rent of £1675 so I think we have been pretty lucky. I share the flat and pay half but still, it's a lot of money.. It is a 3 minute walk to the station and it's really spacious with 2 double bedrooms though. My mortgage for a house in kent is gonna be cheaper, and with travel, brings it up to around the same.

cells

If your income supports it in your shoes I would buy rather than rent, with +500,000 to the population annually I dont see how prices can fall in the SE where a lot of the additional population growth is taking place. Maybe stay the same for years but not fall

So I would not delay and yes I think your landlord will be reasonable especially if you find a replacement for your half of the rental.

Taking in a lodger to help pay the bills will also help you a lot and its tax free upto £7.5k if im not mistaken.