Forthcoming increases in rents will ...

westernpromise

MEM62 wrote: »

For some single-property landlords they may have to. Looking at some of the quoted examples in the press where individuals are now placed in a loss-making situation there will naturally be additional upward pressure on rents to compensate. After all, these are effectively businesses and if costs are forced up revenues have to increase also.

The problem these landlords have is that they don't have the same cost structure as all other landlords. Unless they all do, there is no reason for all rents to rise in unison. What is likelier is that they'll lose all their tenants to landlords like me, when they raise their rents and I don't.

I have one property that lets for about £30k a year, with a mortgage that costs me £3k a year. I'm a max rate taxpayer but frankly they could take the entire ability to offset interest away from me, and it would make very little difference on £3k. I deduct £3k from the rent and pay 45% tax on what's left. If I couldn't, I'd pay 45% on the £3k, which is a hit of £1,400 a year. Big deal: less than 5% of the rent. Nobody knows where the market is within 5% anyway.

If my competitor with an 80% mortgage on an identical £900k property tries to increase the rent, I'll just leave mine the same and poach his tenants.

I do think rents will go up, but not because over-leveraged landlords put them up. They'll go up because those landlords sell and deplete the rental supply by more than those sales deplete the rental demand.

buglawton

After these tax changes, a landlord with several properties might sell off one to pay off the mortgages of the others, to put themselves back in clear profit again.

Next: 2 landlords with 1 property each form mini-clubs. Put their 2 properties into joint ownership, sell one to pay of the mortgage of the other, share the rental profit from the remaining one.

westernpromise

buglawton wrote: »

After these tax changes, a landlord with several properties might sell off one to pay off the mortgages of the others, to put themselves back in clear profit again.

Next: 2 landlords with 1 property each form mini-clubs. Put their 2 properties into joint ownership, sell one to pay of the mortgage of the other, share the rental profit from the remaining one.

They'll have to pay stamp duty though.

Crashy_Time

MEM62 wrote: »

For some single-property landlords they may have to. Looking at some of the quoted examples in the press where individuals are now placed in a loss-making situation there will naturally be additional upward pressure on rents to compensate. After all, these are effectively businesses and if costs are forced up revenues have to increase also.

No, businesses in loss making situations can go bust, and the assets sold on, nothing to say rent increases will be forthcoming.

mwpt

Crashy_Time wrote: »

No, businesses in loss making situations can go bust, and the assets sold on, nothing to say rent increases will be forthcoming.

I agree with Crashy :eek:

Not sure what will happen in reality, but yield from land obviously has two components. How much profit from rent you can command and how much the land costs. A lot of landlords think the yields can only remain neutral by the rents going up, but it can also remain neutral by the asset price going down.

If they can't make a particular yield at Z cost of land, then maybe someone can at 90% of Z.

As cells likes to say, bidders set the price. This is why rents didn't drop when most landlords biggest cost (interest) dropped. There may be a small change in supply as some highly leveraged landlords sell up but not enough to drive rents up hugely. At least in my opinion. No one can predict chaotic systems.

thequant

westernpromise wrote: »

The defining characteristic of the thwarted FTB from whom we hear so much online is a towering sense of entitlement. Many want both the low prices of 25 years ago, but also the low mortgage costs of today, and it's an outrage that this combination is not available. .

This is indeed true, and the other factor is that many graduates look back 25 years and see that graduates of that era were buying in london shortly after entering the workplace as another benchmark of how unfair it is.

However they neglect to factor in that 25 years the expansion of higher education was just beginning, those graduates who can't buy now, would not have even been in higher education 25 years ago.

westernpromise

thequant wrote: »

This is indeed true, and the other factor is that many graduates look back 25 years and see that graduates of that era were buying in london shortly after entering the workplace as another benchmark of how unfair it is.

However they neglect to factor in that 25 years the expansion of higher education was just beginning, those graduates who can't buy now, would not have even been in higher education 25 years ago.

That's a very good point. The graduate of today holds a degree whose value has not increased his or her own market value, so they earn what they'd have earned 25 years ago without any degree. Meanwhile, those wh'd have had a degree 25 years ago have one today that actually is worth something. Hence my graduate of 1988 on £24k a year exists today, makes £46k a year, and can afford to buy the same property as his / her 1988 counterpart.

It is actually a bit of secular proof of the worthlessness of expanded degrees. The typical graduate salary figure now included the salaries of graduates whose degrees aren't worth anything.

buglawton

westernpromise wrote: »

They'll have to pay stamp duty though.

The buyer would on one, if they are a BTL or 2nd home buyer. Transfer of ownership on the one going into joint names - probably stamp duty. There might be CGT at the same time on a sale, but it might be a good time to crystallize a property and use up an annual CGT allowance.

Actually, it might be better to give up PAYE work altogether, stop paying 40% for working hard and embark on a grand tour of living in one's BTLs one at a time for a year or whatever to max owner/occupiers GGT exemptions... This might mean turfing tenants out but hey, think of the rent rise once the next tenant is installed.

Looks like the govt is turning landlords into a bunch of tax avoiders

Thrugelmir

buglawton wrote: »

Looks like the govt is turning landlords into a bunch of tax avoiders

The rules will tighten wherever people run too.

westernpromise

Thrugelmir wrote: »

The rules will tighten wherever people run too.

There are overseas structures available that are wholly anonymous and constructively tax-exempt in their domicile. One such is a certain type of Lichtenstein entity that has nominee directors, need file no accounts and that pays a flat E$30k a year in taxes. No doubt other jurisdictions offer something similar.

Why wouldn't everyone who owns property migrate to such structures eventually to own property through? The SDLT charge is converging on the corporate rate so rapidly that it will soon be worth it.

So such a company becomes the corporate landlord and is the name on the letting agreement.

If HMRC somehow gets hold of that and wants a piece of the action, it can write to these companies at the address on the letting agreement; but the companies are just entries in a register, and all they need disclose is the names of the nominees and a correspondence address. Quite where HMRC gets in extracting tax via Mr. Khan, Mr. Jones or Mr. Smith, nominee directors of Euro Properties Inc, care of that company at PO BOX 25, San Jose, Costa Rica, I don't really know.