Forthcoming increases in rents will ...

Generali

I suspect that these very large increases in rents are more reflective of small sample sizes resulting in sampling error.

cells

chucknorris wrote: »

Cells produced some figures not too long ago on the percentages of properties bought in London for investment (sorry I can't be bothered to search for it), but it was a significant percentage. If landlords stop buying, as you say something will have to give, I don't think they will stop buying altogether, but their numbers will reduce as they will tend to invest higher deposits and be incorporated. The 3% stamp duty is a barrier, but there are noises about incorporated landlords not having to pay (details yet to be published).

In hackney virtually all transactions are via landlords. This makes sense as only about 20% of the stock is owner occupied. 90% of the purchases I have made were off other landlords. So whatever the impact its going to be more in inner London than outer London imo

Also age is going to be a lot more important for future landlords. Five years ago you could buy a flat for £250k in London and pay £2.5k stamp duty. In a couple of months that same flat now closer to £500k is going to attract £30k in stamp duty

If I were 60 years old with the view of holding for 10 years I think the £2.5k stamp duty of yesteryear would have been acceptable but the £30k stamp duty for just 10 years is going to be a lot less attractive.


Incorporated landlords who can hold for a hundred years or the younger landlords who can hold for 30 years might think it still worthwhile. However if I were 65 years I certainly wouldn't put my pension pot towards a £30k tax bill as I might be dead in 5 years

Bluebirdman_of_Alcathays

mwpt wrote: »

18%?!

I have heard through the grapevine that Bristol is buzzing in the last few years but that seems incredible. Source?

EDIT: Found it, on a guardian article. So, what forced up these rent rises?

Was it a decrease in the OO population, putting more pressure on rental stock?
Was it an increase in OO occupation, leaving fewer rental properties, putting more pressure on the rental stock?
Was it more BTL entrants to the market, leaving OOs priced out and forced to rent, pressure on rental stock?
Was it the announcement of the upcoming tax changes, prompting landlords to raise rents?
Was it fewer BTL entrants to the market, leaving fewer rental properties, pressure on rental stock?

All of these I've seen as reasons cited for increased rents.

I live in Bristol, and I can attest that the 18% figure sounds about correct.


In my industry (law) Bristol firms last week finished 1,2 and 3 in Firm of the Year rankings. These awards always used to go to London firms that would pay 6 figures once you were 2-3 years qualified. Anecdotally, the lawyers I speak to that have relocated have found even for them, buying property in London is almost unachievable unless you have a deposit from BOMAD (they're uninterested in Living zone 6/a hellhole/Wood Green)

buglawton

Generali wrote: »

That's about 0.4% of income tax and NI receipts. You honestly believe Mr Osbourne is going to lose his job over that?
It sounds like wishful thinking.

If it's 0.4% then that's an absolutely huge loss. Imagine the reaction if a 0.5% tax hike on incomes were proposed with our currently flat economic outlook!

No, he won't lose his job over one single fail, it will be the cumulative result of a series of knee-jerk policy changes. Please the media, fail balancing the tax books and generally mess up the property market in the process.

He's doing it to please some media-sensitive part of the Tory party, but he'll be the fall guy in the end.

westernpromise

cells wrote: »

No normal Londer is going to move sideways or down when they need to hand over £15k plus solicitors plus moving hassle. Even moving up is going to be stupid for a lot of people why pay £30k stamp duty when you can pay £30k and put in a loft conversion and add £30k value to the house.

This. This is a very clear consequence of making transaction costs absurdly high - people find ways to avoid doing the transaction. The effect is to reduce supply of property for sale, which raises its price because demand's the same, which means the stamp duty is even greater which means the supply falls and so on.

If the state seriously wanted to rein in property prices they should abolish stamp duty altogether, although perhaps keep the penalty on non-main residences.

mwpt

buglawton wrote: »

If it's 0.4% then that's an absolutely huge loss. Imagine the reaction if a 0.5% tax hike on incomes were proposed with our currently flat economic outlook!

No, he won't lose his job over one single fail, it will be the cumulative result of a series of knee-jerk policy changes. Please the media, fail balancing the tax books and generally mess up the property market in the process.

He's doing it to please some media-sensitive part of the Tory party, but he'll be the fall guy in the end.

I think Osborne rubbed this BTL landlord the wrong way.

westernpromise

chucknorris wrote: »

It is going to be interesting what happens, but a couple of things did come to my attention from your post:

1. £400/week rent link was from 2008, rents have increased quite a bit sine then, I think £500 to £550 is about the market price now.

2. The article is focusing on it being (possibly) lucrative for existing landlords, rather than new new entrants, I agree that property looks far from good for new entrants. But maybe not too bad for incorporated landlords.

Cells produced some figures not too long ago on the percentages of properties bought in London for investment (sorry I can't be bothered to search for it), but it was a significant percentage. If landlords stop buying, as you say something will have to give, I don't think they will stop buying altogether, but their numbers will reduce as they will tend to invest higher deposits and be incorporated. The 3% stamp duty is a barrier, but there are noises about incorporated landlords not having to pay (details yet to be published).

Highly-leveraged landlords predicting that rents will have to rise because their own costs have gone up are kidding themselves, I think; rents may rise, but it will be for other reasons.

Existing landlords without leverage aren't being penalised on their existing holdings, but the stamp duty will deter them from adding more because the yields aren't there. This will take landlords' interest down a notch, although landlords aren't necessarily the highest bidder anyway. What this will do, gradually, is tighten the supply of rental property, because it's going to be gradually sold to owner-occupiers, whose buying will displace more people than it re-houses. Between this and the fact that we still have significant net immigration, I just don't see where all these people are going to live. They can't buy, but because the supply of previously rentable property is increasingly going to be hogged by FTBs who don't use the space as fully as renters do, there'll be insufficient rental supply.

Jonbvn

Generali wrote: »

The return can only come from capital gains.

Inevitably, and clearly unsustainable.:money:

westernpromise

Generali wrote: »

...you've got to wonder how much more than £900,000 prices can get.

Indeed - prices pretty much topped out 2007 at the then level of rates and surged again when it became clear that 0.5% base rate was lockable-in for years via a fixed-rate mortgage. The low cost of finance is now fully priced in, so the immediate future seems like flatlining to me. $hitty areas will converge on the prices found in adjoining nice areas, I'd guess. So I'd expect prices along the Harrow Road to rise to mimic those of Maida Vale, even though the area is nothing like Maida Vale, on the basis that you're almost in Maida Vale.

The imponderable for me is what happens when all these people continue to flood in and need to rent because they're not interested in buying.

westernpromise

buglawton wrote: »

If it's 0.4% then that's an absolutely huge loss. Imagine the reaction if a 0.5% tax hike on incomes were proposed with our currently flat economic outlook!

No, he won't lose his job over one single fail, it will be the cumulative result of a series of knee-jerk policy changes. Please the media, fail balancing the tax books and generally mess up the property market in the process.

He's doing it to please some media-sensitive part of the Tory party, but he'll be the fall guy in the end.

If any Chancellor raised a tax to a level so high that revenues collapsed as everybody avoided it, he would thereby make an abject fool of himself.

First, he's demonstrated his failure to understand the Laffer Curve, and secondly, he's clearly failed specifically in whatever his claimed goal was in raising that tax. If the aim was to outlaw an activity he should have just done so. If it was not but the tax is so high that the legitimate activity stops anyway, then he has patently screwed up.

A chancellor who brought almost all legitimate activity in the property market to a standstill would not cut a credible figure.

We are close to that point in London. It is now cheaper to extend than to sell and re-buy, and it is rational to hold onto all property you now own. Selling it and buying back in again later both crystallises a CGT liability and is again prohibitively costly. At some really, really rich prices, some people will be persuaded to sell, but there aren't many folk left who'll pay those prices. They just convert the loft instead.