Stamp duty 3% increase (2016 budget), and its effect on future house prices?

wotsthat

mwpt wrote: »

Certain posters on here desperately want it to be true that a decrease in tax breaks for a relatively smallish set of landlords, the very highly leveraged landlords, who were always betting everything on black, can drive the entire rental market significantly.

Depends what significant means. Every penny the government raise is going to come from the rental market via increased rents and lower profitability. Time will tell how tenants and landlords agree to share these costs.

Of course, there's plenty of time for the target group to take measures to avoid these costs i.e. incorporation, transfer to spouse, using cash to reduce debt, increase pension payments, working less etc.

The highly leveraged landlords who were always betting on black won't have so many options but I expect the numbers who can't mitigate at least some of the costs will be small and the numbers of disappointed HPC'ers will be high.

mwpt

wotsthat wrote: »

Depends what significant means. Every penny the government raise is going to come from the rental market via increased rents and lower profitability. Time will tell how tenants and landlords agree to share these costs.

Of course, there's plenty of time for the target group to take measures to avoid these costs i.e. incorporation, transfer to spouse, using cash to reduce debt, increase pension payments, working less etc.

The highly leveraged landlords who were always betting on black won't have so many options but I expect the numbers who can't mitigate at least some of the costs will be small and the numbers of disappointed HPC'ers will be high.

Fair. I do not actively desire to see anyone ruined financially. I'll leave that to the HPC gang. But if the tax changes cause some highly leveraged landlords to crash and burn and sell up, I regard that as a good thing in general, just not for them.

I've no strong opinion on whether this will actually happen or not.

cells

wotsthat wrote: »

Depends what significant means. Every penny the government raise is going to come from the rental market via increased rents and lower profitability. Time will tell how tenants and landlords agree to share these costs.

Of course, there's plenty of time for the target group to take measures to avoid these costs i.e. incorporation, transfer to spouse, using cash to reduce debt, increase pension payments, working less etc.

The highly leveraged landlords who were always betting on black won't have so many options but I expect the numbers who can't mitigate at least some of the costs will be small and the numbers of disappointed HPC'ers will be high.

With the recent HPI if it continues then 'higjly leveraged landlords' would find by the time their 2 year 75% fix is up prices have increased and they can remortgage onto a 60% deal at a better rate

The HPC wish was for the tax changes and higher rates to give a double hit to landlords. If rates stay low until 2021 as the news suggests and HPI continues then the additional taxes will be offset by a fall in rates paid. If the BTL mortgage market gets more competitive we could see another 1% slashed from pay rates.

So its far from certain that leveraged landlords are scewed. The new taxes might well be offset by lower mortgag rates that might be here for quite some time

westernpromise

wotsthat wrote: »

Of course, there's plenty of time for the target group to take measures to avoid these costs i.e. incorporation, transfer to spouse, using cash to reduce debt, increase pension payments, working less etc.

This strikes me as an interesting one. As a top rate taxpayer I can get back £45 for every £100 I put into a pension. Is there a way to recoup the tax raid losses through one's pension?

wotsthat

westernpromise wrote: »

This strikes me as an interesting one. As a top rate taxpayer I can get back £45 for every £100 I put into a pension. Is there a way to recoup the tax raid losses through one's pension?

Depends whether you've used up your pension allowance.

If not, you increase pension contributions and the tax relief will offset some of the increased taxes you might pay elsewhere. Half of tax relief is cash in hand via a self assessment and the other half claimed back by the pension provider.

cells

westernpromise wrote: »

This strikes me as an interesting one. As a top rate taxpayer I can get back £45 for every £100 I put into a pension. Is there a way to recoup the tax raid losses through one's pension?

not really as you cold put money into a pension before or after the interest is not a cost changes. Also rental income doesn't count as income you can use for pensions.

The best way to reduce the new tax on interest is to lower the interest you pay. So just spend some time being a MoneySavingExpert and remortgage onto the best deals. In London this should be easier as HPI will put you onto lower band LTVs. Also with some luck we may see more competition in the mortgage market and the spread between residential and BTL mortgages might narrow

caronoel

cells wrote: »

good news, it shows rents can go up 30% and still be within historic norms...

Your graph is interesting

It shows rents dramatically rising as a proportion of wages in the immediate aftermath of the tax grab in 1998, even while Irish wages were rocketing as the Celtic tiger took hold.

The graph only ticks down again in 2003 as the Irish government saw the unintended consequences of their actions.

Here's hoping that Osborne and co dont punish tenants in the same way that the Irish government did

Thrugelmir

cells wrote: »

So its far from certain that leveraged landlords are scewed. The new taxes might well be offset by lower mortgag rates that might be here for quite some time

Under the EU directive many amateur LL's will find themselves in the regulated category for BTL mortgages. Lenders are going to charge them for the privilege.

cells

Thrugelmir wrote: »

Under the EU directive many amateur LL's will find themselves in the regulated category for BTL mortgages. Lenders are going to charge them for the privilege.

is that a wish or are you a lender and know that you will both charge more and be able to move the market with your higher charges?

caronoel

Thrugelmir wrote: »

Under the EU directive many amateur LL's will find themselves in the regulated category for BTL mortgages. Lenders are going to charge them for the privilege.

Anything that reduces the supply of funding for property investors will eventually be passed on to tenants

Simple supply and demand