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

mwpt

caronoel wrote: »

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

Simple supply and demand

So basically, what we need is fewer OOs and more leveraged property investors such as yourself. You don't quite have all the money yet.

cells

mwpt wrote: »

So basically, what we need is fewer OOs and more leveraged property investors such as yourself. You don't quite have all the money yet.

When the country builds so few homes that the occupancy per household is increasing (while it should be decreasing like it was from 1900-2005) then there is no option but for households to live more dense.

The only realistic way for that to happen and it has been the main way for the last 10 years is for the rental sector to expand. There are other alternatives but they are not happening and will continue to not happen. For instance you could tax or somehow make illegal single occupancy homes (except for studios and 1 bed homes). For instance the councils/HA could evict or somehow get rid of lower occupancy council homes and convert the council stock to HMOs.

So as much as you hate it, we do need more renters while the build rate is this low. If the build rate goes up we would actually need less renters that is to say a contraction in the rental sector. My estimate is that the equilibrium is around 300,000 homes so if say we were building 350,000 homes or more per year then the rental sector would contract if we build 250,000 or fewer homes the rental sector will expand (that is at population growth of 500,000 a year)

cells

mwpt wrote: »

So basically, what we need is fewer OOs and more leveraged property investors such as yourself. You don't quite have all the money yet.

Most property investors are not leveraged at all. I reckon 75% of the 440,000 increase in rental property last year was without finance.

A lot of that will be the about 300,000 properties per year left as inheritances which have no mortgages. The new owners decide to keep them as renting them is more profitable due to the lower prices due to people like Mr mwpt who has made it impossible for marginal would be owners to bid due to his mortgage rationing ideas.

westernpromise

What one doesn’t know is how many unleveraged rental units are bought by extending the debt on the buyer’s main residence. If you own outright a £1 million 3-bed semi in Highgate, then you could remortgage that for £200k, and buy outright two or three 3-bed semis in the Midlands. All three would then appear to be unleveraged buys when they’re not.

There does seem to be a common assumption among crash trolls that all landlords are borrowed to the hilt and will go bust. Of course any landlord who borrowed 75% of the buying price in 2004 now has maybe a 25% LTV mortgage. Meanwhile, recent entrants may have to divest, but of couse recent entrants won’t have a CGT bill to worry about so most should be OK.

cells

westernpromise wrote: »

What one doesn’t know is how many unleveraged rental units are bought by extending the debt on the buyer’s main residence. If you own outright a £1 million 3-bed semi in Highgate, then you could remortgage that for £200k, and buy outright two or three 3-bed semis in the Midlands. All three would then appear to be unleveraged buys when they’re not.

There does seem to be a common assumption among crash trolls that all landlords are borrowed to the hilt and will go bust. Of course any landlord who borrowed 75% of the buying price in 2004 now has maybe a 25% LTV mortgage. Meanwhile, recent entrants may have to divest, but of couse recent entrants won’t have a CGT bill to worry about so most should be OK.

I am not sure I would count the capital raised from the main home as 'leveraged'. Its somewhat of an accounting trick.

Lets say I own a million pound house outright and sell it.
I have a million pounds and I buy 7 northern BTLs at £100k each.
I decide some time later to rebuy a £1million house and use the £300k remaining as a deposit. Was that a leveraged BTL purchase even though there is no mortgaeg or debt at the point of purchase just £1m in a savings account?

I dont think think I would call that leveraged BTL. but even if you do think that lets try it this way, imagine you have a million pounds and no home. You can either buy a million pound home or you can buy 7 x northern BTLs at £100k each and use £300k remaining to buy a million pound home. Is that leveraged BTL?

Both are exactly the same you start with £1million of capital and you end up with 7 BTLs and a main residence with a £700k mortgage. Yet one is "highly leveraged BTL" and the other is no leverage BTL.

So I would suggest once more than raising funds from the main home to buy a BTL should not be seen as a debt purchase but an equity purchase

Thrugelmir

cells wrote: »

You can either buy a million pound home or you can buy 7 x northern BTLs at £100k each and use £300k remaining to buy a million pound home. Is that leveraged BTL?

7 northern let properties won't fund a £700k repayment mortgage. :EasterBun

mwpt

cells wrote: »

I am not sure I would count the capital raised from the main home as 'leveraged'. Its somewhat of an accounting trick.

Lets say I own a million pound house outright and sell it.
I have a million pounds and I buy 7 northern BTLs at £100k each.
I decide some time later to rebuy a £1million house and use the £300k remaining as a deposit. Was that a leveraged BTL purchase even though there is no mortgaeg or debt at the point of purchase just £1m in a savings account?

I dont think think I would call that leveraged BTL. but even if you do think that lets try it this way, imagine you have a million pounds and no home. You can either buy a million pound home or you can buy 7 x northern BTLs at £100k each and use £300k remaining to buy a million pound home. Is that leveraged BTL?

Both are exactly the same you start with £1million of capital and you end up with 7 BTLs and a main residence with a £700k mortgage. Yet one is "highly leveraged BTL" and the other is no leverage BTL.

So I would suggest once more than raising funds from the main home to buy a BTL should not be seen as a debt purchase but an equity purchase

No, because there is leverage entering the system which you have not accounted for which would not be present if the BTL properties were not bought.

wotsthat

Got to admit I'm not worried about anyone that's got a million pound house and 7 BTL's whether they've got a £700k mortgage or not.

cells

mwpt wrote: »

No, because there is leverage entering the system which you have not accounted for which would not be present if the BTL properties were not bought.

If I have a million pounds in a bank and buy 7 northern BTLs and keep £300,000 in the bank. That is clearly no leverage as its all cash purchase, correct?

If six months to a year later I decide I want to buy a house and buy a million pound house and use £300,000 as the deposit that is a leveraged purchase of a main residence. Correct? And leveraged purchase of a main residence, aka buying your own home with a mortgage, is ok with you?


How is that any different all all, to a person with a £1m house who has no mortgage taking out £700,000 equity and buying 7 northern BTLs. The end result is EXACTLY the same. So why is the label different?

mwpt

cells wrote: »

If I have a million pounds in a bank and buy 7 northern BTLs and keep £300,000 in the bank. That is clearly no leverage as its all cash purchase, correct?

If six months to a year later I decide I want to buy a house and buy a million pound house and use £300,000 as the deposit that is a leveraged purchase of a main residence. Correct? And leveraged purchase of a main residence, aka buying your own home with a mortgage, is ok with you?


How is that any different all all, to a person with a £1m house who has no mortgage taking out £700,000 equity and buying 7 northern BTLs. The end result is EXACTLY the same. So why is the label different?

Because there is now leverage in the system, due by the person who now "owns" more houses than he would otherwise have, with no leverage.