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

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.

Why do you say that?

You could just as well say, No because there is leverage entering the system which you have not accounted for which would not be present if the main residence was not bought.

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To try once more. There are three triplets who earn get a payday of a million pounds from a business sale.

Tom decides to spend his million on a million pounds main residence

Harry decides to spend his million on 9 northern BTLs and 1 northern home for himself all of which come to £1m total.

John decides to spend his million on 7 norther BTLs and puts down £300k on a southers house for himself worth £1million.


Are John 7 BTLs (none of which have a mortgage) leveraged?
Or is the leverage on his main home, which does have a mortgage?

cells

mwpt wrote: »

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.

So should Johns 7 BTLs be seen as leveraged purchases?

Dont you think that is a bit crazy?

Clearly his 1 owner purchase was the one that was bought with leverage. He went to a bank and said here is my £300,000 I want to leverage it up and buy a million pound main residence. The BTLs were all purchased from savings he didnt even go to a bank in buying them

mwpt

cells wrote: »

To try once more. There are three triplets who earn get a payday of a million pounds from a business sale.

Tom decides to spend his million on a million pounds main residence

Harry decides to spend his million on 9 northern BTLs and 1 northern home for himself all of which come to £1m total.

John decides to spend his million on 7 norther BTLs and puts down £300k on a southers house for himself worth £1million.


Are John 7 BTLs (none of which have a mortgage) leveraged?
Or is the leverage on his main home, which does have a mortgage?

Yes. John has more property to his name by value than his brothers but he also has debt. If leverage did not exist he would have had to choose to omit some of the BTL properties or his main residence.

wotsthat

John won't be going to heaven.

westernpromise

I see your point but all I am pointing out is that gross statistics on BTL borrowing may be very misleading.

mwpt

Conrad wrote: »

I'm selling a buy to let to buy another in spite of the SD. It's just a business cost. What's the alternative, buy a £150k subway franchise all of which is pure cost?

God forbid you start an actual productive business.

Rent seeking:
"In economics and in public-choice theory, rent-seeking involves seeking to increase one's share of existing wealth without creating new wealth. Rent-seeking results in reduced economic efficiency through poor allocation of resources, reduced actual wealth creation, lost government revenue, increased income inequality,[1] and (potentially) national decline."

mwpt

By the way, one thing that I haven't seen discussed is what this does to the flipper market? I know someone who has made a business out of buying properties ripe for "doing up" either by adding floor space or just modernising and selling on. In London, the extra 3% stamp duty is going to eat into profit in this business and this can't just be "passed on to tenants".

cells

mwpt wrote: »

By the way, one thing that I haven't seen discussed is what this does to the flipper market? I know someone who has made a business out of buying properties ripe for "doing up" either by adding floor space or just modernising and selling on. In London, the extra 3% stamp duty is going to eat into profit in this business and this can't just be "passed on to tenants".

There must be a market for it. People willing to pay in excess of the transactions materials and labour cost. So either those business will make less profits or the customers will need to pay more to take into account the additional transaction costs.

mwpt

cells wrote: »

There must be a market for it. People willing to pay in excess of the transactions materials and labour cost. So either those business will make less profits or the customers will need to pay more to take into account the additional transaction costs.

I don't know where to go with this. So this 3% extra stamp duty is also going to be passed on to the subsequent buyers. Boy, you really can't lose in the property business.

wotsthat

mwpt wrote: »

I don't know where to go with this. So this 3% extra stamp duty is also going to be passed on to the subsequent buyers. Boy, you really can't lose in the property business.

He said it'll come out of profits or be added to the cost.

The reality is the costs will be shared and the market will decide the split. We'll have to wait and see.

Seems a fairly safe bet that the number of people buying houses to do them up will fall.