Treatment of BTL in the budget?

chucknorris

mwpt wrote: »

I know cells continues to buy BTL properties in London, as do others on here? They must have supreme confidence in all the stars aligning for several years to come because from a pure yield business perspective, it's hard to see how London BTL works if you're a new investor.

Maybe you need contacts inside the industry to get the cheaper property deals though.

Well we are all different, and they are entitled to their opinion (as we also are) as to where the market will go. But I am probably a fair bit older than them (I'm 58), and my exit strategy is not many years away from being implemented, so it isn't the time for me to be too bullish. I would be very annoyed at myself if I hung on too long and got caught in a correction, and had to stay in the market for another 12 years, but if I sold up and missed another 10% rise, it wouldn't be the end of the world. You can only see the top of the market when it has passed.

littlegreenfrog_2

CLAPTON wrote: »

so it would appear, your target group is home buyer rather than those that have to rent

This type of policy shift would make potential homebuyers out of people who are currently condemned to rent indefinitely because they have been priced out by investors. These are often people with decent jobs who aren't eligible for social housing or any kind of benefits. Currently not rich enough to be able to afford to buy, and not poor enough to qualify for any kind of state support.

Clearly it is always going to be very difficult for people earning the minimum wage to buy their own property, especially if they live in a more expensive part of the country. And we are always going to need cleaners and shop assistants in London and Surrey.

Everyone should have the right to a secure and stable home. Home ownership should be realistically achievable for anyone earning a decent wage, and people who are on very low incomes should be supported in other ways, for example, by building more social housing.

CLAPTON

littlegreenfrog wrote: »

This type of policy shift would make potential homebuyers out of people who are currently condemned to rent indefinitely because they have been priced out by investors. These are often people with decent jobs who aren't eligible for social housing or any kind of benefits. Currently not rich enough to be able to afford to buy, and not poor enough to qualify for any kind of state support.

Clearly it is always going to be very difficult for people earning the minimum wage to buy their own property, especially if they live in a more expensive part of the country. And we are always going to need cleaners and shop assistants in London and Surrey.

Everyone should have the right to a secure and stable home. Home ownership should be realistically achievable for anyone earning a decent wage, and people who are on very low incomes should be supported in other ways, for example, by building more social housing.

the issue I raised is whether the changes will achieve the aims.
In my view he extra taxes will indeed make a shift from letting to ownership which I think is great.

however, the rental sector is not just 'social ' housing but a huge range of people who will probably be worse off paying higher rents for more limited accommodation.

littlegreenfrog_2

CLAPTON wrote: »

the issue I raised is whether the changes will achieve the aims.
In my view he extra taxes will indeed make a shift from letting to ownership which I think is great.

however, the rental sector is not just 'social ' housing but a huge range of people who will probably be worse off paying higher rents for more limited accommodation.

You're right about that, and there's no easy solution. But doesn't the idea that the reduced tax relief will result in higher rents suggest that landlords are not already charging tenants the maximum they think the market will bear?

As someone who enjoyed 7% increases in my rent between 2011 and 2013 when interest rates remained at rock bottom (and no decoration or repairs were done), I find it hard to believe that the amount of rent landlords charge is genuinely linked to their own costs of owning and managing the property. I think it's more, "what is the maximum I can get away with?"

CLAPTON

littlegreenfrog wrote: »

You're right about that, and there's no easy solution. But doesn't the idea that the reduced tax relief will result in higher rents suggest that landlords are not already charging tenants the maximum they think the market will bear?

As someone who enjoyed 7% increases in my rent between 2011 and 2013 when interest rates remained at rock bottom (and no decoration or repairs were done), I find it hard to believe that the amount of rent landlords charge is genuinely linked to their own costs of owning and managing the property. I think it's more, "what is the maximum I can get away with?"

I would think that most landlords charge what the market will bear.
however, with a reduction is rental places the supply/demand balance may change so pushing prices up (and/or forcing more people to flat share rather than have their own space.
It rather depends on how the move from rental property to owner occupier goes, but my guess is that (say) a two bed flat with two couples might well be sold to just one couple so effective demand and supply will change.

littlegreenfrog_2

CLAPTON wrote: »

I would think that most landlords charge what the market will bear.
however, with a reduction is rental places the supply/demand balance may change so pushing prices up (and/or forcing more people to flat share rather than have their own space.
It rather depends on how the move from rental property to owner occupier goes, but my guess is that (say) a two bed flat with two couples might well be sold to just one couple so effective demand and supply will change.

Possible, but unlikely to make a big difference, I would say. I have a lot of friends and acquaintances renting in London and they are all either sharing with flatmates and living one to a room, or couples living in one bed flats. With people on lower incomes you might get couples flatsharing with other couples or even families sharing a room, but they are likely to be the people who would still be renting even if prices fell a bit.

You would probably get couples moving out of rented one bed flats and buying two bed flats, but if that's because they are planning to start a family they would have needed to move to a two bed flat even if they had stayed renting.

cells

littlegreenfrog wrote: »

Possible, but unlikely to make a big difference, I would say. I have a lot of friends and acquaintances renting in London and they are all either sharing with flatmates and living one to a room, or couples living in one bed flats. With people on lower incomes you might get couples flatsharing with other couples or even families sharing a room, but they are likely to be the people who would still be renting even if prices fell a bit.

You would probably get couples moving out of rented one bed flats and buying two bed flats, but if that's because they are planning to start a family they would have needed to move to a two bed flat even if they had stayed renting.

I looked into this once but I cant remember the exact numbers but simply put renters lived more dense. It was something like 25 sqm per renter and 35 sqm per owner

So for one renter to become one owner you need to build 10 sqm of residential floorspace OR the remaining renters need to budge up and live a tiny fraction more dense

littlegreenfrog_2

cells wrote: »

I looked into this once but I cant remember the exact numbers but simply put renters lived more dense. It was something like 25 sqm per renter and 35 sqm per owner

So for one renter to become one owner you need to build 10 sqm of residential floorspace OR the remaining renters need to budge up and live a tiny fraction more dense

Wouldn't that have more to do with the fact that renters are typically younger and poorer? Obviously if you're renting and saving for a deposit then you will probably want to keep your costs down by flat sharing to save as much money as possible. But whether they succeed in buying or not, they will still get older, and there comes a time when people just don't want to live like students any more, whether they are renters or home owners. People get into long-term relationships and settle down, and they want to live with their other half alone, not flat share with four other people. People with children can't realistically flat share either. Even people who are single with no kids generally get to an age where they don't want to flat share any more if they can afford not to. The only way someone is going to carry on living with a group of flatmates into their 30s or 40s is if they don't settle down and have children.

Jason74

westernpromise wrote: »

The state is not entitled to an opinion on how I use my property, any more than it is entitled to hold an opinion on what I do in my bedroom or on what time I choose to eat breakfast.



Places like St. John's Wood, Belsize Park and Hampstead are also full of homes that locals can't afford to buy. What's so special about Cornwall?



You seem quite keen on the state intervening in people's affairs, so here's a suggestion for you in similar vein. To alleviate the housing shortage, how about if the state decreed that all rental properties must be occupied by no fewer than 1.5 people per room excluding those less than 6 feet wide.

So a rented 3 bedroom house with a sitting room must by law be occupied by at least 6 people. A five-bedroom house with two receptions would be required to house 11 people.

For every month where the property is underoccupied, a fine of 3x the rent plus VAT would be levied on the other tenants. This ensures that if the tenants don't get along, there is a financial penalty for being so obnoxious to each other that someone feels forced to leave; the others will be fined a multiple of the rent until the house is legally re-occupied.

This will prevent small numbers of greedy, selfish, horrible anti-social tenants hogging properties that could easily house far more people. It will also reduce the demand for rental properties because tenants will be made to fit into fewer houses. Rich tenants will just pay the fine and treat it as a premium worth paying for the luxury of reduced occupation density. The higher rents they pay will be taxed as landlord's profits so the Exchequer gains.

It's fun thinking up arbitrary state penalties and taxes to be imposed on everyone except myself.

Generally speaking, I would agree with you. If you have a collection of cars, fine art, watches, pianos or suits (for a few examples), what you do with those is absolutely nothing to do with the state, and as long as you are not asking the state for support ,it should basically leave you to do whatever you please with those assets.

But whether people like it or not, housing is unlike almost any other owned possession, because it has two qualities that, when taken together, make it pretty much unique. Those qualities are (1) it is essential for human life and (2) there is a shortage of it relative to need. Because of that combination, it is absolutely right that there should be a certain amount of Government influence regarding how that resource is used.

Of course, once you (in the generic sense, I acknowledge that you personally accept no such thing) get into the realm of accepting that Government should have an influence in how residential property is used, there does then become the issue of degree. Your deliberately absurd example illustrates very well that left unchecked, government interference could produce some very silly and undesirable outcomes.

But I personally think that at present, there is remarkably little government intervention in housing given the issues that we currently face. For me, the growth in BTL, along with the decline in social housing, is certainly a big part of the problem around UK housing. With that in mind, for me, the tax changes around BTL are not "a nonsense tax that is not in the tenants interest, and needs to be cast aside". They are a good start.

cells

Jason74 wrote: »

Generally speaking, I would agree with you. If you have a collection of cars, fine art, watches, pianos or suits (for a few examples), what you do with those is absolutely nothing to do with the state, and as long as you are not asking the state for support ,it should basically leave you to do whatever you please with those assets.

But whether people like it or not, housing is unlike almost any other owned possession, because it has two qualities that, when taken together, make it almost unique. Those qualities are (1) it is essential for human life and (2) there is a shortage of it relative to need. Because of that combination, it is absolutely right that there should be a certain amount of Government influence regarding how that resource is used.

Of course, once you (in the generic sense, I acknowledge that you personally accept no such thing) get into the realm of accepting that Government should have an influence in how residential property is used, there does then become the issue of degree. Your deliberately absurd example illustrates very well that left unchecked, government interference could produce some very silly and undesirable outcomes.

But I personally think that at present, there is remarkably little government intervention in housing given the issues that we currently face. For me, the growth in BTL, along with the decline in social housing, is certainly a big part of the problem around UK housing. With that in mind, for me, the tax changes around BTL are not "a nonsense tax that is not in the tenants interest, and needs to be cast aside". They are a good start.

if there was a shortage of food or shoes or a certain medicine there are ways to slightly address the issue. Maybe multiple show owners or far people could be taxed more. Maybe the dosage of medicine could be lowered and spread more thin. But not before long you would be back in the same place with a shortage of those things. Only producing more would be a true fix

Housing is the same if we have a shortage of homes we need more homes. Taxing BTL does not make much of a difference in fact it has a SMALL impact to make things worse as on the margin some renters become owners. However since renters use housing more efficiently it makes the situation overall worse.


Also you like a lot of people who hold similar views to you are blind to the fact that the UK is multiple markets. Everything from stoke on trent where the average house costs less than £50k to London where the average costs more than £500k. It cant be a lack of social housing, as London has a good deal more than rUK. It cant be the mix of owners vs renters as London has a higher occupancy rate. So its not BTL its not social homes (lack of) its simply supply and demand