The Next Nail in the Coffin

Generali

http://www.telegraph.co.uk/technology/2016/03/27/fears-of-buy-to-let-property-crash-behind-latest-report-into-int/

The Bank of England could launch new measures to regulate buy-to-let mortgages as it outlines its findings in an investigation into lending standards.

A regulatory branch of the Bank will report the findings on Tuesday. It is expected that the Prudential Regulatory Authority will introduce measures to allay ongoing fears that a rise in interest rates could trigger a property crash.

The Government really doesn't want you to have a mortgage-financed BTL property any more.

chucknorris

Generali wrote: »

http://www.telegraph.co.uk/technology/2016/03/27/fears-of-buy-to-let-property-crash-behind-latest-report-into-int/



The Government really doesn't want you to have a mortgage-financed BTL property any more.

Don't they realise that more than enough may have been done already to dampen BTL lending? There will almost certainly be a significant fall in the rate of new BTL mortgages, due to the recent tax changes (wear & tear, interest relief capped at 20% and stamp duty hikes). Wouldn't it be more sensible to see what the effect of those changes are, before leaping in again with more restrictions?

Generali

chucknorris wrote: »

Don't they realise that more than enough may have been done already to dampen BTL lending? There will almost certainly be a significant fall in the rate of new BTL mortgages, due to the recent tax changes (wear & tear, interest relief capped at 20% and stamp duty hikes). Wouldn't it be more sensible to see what the effect of those changes are, before leaping in again with more restrictions?

I agree but you don't need a weatherman to tell the where the wind blows.

I wonder if this is about the professionalisation of the industry as much as anything. At the moment nobody knows where the risks lie and anecdotally there seems to be a lot of stuff like non-compliance with the rules on letting.

I suspect that the Government wants to see large landlords letting to thousands of tenants. The BoE wants to understand who has borrowed what against what collateral.

Rinoa

I can see why they don't like BTL. Housing benefit is out of control. The long term effect of more people renting is an ever increasing cost to the exchequer.

chucknorris

Generali wrote: »

I agree but you don't need a weatherman to tell the where the wind blows.

I wonder if this is about the professionalisation of the industry as much as anything. At the moment nobody knows where the risks lie and anecdotally there seems to be a lot of stuff like non-compliance with the rules on letting.

I suspect that the Government wants to see large landlords letting to thousands of tenants. The BoE wants to understand who has borrowed what against what collateral.

It is almost a good thing that this is happening, as it is paving the way for me to sell up, by justifying a move to shares, I'm just waiting for interest rates to creep up now, then shares will be equally profitable, but without the hassle.

If I end up going to the Isle of Man I will probably sell 2 or more properties anyway (regardless of the base rate), as I will want to reduce my UK taxable income down to below the 40% tax band. Although my wife wants to hang on to her properties, but that may open the door for me to sell my other properties, and 'creating' a 50% share in her properties, to bring her down below the 40% UK tax band. I have not mentioned this to her yet though, probably best wait and see what we make of the IOM, we might not even like it.

wolfplayer

With BTL you have to hit it again and again.

Get them selling into a skint market, at crashed prices.

8 properties in London? Don't whine about it.

Generali

Well AIUI you're in a bit of a different position to many as you don't use little leverage (these days at least). I guess your biggest worry is that your market dries up when you want to exit.

chucknorris

wolfplayer wrote: »

With BTL you have to hit it again and again.

Get them selling into a skint market, at crashed prices.

8 properties in London? Don't whine about it.

Who is whining? Certainly not me, this is possibly going to benefit existing landlords, it is incoming wannabe landlords that it will hit. I haven't invested in property since 2008, and have absolutely no intention of investing further in property (in the UK).

If only I had said something like 'it is a good thing'. Wait a minute, I did:

chucknorris wrote: »

It is almost a good thing that this is happening

I find it strange that you interpret that as whining, please explain.

chucknorris

Generali wrote: »

Well AIUI you're in a bit of a different position to many as you don't use little leverage (these days at least). I guess your biggest worry is that your market dries up when you want to exit.

Yep, it is all about the timing, the delicate balance between staying in whilst it is extremely profitable, against the possible dampening of the London market, due to the investment part of the market drying up.

Generali

chucknorris wrote: »

Yep, it is all about the timing, the delicate balance between staying in whilst it is extremely profitable, against the possible dampening of the London market, due to the investment part of the market drying up.

Yes.

Bear in mind that indices often don't reflect real prices. With property markets, often liquidity simply dries up as people don't want to "give their house away" so instead of selling their house at the market price they simply wait for the market to come back to them.

Anyone that follows the housing market in an area will know a couple of properties on at stupid prices that have been hanging about for years. If you look at the chart on page 7:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508738/UK_Tables_Mar_2016__cir_.pdf

then you can see the effect I mean. Yes, a part of that is almost certainly due to HAMISH's mortgage famine but a big chunk will be people either simply withdrawing their houses from the market or pricing them so high that they might as well have done.

You can see a similar effect in the data table on page 11 albeit less pronounced as the data is annualised which flattens out the effect a bit.

As an aside it's interesting to note that the decline in volumes in England and Wales has largely been recovered whereas the declines in Scotland and NI haven't (down 27% and 35% respectively).

wolfplayer

chucknorris wrote: »

Yep, it is all about the timing, the delicate balance between staying in whilst it is extremely profitable, against the possible dampening of the London market, due to the investment part of the market drying up.

That might be more of a fine balance than you realise.

Holding to the end in real estate, and you can get stuck.

You only have to read a few of the BTL stories about Clause 24 to read landlords complaining about all the new regulations, laws and taxes, and making the astonishing claim that they can't sell to FTBs or upsizers, because such buyers have no chance of affording.

The BTLing landlords just need to put it all together. Some are going to have to drop their prices by a long way in order to sell. And lower prices, when there are a few such sales, bring down values for all other owners.

Hold onto the view, if it eases your mind, that other BTLing landlords going to be in market to buy from you, in the near future.