The Next Nail in the Coffin

economic

why would anyone want to buy in wood green let alone spend 500k????

wotsthat

economic wrote: »

why would anyone want to buy in wood green let alone spend 500k????

Get ye behind me Satan

economic

huh?

it really must be a bubble if people are spending 500k in wood green

chucknorris

economic wrote: »

huh?

it really must be a bubble if people are spending 500k in wood green

When it comes to houses (not flats) £500k doesn't that buy much in London, but it would probably buy a (not so great) house in Wood Green. I think that you are possibly missing the 'in joke' (friendly banter) here, one of our regulars (padington) lives in Wood Green.

cells

mwpt wrote: »

Sorry, I disagree with your opinion. The BoE are acting on measures to curb lending into this sector and reduce risk ratios, this has nothing to do with a tax grab.

you are half right imo. They are acting to curb lending into this sector which isnt their job just like when they acted to curb lending to owner buyers it wasnt their job and it backfired by forcing would be owners out of the mortgage market and into the only other sector that would have them

just as their actions didnt make lending to owners less risky (or maybe so marginally that its negligible) but had a big downside so will their actions to make BTL 'less risky'

cells

Generali wrote: »

I've been looking at some of the tax changes and they're quite interesting.

If you take a 2 bed terrace in Stoke-on Trent for £100,000, that's going to cost £3,000 extra in SDLT. It's going to take something like 30 weeks of gross rent just to recover that. If you buy a £500,000 place in Wood Green then it's an extra fifteen grand, probably more like 35 weeks gross rent.

What I hadn't appreciated is that the extra 3% SDLT is payable on the entire purchase price, it's not at the margin.

If you are into BTL for a capital gain then the 3% is a drop in the ocean. If you have to make it work as a business then that 3% is a pretty nasty chop into your profits. Once you've paid for conveyancing and so on your entire first year of gross rental income is likely to be going to someone other than you.

your also paying the transaction costs from taxed income. So in London if you buy a £500k BTL and pay £32k stamp duty and other transaction costs. Once the new tax rules kick in if you bought with a 75% mortgage you will be lucky to get £3.2k post taxes.

So post taxes it could well take you 10 years to collect your £32k again.

You can claim some of that £32k back in lower capital gains taxes when you sell. However inflation wrecks a lot of the value of that. For instance if someone bought a house for £1,000 some 60 years ago and paid £100 transaction costs and now they sell the house for £100,000 they get to claim the £100 from capital gains which means their tax is reduced by a whopping £28. That £28 is absolutely nothing but the £100 some 60 years ago was quite something indeed!


So yes you really do need to think there are capital gains down the road or the tax burden the risk and the current prices&rents make it a difficult proposition

cells

ruggedtoast wrote: »

According to The Telegraph 2 years ago, 1 in 5 properties was owned by BTL landlords.

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11179073/Buy-to-let-boom-one-in-five-homes-now-owned-by-landlords.html

Predicted to rise to 1 in 3 in a decade or so.

Its not hard to see why even the Tories are finally trying to do something about this. They have spent vast amount of political capital over the years trying (and mostly succeeding) in making people who rent feel like life's biggest failures.

If a 1/3 of households are resentful renters, even with their gerrymandered constituencies and paid off media the Tories are going to struggle against Labour in the next two elections.

As someone said earlier, they appear to be moving toward a model of large commercial landlords rather than the one man band.

Regardless of what BTL landlords may think about themselves, the Tories really don't care much about small time investors going to the wall. They didn't in the 80s, or the early 90s, and they don't now.

The banking industry has been well and truly paid off. It is not dependent on BTL to underpin its loan book anymore.

Highly leveraged investors with a their mobile phones pre programmed to divert their tenants calls to voicemail are in for a rough ride.

banks are dependant on BTL for profits.
The current defaults are comparable or lower than owners (both being extremely low) yet the BTLs tend to pay twice as much above borrowing than the owners

renters dont vote as much as owners. in the past when renting was very high, eg the 1920s when it was something like 75% of the population, the tories had no problems winning elections

a model of large landlords will be worse for all but the large landlords and their owners. They will pay 18% income tax while many landlords pay 45%. They will buy and hold multiple times longer than human landlords who have to sell due to death or divorce etc so a lot less stamp duty and transactions. They will not pay the interest rate charges either. So if a million properties went to large corp landlords out of the hands of jo public then that is likely some £3-4 billion less taxes per year. If two million properties moved that way it would be £6-8 billion less. very significant sums of money

padington

chucknorris wrote: »

When it comes to houses (not flats) £500k doesn't that buy much in London, but it would probably buy a (not so great) house in Wood Green. I think that you are possibly missing the 'in joke' here, one of our regulars (padington) lives in Wood Green.

I used to live in a place called Wood Green, now I'm told I live in
'Alexander park borders'.

mwpt

cells wrote: »

banks are dependant on BTL for profits.
The current defaults are comparable or lower than owners (both being extremely low) yet the BTLs tend to pay twice as much above borrowing than the owners

renters dont vote as much as owners. in the past when renting was very high, eg the 1920s when it was something like 75% of the population, the tories had no problems winning elections

a model of large landlords will be worse for all but the large landlords and their owners. They will pay 18% income tax while many landlords pay 45%. They will buy and hold multiple times longer than human landlords who have to sell due to death or divorce etc so a lot less stamp duty and transactions. They will not pay the interest rate charges either. So if a million properties went to large corp landlords out of the hands of jo public then that is likely some £3-4 billion less taxes per year. If two million properties moved that way it would be £6-8 billion less. very significant sums of money

The government really must be stupid. What a pity they don't visit this forum for their policies.

chucknorris

economic wrote: »

i would say hes one of those buy and hold forever folks that will eventually lose it all if he doesnt sell.

I've just looked at the figures more closely, when Crashy first advised me to sell up (July 2014) our property values were £300k lower than they are now, and if we had invested the equity in the stock market back then, that investment would now be £340k lower (the market is currently down about 8.5% since then). That is a total difference of £640k. I'm not taking any credit for that, because it could have went the other way (I'm not an after timer), no one knows what capital values will do. But both you and crashy seem to think that you do, and you were both wrong to the tune of £640k.

But as I have said, it isn't capital values currently keeping me in the market, because no one knows whether they will rise or fall, but what I do know, is that my rental profits currently exceed the alternative dividend income. That is why I base my decisions on income not capital value.

EDIT: What you and crashy will probably not understand is that even if the market had moved the other way, it still would have been the right decision to stay in the market, because that decision was based upon known facts, rather than speculation.