Ireland moves to control rent rises

chucknorris

cells wrote: »

Oh and some good service contracts are starting to aoear. Eg you pay British gas x per month and they cover most things the tenants can call them directly and it is covered by the service contract

I've been doing that with British gas, and a maintenance contractor before them since I started being a landlord over 25 years ago.

Thrugelmir

chucknorris wrote: »

I honestly thought that you would have appreciated that loan interest is a perfectly legitimate business expense.

Borrowing to leverage though doesn't add any value or create wealth. If interest rates were at more more "normal" levels then we wouldn't be having this discussion. On a wider note there's still a black hole to fill. So no doubt there'll be equally as disliked measures in the yeas to come.

chucknorris

Thrugelmir wrote: »

Borrowing to leverage though doesn't add any value or create wealth. If interest rates were at more more "normal" levels then we wouldn't be having this discussion.

Come off it, a lot of businesses have business loans, we are not talking about adding value, we talking about whether it is normal for businesses to have loans, and are those loans a legitimate allowable business expense (the answer is obviously yes).

Also I disagree when rates are back at normal levels it, the changes will have much more impact, so we would definitely be having this discussion.

EDIT: It would have been much fairer if they had introduced this on new loans (not existing), then no one would have been caught out (I wasn't). I believe Ireland introduced this system only on new loans (not existing), but they are actually withdrawing it, so it failed as a workable system!

Thrugelmir

chucknorris wrote: »

Come off it, a lot of businesses have business loans, we are not talking about adding value, we talking about whether it is normal for businesses to have loans, and are those loans a legitimate allowable business expense (the answer is obviously yes).

Business loans are repayable they are not interest only. Nor are they offered on 25 year terms. Factoring is a continually moving debt, likewise overdrafts. Also they are continually monitored and subject to reduction and withdrawl. A totally different world that the average person running a BTL would struggle to survive in.

As far as tax collection goes it's low hanging fruit. That the electorate would support. So doesn't create major headlines in the media.

Every day I go to work and cull costs. Austerity is live and kicking. I can assure you of that.

chucknorris

Thrugelmir wrote: »

Business loans are repayable they are not interest only.

Interest only loans are repayable!!!!!!!!!!! Jesus Christ! I didn't realise that you were so naive, my bad, I credited you with more intelligence.

EDIT: Sorry about the honesty above. Could I have an interest only loan (they sound very profitable) the non repayable type from you please?

Thrug, I am a chartered quantity surveyor, I know how the business world works.

cells

there is no sane reason for the interest rate changes, its just screwing standard logical accounting practices. If the aim was to tax the sector more they should have introduced some sort of second mortgage tax. Something like a 1% tax on bank lending to residential homes that is not for a primary residence applied both to companies and sole traders.

In effect it would have the same impact of increasing interest costs for landlords but keeping logical accounting practices.

It would mean whatever rates are currently on offer would have gone up by 1% so a 2.5% BTL mortgage would be 3.5% now with 1% of it as a tax to the government.

Im not sure there is a good argument to highlight one sector and tax it more but if it needed to be done the above would have been a better way to go about it. It would have meant some £2B a year in additional taxes collected.

zagubov

Singapore knew how to deal with gouging landlords back in the 1960s.
http://www.clc.gov.sg/documents/uss/USS_Land_Acquisition_and_Resettlement.pdf

padington

westernpromise wrote: »

Rents went up because house prices went down, I would think. As has been pointed out, rent is house price crash insurance. If a crash materialises the risk premiums go up, in the same way that getting flood insurance for a house that is flooded is usually quite expensive.

For this reason, landlords did rather well out of 1988-1992 in the UK. This is why, if you want to know who'll own property after a crash, you need to look at who owned it before, as it's the same people.

Believe me, when you raise the costs of a product, the cost eventually gets passed on to the consumer eventually if possible. With supply and demand of housing, passing the cost on is highly possible. Obviously if the landlord has been trying to squeeze out the very top market price, that landlord will not be able to increase prices this year. However there are quite a few who prefer an easy life, or feel they can afford to be a little generous. Many of those landlords offering a below market rate will have to reconsider. When they do average prices will go up. Then to make matters worse, the more ruthless landlords will up their price that little bit more, simply because they can.

That will push prices up on its own.

westernpromise

padington wrote: »

Believe me, when you raise the costs of a product, the cost eventually gets passed on to the consumer eventually if possible. With supply and demand of housing, passing the cost on is highly possible. Obviously if the landlord has been trying to squeeze out the very top market price, that landlord will not be able to increase prices this year. However there are quite a few who prefer an easy life, or feel they can afford to be a little generous. Many of those landlords offering a below market rate will have to reconsider. When they do average prices will go up. Then to make matters worse, the more ruthless landlords will up their price that little bit more, simply because they can.

That will push prices up on its own.

I don't think so. Saab stopped making cars because they couldn't make a profit at the price at which they had to sell them. That price was determined by what their competitors could afford to sell for. Saab were competed out of business by players with a cheaper cost structure.

Over-leveraged landlords will similarly be unable to pass their increased costs on because there are other landlords who don't have their cost structure and don't need to increase.

I actually think the number of landlords in this position is far smaller than most imagine and hence they will lack the market power to increase rents. If they try, the tenants they will get will be the worst ones who nobody else will take.

The difference to me next year is about £240 on a flat that lets for over 100 times that per annum. I don't believe that anyone even knows what the lettable value is to an accuracy of less than 1%. In any case the interest rate cut has given me more than that back. I could actually cut the rent and be no worse off, as could most low-leveraged landlords.

padington

westernpromise wrote: »

I don't think so. Saab stopped making cars because they couldn't make a profit at the price at which they had to sell them. That price was determined by what their competitors could afford to sell for. Saab were competed out of business by players with a cheaper cost structure.

Over-leveraged landlords will similarly be unable to pass their increased costs on because there are other landlords who don't have their cost structure and don't need to increase.

I actually think the number of landlords in this position is far smaller than most imagine and hence they will lack the market power to increase rents. If they try, the tenants they will get will be the worst ones who nobody else will take.

The difference to me next year is about £240 on a flat that lets for over 100 times that per annum. I don't believe that anyone even knows what the lettable value is to an accuracy of less than 1%. In any case the interest rate cut has given me more than that back. I could actually cut the rent and be no worse off, as could most low-leveraged landlords.

If only 10% of landlords push up the rent of their places, it will be a significant increase, I think the it might be more than 10%. When interest rates rise a little bit, that will push rents up more. IF we enter a little house price deflation, rents will go up even more.