Stamp duty holiday ?

Grumpy_chap

danlightbulb said:

I do think stamp duty thresholds should be increased as the cut off of £125k is far too low compared to how house prices have risen.

It seems like any change to SDLT would be an increase in the starting threshold.

For 2nd home owners, the rate should be lifted massively to discourage it. 20-30% of house value kind of territory. 

Punitive taxes tend to result in undesireable outcomes, but not for those that would be paying the tax.

Or the alternative would be to introduce a wealth tax on 2nd homes, something which would also capture current 2nd home owners, which stamp duty changes wouldn't do. A wealth tax on property should be something of the order of 5% of property value per year.

So, rather than aiming for 5% gross yield, Landlords will simply increase the prices to 10% gross yield to cover their current income plus the tax they now have to pay.  It will be the tenants that lose out.

[Deleted User]

Fingers crossed its second homes too as I want to get a buy to let

gingercordial

Well this is annoying if it's true that it will be in the autumn.  We are buying as FTBs well above £500k (London...) so it won't affect us, which I'm fine with as we'd budgeted for it.  But our sellers are moving out of London and downsizing so I suspect they're intending to spend less than that, which will presumably mean they'll want to delay in the hope of a saving.  Maybe fine if there's a specific date not too late in the "autumn" and we can work to be ready to exchange on that day.  Otherwise this will be an issue for us as we are already fed up of waiting.

wazza07

We completed on the sale of our house two weeks back and have gone into rented until we find something else to buy (our onward purchase fell through). It might work in our favour as we’re looking around the £450k-£500k mark. But I imagine the market will come to a tumbling halt if it’s not implemented immediately which will be frustrating as we don’t want to be in rented for too long. 

AdrianC

davidmcn said:

LIMPIT61 said:

If as now widely reported there is going to be an announcement by the Chancellor within his scheduled statement on Wednesday 8th July for a potential reduction in the threshold of STD

I think you mean SDLT. Pretty sure the Department of Health still has responsibility for STDs...

That one's definitely under the PM's personal control.

...allegedly...

danlightbulb

Grumpy_chap said:

danlightbulb said:

I do think stamp duty thresholds should be increased as the cut off of £125k is far too low compared to how house prices have risen.

It seems like any change to SDLT would be an increase in the starting threshold.

For 2nd home owners, the rate should be lifted massively to discourage it. 20-30% of house value kind of territory. 

Punitive taxes tend to result in undesireable outcomes, but not for those that would be paying the tax.

Or the alternative would be to introduce a wealth tax on 2nd homes, something which would also capture current 2nd home owners, which stamp duty changes wouldn't do. A wealth tax on property should be something of the order of 5% of property value per year.

So, rather than aiming for 5% gross yield, Landlords will simply increase the prices to 10% gross yield to cover their current income plus the tax they now have to pay.  It will be the tenants that lose out.

You didn't read my later post where I provided more detail on the suggestion.

Grumpy_chap

danlightbulb said:

You didn't read my later post where I provided more detail on the suggestion.

Yes, I did.  It, too, seemed flawed (little regard for the economics of running a business) and tenants would lose out.

danlightbulb said:.

What should happen with lets is that a direct 2nd home wealth tax shouldn't apply, however we do need controls to ensure the renter is not exploited. For example, is it appropriate for the rent to more than cover the mortgage of a property AND for the owner to also benefit from house price inflation on the property at the same time? Obviously we have capital gains tax, but that only applies when the property is sold and doesn't stop landlords from getting their tenants to cover their full mortgage plus more.

The landlord has to operate the rental property as a business and therefore the assessment needs to be considered in the light of a business.  The landlord business operating costs need to be covered plus a margin, otherwise the business plan fails and there are no rental properties available.  Finance costs are part of the operating cost of running a business, it makes no difference whether this is a landlord with a BTL or a supermarket or a property developer - to operate there are likely to be finance charges within the calculated charge-out rate for the goods or service provided.  In addition to finance costs, other operating costs of running a business as a landlord include agent fees, maintenance, repairs, etc.  The landlord who makes the largest operating profit will be the landlord who owns the property outright.

The landlord business owner also benefits from the property inflation (or suffers from the property deflation).  This is also comparable to any other type of business.  If a supermarket borrows money to grow the business, then the size of the business increases, turnover and profits increase, the share price increases as the comparable equivalent to the asset value increase which benefits the business owner.

danlightbulb said:

So I think we need something that puts some controls in on this. I.e there should be rules that stipulate that a renter cannot pay more than 60-70% of the equivalent monthly mortgage for the property. This ensures that the landlords are themselves contributing to the cost of the property they will eventually benefit from owning when they liquidate it. It isn't right that landlords benefit from free house price inflation when the renter is paying their full mortgage plus more.

This simply would not work.  It would be like walking into the Supermarket and saying I am only willing to pay price representative of 70% of the cost of the supermarket being here - you take a loss on all the other costs.  Thanks very much.

danlightbulb said:

I also think the current tax system for landlords is very unfair. Why should a landlord be able to offset their mortgage interest, new windows or other property repairs, buildings insurance etc costs against their tax bill when other homeowners cannot?

It is entirely fair as the landlord does not gain from the maintenance of the property - it is the tenant that gains.  Any tenant would want a landlord that responds positively to requests for the property to be maintained rather than trying to shirk responsibility.  The maintenance then becomes part of the business operating costs (or capital if the work is improvement) so is treated for tax in the same way as any other business cost.  What you propose is a charter for rogue landlords leaving the tenants in sub-standard accommodation, cold, damp, draughty and just deteriorating with poor decorating, broken appliances and really just an unhappy and unhealthy place to live.  It is surely  much better to encourage landlords to maintain the property they rent out as desireable happy homes?  Though, of course, the tax treatment of this would be irrelevant if the 70% of finance cost cap is applied as you suggest as the landlord will be destitute and begrudge every penny.

Your ideas are entirely driven from jealousy and would result in appalling (or no) rental property being available.

If you feel landlords have it so easy, why not jump on the bandwagon?

dbailey10

gingercordial said:

Well this is annoying if it's true that it will be in the autumn.  We are buying as FTBs well above £500k (London...) so it won't affect us, which I'm fine with as we'd budgeted for it.  But our sellers are moving out of London and downsizing so I suspect they're intending to spend less than that, which will presumably mean they'll want to delay in the hope of a saving.  Maybe fine if there's a specific date not too late in the "autumn" and we can work to be ready to exchange on that day.  Otherwise this will be an issue for us as we are already fed up of waiting.

Why do you say it won't affect you? From what I've read it's the minimum threshold moving upwards so potential savings of £10,000+ on properties over £500k. That's the way I've read it but of course nothing known for sure until Wednesday.

danlightbulb

@Grumpy_chap whilst I'm not saying my ideas are flawless, you seem to be failing to be willing to be open to any suggestion of changes at all. What are your ideas?

Owning a property and letting it out is not like other businesses. Its 'leasing' the property to the tenant. The tenant should therefore be covering the financing cost, as you say, but why should they also cover the capital cost when the landlord retains that? Take car leasing as an example - the financing cost, depreciation and maintenance are covered by the rental payments. For houses though, there is no depreciation (quite the opposite actually), yet we have the mortgage capital being repaid by the tenants. If the tenant is covering the financing cost then arguably he should also be sharing in the capital appreciation.

grumiofoundation

danlightbulb said:

@Grumpy_chap whilst I'm not saying my ideas are flawless, you seem to be failing to be willing to be open to any suggestion of changes at all. What are your ideas?

Owning a property and letting it out is not like other businesses. Its 'leasing' the property to the tenant. The tenant should therefore be covering the financing cost, as you say, but why should they also cover the capital cost when the landlord retains that? Take car leasing as an example - the financing cost, depreciation and maintenance are covered by the rental payments. You can't claim being a landlord is different to all other businesses then in the next sentence compare it to another business - people have to rent but no-one has to lease a car.  For houses though, there is no depreciation (quite the opposite actually), yet we have the mortgage capital being repaid by the tenants.


If the tenant is covering the financing cost then arguably he should also be sharing in the capital appreciation.

How would this work? Say landlord sells property after 2 years, 10 different tenants all receive a slice of the profits? Or would the tenant receive a small amount of rent back each month based on average house price rises? 

In either case would this not just lead to the landlords putting the rent up to cover for this?