A Goodbye To All That Buy To Let

[Bland Unsight]

Here's what I think - A goodbye to all that buy-to-let

And good riddance too. Sell now, sell everything.

[Borisina]

Enjoyed reading that, thank you. I can just hear property 118 crowd shrieking that there will be no negative carry trade for us, we will just raise the rents, or we will evict, society NEEDS us.

[Neverwhere]

1 in 10 is a btl?! Wow seriously never knew it was that bad. Have lots been bought post 2008?

A fair few. From the CML via The Telegraph:

There's also some relevant data on Bland Unsight's Buy to Let Mortgage Arrears thread.

[Neverwhere]

Here's what I think - A goodbye to all that buy-to-let

And good riddance too. Sell now, sell everything.

[smiley]

A very good post. I hope you're right, and you probably are.

But, two quibbles:

(1) If 20% of mortgages are BTL, and half the housing stock is mortgaged, it doesn't follow that 10% of the housing stock is BTL. It could be more, or less (unless the 20% refers to all active mortgages, not just current mortgages being given out, which is what I think).

(2) What about overseas buyers? Yes, they might all flock away when it crashes, but if they can evade UK taxes (do buyers from Singapore pay CGT to the UK?) then they may simply buy from the BTL landlords leaving the market.

[Neverwhere]

Capital gains tax is payable by non-residents on UK residential property since April this year:

Capital Gains Tax for non-residents: UK residential property

Overview

If you’re not resident in the UK and sell (or dispose of) a UK residential property you must tell HM Revenue and Customs (HMRC) and you may have to pay Capital Gains Tax on any gains you make on disposals made after 5 April 2015. A disposal is when the contract to sell the property is agreed (often called ‘exchange’).

Work out your residence status.

Capital Gains Tax may be payable on UK residential property disposals by:

• non-resident individuals
• personal representatives of non-residents who have died
• any non-residents who are partners in a partnership
• non-resident trustees
• non-resident companies or funds

If a property was jointly owned each owner must tell HMRC about their own gain or loss.

Find out more about disposing of an asset. Different rules apply if you are temporarily non-resident as you may also have to pay Capital Gains Tax on gains made on disposals of other types of UK assets, such as company shares.

Temporary non residents and Capital Gains Tax: HS278 Self Assessment helpsheet

RDR1: residence, domicile and the remittance basis

UK property you pay Capital Gains Tax on

If you are a non-resident you pay Capital Gains Tax on the gain when you dispose of:

• a UK residential property that isn’t your main home
• your main home if you’ve let it out, used it for business, had long periods of absence or it’s very large
• an interest in either of the above
• properties in the process of being constructed or adapted for use as a dwelling
• the right to acquire a UK residential property ‘off plan’

[frederico]

Interesting read, part of me says you've got a bit over excited about it all.

However I do think it's financial stability that has put the Willie's up them.

I think the way BTL works has caught them by surprise, and the way you describe the financing, it does seem like left to its own devices it could cause financial crisis 2.

I suppose the risk is they've left it too late,

With regard to people selling up, I think quite a few are going to cling on to the bitter end. They will probably never sell and be stuck with a loss making project waiting for prices to rise again.

[XswampyX]

It's not even about the CGT is it? It's just like the great big, red, juicy cherry on the top!

With the new tax rules they don't have a business, they only have a massive tax generating machine that's the icing!

The sponge is the BTL'er brain.

CGT is the coup de grace.

Edit to add :- And good riddance too. Sell now, sell everything.

Edited August 3, 2015 by XswampyX

[Assume The Opposite]

Very good!

[Habeas Domus]

Good article, but I would move the reference to housepricecrash.co.uk from the first paragraph to the end, otherwise people will assume you are starting from a biased HPC point of view

[Maursh]

With regard to people selling up, I think quite a few are going to cling on to the bitter end. They will probably never sell and be stuck with a loss making project waiting for prices to rise again.

Many BTL investors are so highly leveraged they cannot afford to simply "cling on". With the change in tax allowance in mortgage interest payments, there will be many who cannot afford to pay their tax bill each period. And in a falling market, many more who are not incentivised to do so.

[XswampyX]

Exactly, and with 15% of the buyers suddenly taken out of the market.... who are they going to sell to? Oh the people who they rent to, erm. d84s n0t c0mpurt --error-- -error- d£$% nut c*m6ute --eeeekk- --eeeekk-

[Bland Unsight]

A very good post. I hope you're right, and you probably are.

But, two quibbles:

(1) If 20% of mortgages are BTL, and half the housing stock is mortgaged, it doesn't follow that 10% of the housing stock is BTL. It could be more, or less (unless the 20% refers to all active mortgages, not just current mortgages being given out, which is what I think).

(2) What about overseas buyers? Yes, they might all flock away when it crashes, but if they can evade UK taxes (do buyers from Singapore pay CGT to the UK?) then they may simply buy from the BTL landlords leaving the market.

DYOR

If you want to shoot down my numbers, better do it with your numbers. I just spent the four most boring years of my life working out the blindingly obvious. I'm not about to repeat the exercise because it's easier for you to sniff at my numbers and do nothing than open a browser window and learn. Sorry.

[Bland Unsight]

Interesting read, part of me says you've got a bit over excited about it all.

I'm not in the least bit excited. I am bored. Bored by idiocy. Carney is calling a financial stability risk and Osborne is endorsing his call. Nobody gives a shit what I think.

[Bland Unsight]

Good article, but I would move the reference to housepricecrash.co.uk from the first paragraph to the end, otherwise people will assume you are starting from a biased HPC point of view

That's not how this works. Maybe 200 people tops will read it, all hpcers, and it is nothing but a condensation of what I learned from them, wisdom they dropped on me for free. You give respect to that, and you get it in early.

If just one lurking aspiring buy-to-let investor reads it, buys the argument and it saves themselves from getting milked for bare minimum of 25% of the price of a shit house, it was worth every minute of the two hours it took to knock it out. If one moronic buy-to-let investor finally works out that there are no one-way bets in investment and sells out whilst they can, that's all good too.

There is no reality. There is irreality. Voice of reason morons working off prejudice need to get their eyes on the horizon. All things pass.

[jammin35]

I hadn't considered the gap between an OO's ability to pay and that of a LL.

I wonder if that explains why Help to Buy was extended and not withdrawn. I assumed it was a political decision to keep younger votes but now I wonder if it is to soften the blow by helping people pay more.

In other words, to encourage a few more greater fools in to the deflating bubble.

[frederico]

I'm not in the least bit excited. I am bored. Bored by idiocy. Carney is calling a financial stability risk and Osborne is endorsing his call. Nobody gives a shit what I think.

I think you're wrong, people do give a shit what you think, I know I do. I don't think you will influence those in power, but I do think that by looking at the facts you can draw the correct conclusions.

I can totally understand people being very annoyed with the current situation and relieved that there may be light at the end of the tunnel.

I don't know how people will react to this, I do know that the house prices are a one way bet mantra is going to be very hard to shake off.

One things for sure, if interest rates do ever rise, a lot of people are going to be in financial hardship.

[VeryMeanReversion]

DYOR

If you want to shoot down my numbers, better do it with your numbers. I just spent the four most boring years of my life working out the blindingly obvious. I'm not about to repeat the exercise because it's easier for you to sniff at my numbers and do nothing than open a browser window and learn. Sorry.

Seems harsh, the poster was complimentary about your post and raised a couple of sensible points.

[Guest_growlers_*]

Condensed knowledge. Thanks.

Worth noting context tax changes are happening in too: liberalised planning will likely lead to more building + consensus growing that IRs will rise + regulatory change you note.

This probably is the worst time to be long housing in a generation.

Edited August 4, 2015 by growlers

[jammin35]

I hadn't considered the gap between an OO's ability to pay and that of a LL.

I wonder if that explains why Help to Buy was extended and not withdrawn. I assumed it was a political decision to keep younger votes but now I wonder if it is to soften the blow by helping people pay more.

In other words, to encourage a few more greater fools in to the deflating bubble.

[frederico]

As I said, hard to believe maybe, but I think they've been caught unawares.

They were after all in 2008, once the ratings agencies decide those loan packages are sub prime it all goes wrong very quickly.

[Bland Unsight]

I think you're wrong, people do give a shit what you think, I know I do. I don't think you will influence those in power, but I do think that by looking at the facts you can draw the correct conclusions.

I can totally understand people being very annoyed with the current situation and relieved that there may be light at the end of the tunnel.

I don't know how people will react to this, I do know that the house prices are a one way bet mantra is going to be very hard to shake off.

One things for sure, if interest rates do ever rise, a lot of people are going to be in financial hardship.

I know that now, and it means a great deal. I've been very upfront about the fact that I see the boards as a social space. I'm not looking for confirmation - I am looking for connection and conversation - and conflict. How can I learn by talking?

[dances with sheeple]

Good article, but I would move the reference to housepricecrash.co.uk from the first paragraph to the end, otherwise people will assume you are starting from a biased HPC point of view

Who cares, anyone not on the HPC side by now is a muppet anyway.

[Venger]

Very good paper, Bland Unsight.

Who cares, anyone not on the HPC side by now is a muppet anyway.

Exactly. If it were to be passed to wider non-HPC audience, it would be they who are dumb to believe, because it's from a HPC member, it holds nothing to inform, or give an alternative market perspective. If they just want to read papers from one set of VI, knowing that too many surrender types will claim they are victims of media if market begins to soften, then they can stomach the losses when it occurs.

You know, Balveda, for such a sensitive species you show remarkably little empathy at times.'

'Empathise with stupidity and you're halfway to thinking like an idiot,' muttered the woman, still not looking at Horza. He laughed again and got to his feet.

'Such... bitterness, Balveda,' he said.

She looked up at him. 'I'll tell you, Horza,' she said quietly, 'we're going to win.'

He shook his head. 'I don't think so. You wouldn't know how to.'

Balveda sat back again, hands spread behind her. Her face was serious. 'We can learn, Horza.'

'Who from?'

'Whoever has the lesson there to teach,' she said slowly. 'We spend quite a lot of our time watching warriors and zealots, bullies and militarists - people determined to win regardless. There's no shortage of teachers.'

'If you want to know about winning, ask the Idirans.'

[...]'Balveda,' he said, laughing lightly, 'don't disappoint me. I prefer a fight... You almost sound as though you're coming round to my point of view.'

'No,' she sighed. 'I'm not. Blame it on my Special Circumstances training. We try to think of everything. I was being pessimistic.'

'I'd got the impression SC didn't allow such thoughts.'

'Then think again, Mr Changer,' Balveda said, arching one eyebrow. 'SC allows all thoughts. That's what some people find so frightening about it.'

-Consider Phlebas.

Reasons: the Culture
The Culture went to war to safeguard its own peace of mind: no more. But that peace was the Culture's most precious quality, perhaps its only true and treasured possession. Having prepared and steeled itself (and popular opinion) through decades of the former, it resorted eventually, inevitably, like virtually any organism whose existence is threatened, to the latter.

[..]Indirectly, but definitely and mortally, the Culture was threatened... not with conquest, or loss of life, craft, resource or territory, but with something more important: the loss of its purpose and that clarity of conscience; the destruction of its spirit; the surrender of its soul. Despite all appearances to the contrary, the Culture, not the Idirans, had to fight, and in that necessity of desperation eventually gathered a strength which - even if any real doubt had been entertained as to the eventual result - could brook no compromise.

Reasons: the Idirans
[..]At worst, they perhaps considered that the war was being begun in an atmosphere of mutual incomprehension. They could not have envisaged that while they were understood almost too perfectly by their enemy, they had comprehensively misapprehended the forces of belief, need - even fear - and morale operating within the Culture.

Edited August 4, 2015 by Venger

[Bland Unsight]

Seems harsh, the poster was complimentary about your post and raised a couple of sensible points.

I had a good think about this, and it reminded me of my college football club. We had this whole daft vocabulary. Things that were good enough were "Standard", (hence when we happened upon a curry house called the Standard Tandoori we piled in as if called by siren song), things that were excellent were "Badger", things that were not up to scratch were "Village" as in (village cricket). I introduce this juvenile inanity because there was another call, "Harsh, but fair."

I really think that a crash is coming. I am certain that some highly motivated sellers were created by George Osborne on July 8th 2015. I also believe that as a consequence the trolling on these boards is about to get a lot worse. There is a weird mechanism at play. When the pwoperdee mad idiots are watching prices ramp, they care little for us and we are not heavily trolled and the trolls that we get have no game. However, when the pwoperdee mad get nervous these boards are heavily trolled and we get more adept trolls showing up. Hence, in terms of getting to know other posters and being increasingly convinced that they are who they say they are, it is the dark days on the board (when prices move up) that we discover the best days for making connections, because when it looks like we are wrong most people still here, and still talking about UK residential property, come with clean hands.

Essentially we have two problems.

One is a typical free rider problem. I was once very interested in the sociology of religion. Some scholars posit that modern religious practices in cities are a way of dealing with the free rider problem. You can enjoy the benefits of being part of a collaboration that is larger than the individual and larger even than the extended family, but you have to openly espouse some whacky bullsh!t as the price of admission. The problem with the boards is that because of pseudanimity there is no cost associated with espousing one set of beliefs "House price crash!" whilst privately holding and surreptitiously promoting the contrary view.

The second is that this forum is one of a vanishingly small number of places where a counter-narrative to the presently all encompassing bubble denying idiocy is entertained. Look at the way the BTL tw@ts rocked up on the Moneyweek thread to patronise Miles Shitside, (and the way that a poster then turned up here to characterise Miles Shitside as a ranting loon). We are very, very heavily trolled.

Setting all that aside, another poster via PM pointed out that there is a conspicuous error in the OP. The BTL stock is 15% of the book, not 20%, (I cheekily argued that 15% is 20% to one significant figure, so sue me, .)

Whilst I expressed myself bluntly, I stand to it. DYOR. Don't trust me, don't trust your mortgage broker, (and maybe take Mark Alexander, Fergus Wilson and Vannessa Warwick with a pinch of salt too, though no more salt for Fergus - that f**ker already looks like a wheezing sack of shite, a heart beat from ICU, as matters stand).

Tear down the argument with evidence and argument. That's how we learn, together.