Sunday, May 23, 2010
The usual 'properdee experts' are putting on a brave face, but ...
Independent: Is the housing market about to see a fire sale?
"Experts argue that the reaction from investors will depend largely on the detail behind the new proposed rates and, in particular, whether investors profits will be protected against inflation." - why would landlords' profits be protected from inflation?
Posted by paul @ 10:17 AM (3704 views) Add Comment
22 Comments
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1. taffee said...
exerts view....'after allowances the gain will be small for anyone with just one or two properties'
two points here
1/when did people have 'just one or two buy-to-lets'...when did this become normal
2/so all profit will be wiped out then....does he think that's 'okay then'!
2. quiet guy said...
All of the BTLers I've personally heard about bought for capital appreciation so this proposed tax rise might hurt a bit but dashing for the exit now might be the worst thing to do. My guess is that there won't be much impact on the market. The larger, professional investors who planned for long-term rental yields will eat the smaller amateurs but this tax alone will not tip the market.
"Experts argue that the reaction from investors will depend largely on the detail behind the new proposed rates and, in particular, whether investors profits will be protected against inflation."
Why should property profits get this special treatment? I'm not an accountant so perhaps I'm wrong but I thought that profits on shares and other typical investments was taxed without regard to inflation - just like the interest on my savings.
3. mander said...
Again it will be a case for Office of Fair Trading when a group of people are threating to influence the market by selling the whole lot.
4. tenyearstogetmymoneyback said...
Picking out two points from the article
"Mortgage Works, part of Nationwide, launched a range of deals requiring a deposit of 20 per cent, including a one-year fixed rate at 4.69 per cent, albeit with a hefty arrangement fee of 2.5 per cent."
"many investors may decide to keep a hold on their investments and let their tenants cover their mortgage payments."
how many landlords can get a return of 5% + without the property appreciating ?
5. gone-to-colombia said...
This on its own might not be the turning point, but it´s one of the planets lining up.
6. hpwatcher said...
Houses will go down, taking the whole economy with it - so integral are they now to the UK.
7. novice pete said...
My local rag property section has gone from 400+ to 600+ places for sale in about a month. Still silly prices though.
8. it_is_going_with_a_bang said...
I know of a property developer who has bought millions of pounds of property over 10 years and is very close to going under.
The business plan worked well while prices kept going up. But now having remortgaged as he went along to keep funding the habit, he has a big problem. He can't sell most of his properties because if he did he would need to pay capital gains tax on the the profit from day one - but of course he has already "used" that money to buy more property. Even with 'todays' rather generous tax he can't afford it.
Now if the tax gets hiked up to 40% as planned he would have a tax bill of 3 million - having spent that money on buying more property of course he doesn't have it. So he cannot sell anything.
There are those I know of that would stand to lose out heavily if CGT gets changed so have a finger on the trigger waiting to sell some property - not all their property - but certainly some of it.
It's a mixed bag out there and it will be interesting to see what happens.
9. novice pete said...
I truly believe what we have witnessed is the biggest con trick ever played on the human race, the media, the economists (a lot of them),
the bankers, the politicians (again a lot of them), the regulators? (regulated what exactly?), and the greedy fools that have fallen for it.
10. mick rupert said...
Is it reasonable to think the recent cut to 18% was just to enable those "in the know" to "get out while they still can"? In which case, this would indeed signal the turn, but not for the reason of the CGT increase in itself... If you were "in" property that was yer 2 year window, punk.
If the Conservatives finally let the market deflate properly - short sharp shock style - in the first 2 years of their leadership, the pent-up demand (FTBs) can end up buying their properties and in consequence become lifelong committed Tory voters in return, plus of course the Tory classes can fill their boots with cheaper property.
Conservatives can then blame the global market in addition to Labour mis-handling of the economy. Viva la emergency budget.
11. This comment has been removed as it was found to be in breach of our Blog Policies.
12. alan_540 said...
Let's hope so
13. mark wadsworth said...
What Mick Ruperts says.
I wonder how many times our favourite maths teachers, the Wilsons, have been using their pocket calculators to multiply random figures by forty per cent over the past few days?
14. Exiges said...
.."Is it reasonable to think the recent cut to 18% "
Correct me if I'm wrong, but it wasn't a "cut" to 18%, it was a change from a variable 10%-40% tax (taper relief based on how long you'd held the asset) to an across the board 18% rate.
So in fact many business owners looking to sell up and retire went from facing 10% CGT to 18%
15. Notyethomeless said...
"protected from inflation "
I'd assume this means the capital gains would only be due on the increase on the property 'after inflation' (presumably CPI), thus reducing the tax due.
As quiet guy says: don't know why property should get this treatment if shares don't...
16. righttoleech said...
Quiet Guy.........In the past CGT was paid on gains over and above inflation during the period the asset was owned........I suppose it is possible that indexation could be used to lessen the effect of the rise from 18%.
17. ontheotherhand said...
Can somebody answer a question about amateur vs. professional BTL? Surely the Wilsons and the large professional BTLers that quiet guy talks about form a company to buy and rent out their properties? I though CGT only affected individuals and that companies instead paid taxes on their profits? I
18. str 2007 said...
Its going with a bang
Raises an interesting point.
I must admit this 40% Capital gains tax thing will be quite big. Initially I wa thinking, what's the problem, you only pay the tax on profit.
But as Its going with a bang points out this money has already been spent releasing equity for further properties.
Taking a £100k flat bought in 2000 which is now 'worth' £200k. Selling would involve a £40k tax bill (assuming it was a second or btl property). Fair enough if you still walk away with £60k.
However if that investor released 3 No. £20k deposits for more flats as the price rose now only has 20% equity in that property ie £40k then selling would produce errr nothing.
Having said that they've raised enough money to own 3 other flats for nothing. But the fact is unless forced why would they sell ?
I also seriously question how many people have been paying any CGT on any properties in the last 10 years.
Lets hope Mick Ruperts scenario plays out. I can't help thinking the general public need re-educating about how useful high house prices are to society.
Argueing with ones self here, I suspect the present government will still take the line that equity in houses can be used as security to borrow to invest and therefore it should be maintained.
I think as soon as things start droppin the printing presses will whirr into action again and they will go down the route of inflating debt away.
19. str 2007 said...
on the other hand
Yes I'm sure it won't be as simple as my example above.
As you say there'll be ways to offset CGT I'm sure.
(As a side issue I noticed in Money Week that motorbikes can be put down against tax fully, so a £10k bike effectively will cost you £7.5k or £6k if you're a higher rate tax payer).
So lets hope for that HPC hurries up as I need a bigger garage as I sense another toy arriving before too long.
recaptcha : sunroofs september (no need on a bike, waterproofs september maybe).
20. titaniccaptain said...
@STR2007
Speaking of Toys I found one under my marital bed..........I asked my wife what it was and I am not convinced she is telling the truth.....
Well I have never seen a rabbit which looks like that
21. jack c said...
titaniccaptain - new catch phrase for you (forget the eleaphant in the room) from now on it's the rabbit under the bed
22. techieman said...
TC is that because you she no longer says to you "What's up Doc"? [if only you were a doctor that would actually work quite well as a double entendra].