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Neverwhere

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Everything posted by Neverwhere

  1. Good to see that they're still struggling with details we'd worked out immediately after the Summer Budget!
  2. Neverwhere

    Tax Relief On Buy To Let Mortgage Interest.

    That's the one! At least you've confirmed that I wasn't imagining it, thanks Mr T
  3. Neverwhere

    Tax Relief On Buy To Let Mortgage Interest.

    I think you're right and that is exactly why I can't find it! It all ties up very neatly, with the reliance on debt making it near impossible to evade. Even for those BTL landlords that get themselves stuck scraping by on the SVR that will only represent a temporary reprieve, as at the end of their (normally shorter than a standard mortgage) term they will still have to sell to repay, if they can repay at all, and will flag themselves up to HMRC when they do.
  4. Neverwhere

    Tax Relief On Buy To Let Mortgage Interest.

    This is really the key thing, and while there are many other ways for HMRC to track down tax evading landlords it seems like allowing lenders to do it for them will be the most cost effective and comprehensive tactic. I'm sure we've seen evidence of this already - with BTL landlords complaining that they've been unable to refinance their BTL properties because they couldn't provide a tax return - but I can't quite remember which thread it was discussed on?
  5. Neverwhere

    Tax Relief On Buy To Let Mortgage Interest.

    The broker wasn't very clear themselves but I'm pretty certain they were just referring to landlords' ability to claim tax reliefs on the transfer of properties from individual to LLP to Ltd. AIUI the rules on this are simply that tax reliefs on the transfer are only available for those who aren't making the transfer to reduce their ongoing tax bills; and they involve giving some people the opportunity to keep hold of money that would otherwise legitimately be due as taxes rather than taking additional money away from anyone.
  6. There's a new post on Property118 that once again points to Ireland as a possible case study for the potential impacts of Clause 24 (h/t Bland Unsight for flagging on the BTL Regrouping thread) which I'm quite pleased about because it gives me a good excuse to highlight an interesting paper from the Central Bank of Ireland that was recently referenced in both HM Treasury's December 2015 Open Consultation: Financial Policy Committee powers of direction in the buy-to-let market and The Financial Policy Committee's tools over the buy-to-let mortgage market - Impact Assessment, produced jointly with the Bank of England, in October 2015. First, though, I'm going to run through a few points from the Property118 thread in relation to the Irish PRS: The most obvious thing to mention, of course, is that the legislation in Ireland, while at certain points similar in some respects, is not identical to Clause 24. While Clause 24 ultimately disallows finance costs as a deductible expense it does allow "all financing costs incurred by a landlord [to] be given as a basic rate tax reduction" (HM Revenue & Customs, Policy Paper: Restricting finance cost relief for individual landlords, July 2015). Clause 24 is therefore significantly less onerous than Ireland's full removal of deductibility and all tax reliefs on landlords' finance costs (barring certain restricted exemptions) between 1998 and 2002, and potentially much more akin to the limited reduction in tax breaks for landlords' finance costs (achieved simply by limiting deductibility to 75% of the interest on the loan) that has been in effect in Ireland since 2009: Irish Tax & Customs Tax & Duty Manuals - Section 16 Part 04-08-06 (PDF, 116 KB) - Deductibility of Loan Interest (section 97(2)(e)) With this in mind concerns over the implications for a post-Clause 24 United Kingdom of rent price increases over the earlier period in Ireland seem somewhat exaggerated. This is further emphasised when said increases are considered in real, rather than nominal, terms. To begin with the uncited claim that "[f]ollowing the measure, rents rose by at least 24% in 1998" does not, as far as I can see, appear to be well supported by the cited literature. For instance, the Housing Policy Review 1999-2002, Michelle Norris, The Housing Unit and Nessa Winston, Department of Social Policy and Social Work, University College Dublin directly contradicts this claim (emphasis added): "The available evidence in this regard is set out in FIGURE 2.5 [. . .] It reveals that rent inflation averaged at 3 per cent per annum between 1990 and 1996, but that this jumped to 5.3 per cent between 1997 and 1998.1999/2000 and 2000/2001 saw particularly high growth in private residential sector rents, which increased by 10.5 per cent and 14.6 per cent respectively during these years." This apparent error may have crept in from either a direct misreading of FIGURE 2.5 in the above social policy paper (I would personally tend to have more faith in the authors' interpretation of their own chart) or a reference to a 1998 24% increase in Dublin-specific rents in The Housing Crisis in Dublin, BA Dissertation, National College of Ireland, April 2001, Karl Thomas Connell. As the deductibility of landlords' finance costs was removed across the whole of Ireland and not just in Dublin any regional variation in rent movements obviously cannot be attributed directly to this legislative measure and so either source would render the claim incorrect. (As an aside the third pre-financial crisis paper cited in the Property118 post, OPPORTUNITY KNOCKS?: Institutional Investment in the Private Rented Sector in Ireland, July 2004, Professor ADH Crook and Dr Steven Crowley, University of Sheffield notes that "[t]he Private Rented Sector in Ireland has grown at an unprecedented rate in the last six years for reasons" i.e. between 1998 and 2004. It also expresses concerns over the predominance of individual investors in the Irish PRS: And goes on to detail an increase in Irish first time buyers as a direct result of the tax changes: It's also worth noting that - unsurprisingly given the reputation Ireland has for having massively over built during the boom years - completions of new housing did not drop off over this period, though housing permits did, and the overall Irish housing stock continued to rise: Sourced from Global Property Guide, Ireland In the United Kingdom, of course, housebuilding activity seems likely to be supported against any possible impacts from Clause 24 by all of the various Help To Buy schemes.) Given the other papers cited in the Property118 post all pre-date the second period of reduced tax breaks on Irish landlords' finance costs, and the information for rents during the first period of total removal of said tax breaks is broadly similar across all, I'm going to focus on Ronan C. Lyons, “The spread of rents in Ireland, over time and space”, in Lorcan Sirr (ed), Renting in Ireland. Dublin: Institute of Public Administration, 2014 (PDF version of the relevant chapter available here). On Property118 emphasis is placed on nominal rent price movements, as illustrated in Figure 1: However, when we consider the overall rate of rent price movements this first period of totally removed tax breaks for Irish landlords' finance costs (1998-2002) does not actually appear to be sufficient to cause a significant deviation from the long-term trend in the annualised 10-year change; just as the second period of reduced tax breaks for Irish landlords' finance costs (2009-onwards), which is arguably a better parallel for the reduced tax breaks that will come in for UK landlords' finance costs under Clause 24, appears unable to significantly lift the 10-year change much above zero: (I've posted on this graph previously and I think I may have been mistaken, or at least overly strong, in my interpretation of the 1-year change for 2002 and 2009, due to irregular spacing on the x axis making the rate of changes in these specific years more obscure, but the overall trend in the 10-year change seems quite clear.) Additionally, it seems quite misleading to consider nominal rent price increases in isolation as Ireland adopted the Euro in early 1999 (possibly explicating the fact that nominal Irish rents only appear to take off in 1999, a year after the tax changes are introduced, and meaning that average rents did not literally increase from €600 in 1998 to almost €900 in 2001 because Irish rents were not denominated in euros in 1998) and experienced a general uptick in inflation at this point, with a doubling in general inflation as measured by the Irish harmonised consumer price index (Inflation.eu, Worldwide Inflation Data, Ireland): Hence, turning back to Lyons, it's hardly surprising to see that the rent price increases in question appear to be significantly less marked when rents are considered as a fraction of income; and on my reading neither seem to have succeeded (as yet) in defeating the long-term trend in this respect: So, having established a bit of background on the subject, back to the CBI paper I mentioned at the start, ‘House price volatility: the role of different buyer types’, Central Bank of Ireland Economic Letter Series, Vol 2015, No.2 (h/t The Bank of England ): There are two graphs in particular in this paper that stand out for me a great deal: Thoughts?
  7. Neverwhere

    Buy To Let Finance Watch

    I think that probably runs the other way and brokers are finding it difficult to get lenders to agree to lend to their clients (given loan-to-income/rent ratios) and so are having to shop around, as no doubt they'd much prefer to save on their own time and effort and only deal with a handful of lenders instead. It definitely seems like they are lending into the riskier end of things, given they're expanding their BTL lending whilst overall new BTL borrowing is down: And at the same time as accountants are apparently unwilling to sign off the various schemes - which may or may not require remortgaging - that BTLers are embarking on to try to avoid the recent and ongoing tax changes: Obviously P2P and the challenger banks are quite different, in terms of regulation, and so the banks should have capital buffers to help them cope with any defaults. Also, AIUI, at least some of them make use of Special Purpose Vehicles to hold their BTL books at arm's length. But it does seem like it could be an interesting area to watch. For one thing it could lead to a sudden drying up of available BTL products if their expansion into the BTL lending that the mainstream banks no longer appear to want turns out to have been a bad idea.
  8. Neverwhere

    Ireland: A Btl Case Study

    Irish rents continue to rise as tax reliefs for Irish landlords are phased back in: (Source: The RTB Rent Index Quarter 3 2018)
  9. Neverwhere

    A Goodbye To All That Buy To Let

    Continuing falls in new BTL borrowing, potentially an early indication that the next dwelling stock estimates will show a further reduction in the size of the PRS?
  10. Neverwhere

    Buy To Let Finance Watch

    Both of which look to be limited company buy-to-let, almost as if transferring the beneficial interest to the company means that the company then needs to be party to the financing arrangements...
  11. Neverwhere

    Climate breakdown and housing strategy

    FreeTrader had a great thread on current coastal erosion and house prices/sales:
  12. Neverwhere

    A Goodbye To All That Buy To Let

    I think that as Ah-so notes it's likely to improve their understanding of what's going on, rather than to pursue or support a specific policy. As they've started to collect borrower level data, and the PRA have been asking lenders to assess borrowers' portfolios and not just the individual property they're lending against, it makes sense that they would be looking to see whether this information provides any new insight into the behaviour of a sector (BTL) which the Bank has previously expressed concern about.
  13. Neverwhere

    A Goodbye To All That Buy To Let

    What do you think might explain the difference in relationship between LTV and distress at BTL loan level and at BTL borrower level? It seems like the method for assessing LTV at borrower level could conflate BTL borrowers who've experienced a slight drop in LTV across the board, BTL borrowers who've experienced a significant drop in LTV on a single rental property, and BTL borrowers who've experienced a significant drop in LTV on their own homes, all of whom might be expected to behave somewhat differently?
  14. Neverwhere

    A Goodbye To All That Buy To Let

    It seems that (over the relatively stable period they've looked at) they've confirmed the LTV-distress relationship at individual BTL loan level, but not at combined portfolio-and-main-residence level: I'm not sure why they wouldn't conclude that the difference between the two might indicate an unwillingness or inability on the part of BTLers to even out financial difficulties across all of their properties, in contrast to the way that the authors have evened out LTVs across all of their properties?
  15. I hadn't thought things through to that extent myself, but those are both brilliant points.
  16. And as it's landlords causing the problem it's only fair that it's landlords that pay the tax to cover it, with the added benefit that reducing their still-generous tax breaks might encourage them to sell their properties and reduce the size of the problem in the first place
  17. Agreed. Their unwillingness to address even the most visible manifestations of the problems caused by their own aggregate actions is just a symptom of how poorly equipped they are to engage in effective lobbying.
  18. It seems likely that this will also be the conclusion of anyone in a position of influence, should they - by some unlikely miracle - actually come to their attention. Great advertisement for everything that's wrong with having amateur speculators controlling other people's access to housing and security of tenure.
  19. Virtue signalling about not claiming a salary which doesn't actually exist for them to claim, because they don't have any funds with which to pay it, whilst seemingly looking forward to having enough incoming funding to claim a salary in the future:
  20. I think something which BTL speculators often overlook is that if those wages have been spent providing landlords (or their banks) with income then they are no longer available to be spent purchasing property. This may seem simple and obvious but I don't think the implication - that pent up demand for homeownership will support lower prices than if the wages backing that demand hadn't been redirected into landlord "pensions" in the first place - has really sunk in.
  21. A 2012 estimate from The Strategic Society Centre has it as an extra £8.3 billion annually by 2060.
  22. Setting aside the silly feuding with Shelter, this strikes me as the dumbest of the dumb claims: A significant way in which normal people provide for themselves in retirement is through paying off much of their housing costs during their working life, i.e. through access to homeownership. Because the majority of landlords don't provide homes, but instead use their greater access to tax breaks and loose credit to monopolise the existing housing stock, and force people who would otherwise be homeowners into renting from them or other landlords instead, what they are in fact doing is redistributing retirement provision to themselves and away from people who are already less well off than them. The end result of this, if allowed to continue, would be that the would-be homeowners whom landlords have excluded from homeownership end up forced to rent throughout retirement, with the government covering much of the cost via housing benefit. As a means of "pension" provision buy-to-let is fundamentally an exercise in scamming the state into providing the buy-to-letter with a massively higher state-funded "pension" than they or anyone else would otherwise have access to.
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