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Here's what I think - A goodbye to all that buy-to-let And good riddance too. Sell now, sell everything.

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?

Lots of "the alternative is a socialist hell" and "it's simple economics" arguments. They have a Facebook page. It would be a shame if anyone challenged them in the comments. https://helmores.com/are-buy-to-let-landlords-to-blame-for-mid-devons-housing-crisis/?fbclid=IwAR19rM3LSuZQ09p5kRPunfz_8pHS-Hm0KRFTSgRvPRUnCnsgCqoXw-MeOUw

Very speculative thread. Not so much counting chickens before they've hatched as speculating on the mechanics of their demise whilst it conjectured, but before it arrives. Some thoughts from a conversation. We assume the following: At some point between 2016 and 2020 BCBS risk-weights start to widen the difference between mortgage interest rates on interest-only buy-to-let mortgages and rates on repayment mortgages offered to owner-occupiers, i.e. BTL mortgage rates go up Over the same time scale, Clause 24 of the Finance Act 2015 is applied in its current form turning cash flows on leveraged property portfolios net negative as the rents are inadequate to cover the mortgage interest and the tax, (any ability of leveraged landlords to raise rents is assumed to be inadequate to cover the rising cash outflows). There are then two end games. Either the landlord pays the mortgage interest but starts to build up a debt to the Revenue on the income tax they owe or they pay the Revenue in full and slip into arrears with their lenders. As discussed on the Tax Relief thread (h/t pipllman for the reference), where a creditor makes a bankruptcy petition against a debtor, as assets are disposed of by the trustee, when a CGT liability arises, the CGT represents the first charge, (i.e. AFAIK the Revenue skips in front of the secured creditor and gets paid first). Considering a portfolio landlord, this means that once the Revenue make a bankruptcy petition and the landlord is declared bankrupt then as the BTL properties are sold, the Revenue are paid off and then the banks get what is left. Now, some more speculation. A leveraged landlord in denial will presumably pay the mortgage interest charges as they arise and not make adequate provision for the income tax bill, hence when the bill arrives they won't be able to pay it, i.e. the supposition is that denial leads to a debt to the Revenue. The bank know that if the Revenue can force bankruptcy before the bank can repossess, the bank will face larger losses as the CGT has to be paid first, hence the bank are highly motivated to call in the loan before the Revenue can petition for bankruptcy The Revenue will know that if the bank get to repossess before the Revenue can petition for bankruptcy, then the bank may leave nothing but an asset-less ex landlord unable to pay their CGT. The thing that is new is Clause 24. Before that, with low mortgage interest rates, you had nothing to rapidly bankrupt portfolio leveraged landlords, but now you do.

From a few days ago, apologies if mentioned HMRC's targeting of accidental landlords falls short https://www.ftadviser.com/mortgages/2019/03/14/hmrc-s-targeting-of-accidental-landlords-falls-short/

I saw an advert for this earlier in the gym. There was no sound in there, so I couldn't quite believe what I was seeing. www.buytoletcars.com That's right, for a minimum investment of £7k you can invest in a lease car, and then get your money repaid to you in 36 monthly payments, followed by a lump sum. Or not. I can't imagine what sort of person would be motivated to invest in this. Cheers, SC.

https://www.theguardian.com/money/2018/oct/16/taxes-buy-to-let-landlords-rents-generation-rent-buyers Warnings by landlords that taxes on buy-to-letwould cripple the property market, driving down supply and pushing up rents, have turned out to be entirely hollow, according to research by campaign group Generation Rent. It found that since the “bombshell” introduction of taxes on buy-to-let landlords in George Osborne’s 2015 budget, rents have fallen in real terms.

OK, so I need my reference material to be dependable and at hand, so I'm going to try to keep a list of posters who are have stated that they are BTLers and who have also made posts which suggest that they have not yet achieved a complete mastery of the elementary aspects of capital asset pricing methodologies. A thread here keeps it at hand. A public record might make it dependable - i.e. if people will show up and debate why they shouldn't be on the list, and other posters will stand by them, that would at the very least cast some doubt over my choice to put you on my list. Crucially, you are innocent until proven guilty. Being on the list is harmless fun. A reluctance to show up and argue your way off indicates that perhaps there was a cap that fitted and you had been wearing it heretofore, were wearing it presently and intended to continue wearing it hereafter....

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12019894/Buy-to-let-stampede-ahead-of-stamp-duty-hikes.html

The sale of the Bradford & Bingley mortgage book sitting in United Kingdom Asset Resolution was confirmed in the Budget. Source: Budget 2016 Policy Paper Bradford & Bingley's buy-to-let lender, Mortgage Express, accounts for most of the loan book. Source: UKAR B&B 2015 annual report There's some 'interesting' commentary in the trade press. Source: Basel proposals could ‘compromise’ Bradford and Bingley asset sale, Mortgage Strategy, 18 March 2016 There is an alternative perspective to the IMLA argument, which is that if you are going to shut down the BTL industry, you ought to get shot of your £18bn worth of crappy BTL loans at whatever price the market can bear. The NRAM book was sold in 2015 to Cerebus who are, to use the technical parlance, grown-ups well capable of arranging their own financing and taking a view about the interest they'll have to pay on financing any funding, even after BCBS risk-weights alter the capital costs attached to any lending by the banks to them. I always wonder who this weak as shit IMLA logic is aimed at. Anybody with any familiarity with even the most rudimentary elements of the situation surely just laughs at it, and anybody ignorant enough to be taken in by it wouldn't be interested. Hence we can paint a situation whereby come 2018 all the PovertyLater Mortgage Express mortgages are held by Cerebus. The Court of Appeal has upheld the West Brom decision and Cerebus can bump the mortgages to something aligned with market SVRs. BCBS risk-weight implementation is coming down the tracks and market SVRs have risen markedly above 2016 levels of about 5%, and of course, you've already lost most of the tax deductibility of your mortgage interest. Balance of probabilities, all of this will happen. Sell now, sell everything.

Prospective owner occupiers need not apply? http://www.property118.com/

Some people are never going to learn This article will give hope to any P118 BTL fool desperately looking for a greater fool to unload on.

Spain's Palma to ban holiday rentals after residents' complaints http://www.bbc.com/news/world-europe-43878007

https://www.property118.com/truth-nottingham-council-putting-private-tenants-rents/ Haha, good luck with that ;-) This guy appears to be having some kind of breakdown:

Around the time of the 'postponed' crash in 2007, I remember there was a lot of talk on here about BTL lenders possibly making "margin calls": https://moneyweek.com/could-this-be-the-ruin-of-the-buy-to-letters/ Does anybody know if these clauses are still commonplace in BTL mortgage contracts? If so, this could persuade a lot of the "in it for the long term" landlords to sell up after all...

As it looks like BTL is going to blow-up spectacularly over the next few years I thought it might be interesting to have a guess at how much fraud is going to be discovered in the aftermath. We can then return to this poll at some point in the future and compare the opinions of the forum with the reality on the ground. If you vote "other" please give details in the thread.

We are facing the perfect storm, for BTLers Rising Interest rates Magicked up cash drying up. LIBOR on the way up S24 Taxation Indebted population Maintenance of decaying houses. London Collapsing BrExit Population demographic Boomers dying off HTB fees Anyone with half a brain would not be holding DEBT right now. Add to that, WAR, Rising of right wing parties, immigration ending, Corbyn and what we have is the perfect storm. The BTLers arent riding a Mexican wave, they're at the front of a Tsunami. I cant realistically see BTLers surving the decade. In 2007 the "house is my pensions" nonsense was shown to be B.S. now we have over levered loons who think they can't loose, well, they can and they are about to learn it the hard way.

http://www.bbc.co.uk/news/business-43043294 More first-time buyers took out mortgages in 2017 than in any year since the financial crisis. There were 365,000 first-time buyers in the UK, the highest number since 2006 and an increase of 7.4% compared with 2016, UK Finance said. Yet this growth is expected to cool in 2018, the lenders' trade body said. The buy-to-let market was also "less buoyant", it said. Separate official data shows UK house prices rose by 5.2% in 2017. The figures, from the Office for National Statistics (ONS), showed that the 4.8% rise in the price of properties bought by first-time buyers was a slower rise than elsewhere in the market. The average first-time buyer taking out a mortgage was aged 30 and had an annual household income - either one individual or jointly as a couple - of £41,000, UK Finance said. "Although the [mortgage] market remains competitive [for first-time buyers], there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year," said Paul Smee, head of mortgages at UK Finance. The figures show that the average home mover was aged 39 and had an annual income of £55,000. However, the numbers of those moving dropped by 3% in 2017 compared with the previous year. The number of new buy-to-let mortgages dropped by 17% year-on-year, while the number of landlords remortgaging was down by nearly 12%. Landlords have faced more stringent tax demands. The average home in the UK costs £226,756, according to the ONS. This value rose faster than prices in general, as measured by inflation, in 2017. Accountancy firm PwC said that the figures showed UK house prices had increased by 22% more than earnings between 2012 and 2017. "This shows that house price growth has outpaced average earnings growth for the fifth consecutive year, further ratcheting up the affordability challenge," said Richard Snook, senior economist at PwC. However, the picture is very mixed across the country. London, where the average property still costs significantly more than elsewhere, at £484,173, saw the slowest annual house price growth of 2.5%, according to the ONS. This slowdown was showing some signs of shifting to the South East commuter belt, where house prices dropped by 0.5% in December compared with November. Scotland saw the fastest year-on-year rise in prices, up 7.7%, taking the average house price to £149,000. Another set of ONS data shows that rent paid by tenants in Britain to private landlords rose by 1.1% in the year to January 2018, down from a 1.2% annual rise the previous month.

I hope this one will be interesting! I want to keep this going so hope to come back and update. The method I'm using is: Money supermarket search (until not available, then any source) £160k property Interest only, fixed or tracker, 25 years 60% LTV (£96k) 75% LTV (£120k) 80% LTV (£128k) 85% LTV (£136k) Please feel free to update! Today... 60% LTV 75% LTV 80% LTV 85% LTV Specialist broker (2.5% arrangement fee, no first time LL, 6.33% SVR)

This FTAdviser piece, Regulators turn attention to ‘unsafe’ buy-to-let sector, 18 July 2014, sourcing the remark from (I'm guessing as the piece itself is a little sketchy) the 15 July 2014 Treasury Committee Hearing on the Bank of England June 2014 Financial Stability Report. The Treasury float the regulation of BTL in its December 2009 consultation paper Mortgage regulation: a consultation. As we know, nothing came of it at that time. The responses to the consultation were published in the March 2010 paper Mortgage regulation: summary of responses, (you've got to wonder who dreams up these catchy titles). Quoting the whole portion of Summary section of Mortgage regulation: summary of responses, (page 3), which addresses buy to let, (emphasis added): My gut feel for this is that the move to 75% LTV in the sector was a quid pro quo; the vested interests in the sector raised the bar a little on who could play, and as a result the government did not regulate, (this is pure speculation). As I've argued before I think that late entrant BTL will turn out to be a money pit and only those who are very lucky with the timing and the geography will get out unscathed. It certainly looks as if presently the Bank of England is turning a blind eye to the whole mess. However, with Osborne's pension money about to come on tap, can they continue to ignore the fact that if they are not careful a lot of naive investors may be about to be parted from a lot of the money that is supposed to keep them out of penury? Let us say we take a 2015 vintage pensioner handing over a material portion of their savings to become a canny BTLer. Even if house prices don't fall, if there is nothing left after paying the mortgage, the letting agent's fees and all the rest, isn't the Bank of England setting up a situation where a non-trivial number of people may be locking up their savings in a investment vehicle that pays no dividend or perhaps requires them to chip in some of their pension just to stay at the table - a negative carry trade? Hardly a reasonable way to provide a retirement income. If house prices fall, even if only in real terms, it's even worse. You have an investment that pays no dividend and whittles away at your capital at a rate determined by the gap between CPI and HPI... Hence, my question is, how can the Bank of England through either the FCA or FPC not do something to prevent this potential train wreck? The principal beneficiaries of this disastrous lending, if it continues unchecked, include the banks. The banks only have no risk because they have claim on the BTL and the 'investors' home. It is so cynical that you might as well call it what it is - predatory. The heart of the predatory lending practices in the UK was lending people lots of money using bogus ideas of how there was no risk. In the 1997-2008 owner occupiers and BTLers were lured in with promises of rampant HPI forever. Since 2009 BTLers are being suckered in with nonsense ideas comparing so called "gross yields" to the money they get on their savings accounts. And why are those savings rates so low? The Bank of England's Funding For Lending scheme. And is that scheme still producing a flow of very, very cheap money into BTL? Yes it is. When the regulator and the monetary authority are under the same roof, then the right hand had better have a damn good idea as to the consequences of the left hand's actions or the regulator may find itself complicit in the predatory practices of the regulated. Left as it is, this is lose-lose for the Bank of England. In order for the late BTLers to get out ahead, hence getting the Bank of England off the 'encouraging predatory lending' accusation hook, then BTLers must succeed in materially pushing house prices. If earnings are weak over the same period of time, owner occupiers will have to push themselves to the LTI limits to stay in the game, and that gives you financial instability in two ways. If recesssion hits, the OOers drawn in their spending horns and turn to living off mince. If house prices move down for any other reason, some of your negative carry trade BTLers sell up amplifying the downwards move in house prices. Hence if BTLers win, it comes at the price of financial instability, so the Bank of England loses. If the BTLers lose, then the Bank of England are going to have a lot of explaining to do once the army of greying losers get around to trying to work out how it happened, especially when Mrs Marple and pals find out that in July 2014, when there was plenty of time to do something about it, an FPC external member was talking about safety valves that weren't safe - but doing nothing. Once they put two and two together and realise that what drove them out of cash (low savings rates) and drove them into BTL (cheap mortgage expenses compared to rents) were two sides of the same coin - the Funding For Lending scheme, brought to you by The Bank of England, who chose to keep BTL in the Funding For Lending scheme, even after they took owner occupier mortgages out - well, that is going to be a difficult day at the Treasury Committee - and the Bank of England lose again. When you are in a hole, stop digging. The Bank of England need to turn the taps off BTL. They need to regulate it. And they need to do it now, before it is too late.

All banks in the clear, seemingly very comfortable this time around, BTL not so much... "Today’s stress tests also found that buy-to-let mortgages would suffer the bulk of the losses if there was a financial crisis. Loans to owner-occupiers would be much more modest. In other words, families would keep paying off their mortgages even if the economy went into recession, but some buy-to-let lenders might struggle to meet their obligations." https://www.theguardian.com/business/live/2017/nov/28/bank-of-england-stress-tests-financial-stability-released-live Carney's narrative is that the banks will survive a disorderly Brexit, and worst case house prices will fall 33% PROVIDING nothing else accelerates the downturn

http://www.propertyreporter.co.uk/graham-davidson/millennials-and-buy-to-let-the-rise-of-the-young-investors.html "Unlike a lot of other investment options, property has a unique quality in the fact that it is tangible – you can touch it, see it and feel it. This alone generally means you have more options with how you choose to use it, which is why it is usually more attractive to the younger generation than perhaps stocks and bonds. It can be sold, passed on to loved ones, kept to increase in value or leveraged in order to purchase more properties to build a portfolio. Investing at a younger age simply gives individuals options for the future. It’s not uncommon for younger investors to purchase property in their thirties with no set intentions on how to spend the returns – they can simply be saved as a nest egg for later on down the line." There seem to be a lot of assumptions in that article...Anecdotally, I know of somebody at work- around 30ish who wants to buy to let. He lives with parents but wants to buy somewhere in London (200 miles away) to rent out. Apparently just mate did it and has made loads of money. Madness.

https://www.mortgagestrategy.co.uk/self-cert-risk-lower-buy-let-says-rating-agency/ "The risk of self-certified mortgages is overblown and is safer than lending to portfolio landlords and those with county court judgments, according to rating agency DBRS. DBRS says it has analysed the performance of different kinds of UK mortgages and found that self-cert loans had an average 19 per cent higher risk score than income-verified loans. But it also found that self-cert back books, often seen as risky, were safer than many other sorts of lending" So, has "self cert" just got a bad reputation or are BTL loans becoming toxic? :-)

Looks like the cat is out of the bag: http://www.independent.co.uk/news/uk/home-news/rogue-landlords-12-billion-25-rentals-property-public-money-housing-benefit-lease-flats-houses-a7926421.html?amp

Time for the small violin, he is facing a £700k capital gains tax bill Love this 'I could probably start by selling two or three properties. But many are in the same areas- some are on the same street - and I don't want to negatively impact property prices ' what a gent ? http://www.telegraph.co.uk/personal-banking/mortgages/buy-to-let-stampede-begins-best-sell-37-properties/