Now or never Posted July 8, 2015 Share Posted July 8, 2015 Mr Lambert isn't happy. It’s not landlords the Chancellor has screwed, It’s tenants Responding to the Chancellor’s Budget announcement to restrict the rate of mortgage interest relief the basic rate of 20% from 2017, Richard Lambert, Chief Executive Officer, National landlords Association (NLA), said: “The Chancellor’s unwavering commitment to homeownership blinds him to the impact of the policies he proposes on the hard-working people he claims to champion. “This move does nothing support wider housing provision and will ultimately make Mr Osborne responsible for adding £840 per year – or £70 per month – to rents”. http://www.landlords.org.uk/news-campaigns/news/it’s-not-landlords-the-chancellor-has-screwed-it’s-tenants I think he'll find the landlords are screwed considering the majority of tenants have just had their tax credits reduced and housing benefit frozen! Quote Link to comment Share on other sites More sharing options...
dgul Posted July 8, 2015 Share Posted July 8, 2015 Where we live typical BTL flats (new build 2 bed) four years ago would sell for around 300k and rent for 1200 pcm. So clear around 11k after service charge and EA fees, so 3.5% ROI .... so with tax relief probably break-even on the mortgage payments of 4%. Now flats sell for 400k and rent for 1300 pcm so clear 12k after service charges and EA fees, so 3.0% ROI and now reduced tax relief would with a rate of 4% the returns would be very negative. If I had one I would sell now as the situation can only get worse. Indeed - couple of years to come into effect, so the 'smart' ones will move sooner rather than later - trouble is they all get their advice from the same places, so they'll all be 'the smart ones'... Perhaps we'll see action soon... Quote Link to comment Share on other sites More sharing options...
juvenal Posted July 8, 2015 Share Posted July 8, 2015 The most clever part is simply that the door of property investment doubts has has been opened slightly. Absolutely right. Quote Link to comment Share on other sites More sharing options...
mattyboy1973 Posted July 8, 2015 Share Posted July 8, 2015 Really, when we rented we moved from one property to a slightly better one after a year and the rent was less, the rent remained the same for the next three years and we then bought. Rent for similar properties four years ago was .... asking 1275 so agreed on 1200 and today asking rent is 1300 or sometimes 1400. Sale prices have risen from sub 300k to over 400k in the same four-year period. The new LLs cannot get the same yield as four years ago ... they would if they could but if they try at say 1500 the property remains empty before dropping to 1300 and being available now. It's very clear that rents and house prices (or house prices x mortgage rates) have surprisingly low correlation. I don't know if these BTL rampers actually know that (they should, its their business) or they are just squealing in panic (I would be). I don't see any way at all that these costs can get passed on, especially as this is only going to really badly affect the recent entrants. The more I think about it, the more I think that Gidiot has just killed BTL. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted July 8, 2015 Author Share Posted July 8, 2015 Mr Lambert isn't happy. It’s not landlords the Chancellor has screwed, It’s tenants Responding to the Chancellor’s Budget announcement to restrict the rate of mortgage interest relief the basic rate of 20% from 2017, Richard Lambert, Chief Executive Officer, National landlords Association (NLA), said: “The Chancellor’s unwavering commitment to homeownership blinds him to the impact of the policies he proposes on the hard-working people he claims to champion. “This move does nothing support wider housing provision and will ultimately make Mr Osborne responsible for adding £840 per year – or £70 per month – to rents”. http://www.landlords.org.uk/news-campaigns/news/it%E2%80%99s-not-landlords-the-chancellor-has-screwed-it%E2%80%99s-tenants Stuart Law of Assetz putting on a brave face. http://www.propertytribes.com/summer-emergency-budget-2015-landlord-and-property-perspective-t-127621205-2.html#pid234975 Yes I am sure this will create upward pressure on rents by way of landlords looking at offsetting the increased tax with more income and also by slightly dissuading new investment and as such reducing the genuine (funded) demand for residential property slightly meaning a little less building potentially. Yes it will increase the interest in investing in BTL through companies and yes mortgages as less generous and available for limited company investment but something like the BTL Exchange that Assetz is setting up will invest hands-off through limited companies via crowdfunding and that will probably avoid this new personal tax increase making it sensible to consider investing through crowdfunding a little more than directly and personally - especially given any mortgages used in those companies will be non-recourse. Interesting times but BTL will continue onwards and upwards I am sure. Quote Link to comment Share on other sites More sharing options...
Fairyland Posted July 8, 2015 Share Posted July 8, 2015 Presumably these changes make btl more risky. Rates for btl mortgages should go up to reflect? Excellent idea. I am loving it.1. Reduced rents (HB cut, TC cut) 2. Reduced tax relief 3. Increase in IR ... perfect catalyst Should we step in to rescue them at say 50% drops? Or wait for high street style 70% off, further reductions sale? Quote Link to comment Share on other sites More sharing options...
Guest_northshore_* Posted July 8, 2015 Share Posted July 8, 2015 Really, when we rented we moved from one property to a slightly better one after a year and the rent was less, the rent remained the same for the next three years and we then bought. Rent for similar properties four years ago was .... asking 1275 so agreed on 1200 and today asking rent is 1300 or sometimes 1400. Sale prices have risen from sub 300k to over 400k in the same four-year period. The new LLs cannot get the same yield as four years ago ... they would if they could but if they try at say 1500 the property remains empty before dropping to 1300 and being available now. If they could add it onto rents they wouldn't care about the increased costs and wouldn't publish wailing letters/articles in the press about it. Quote Link to comment Share on other sites More sharing options...
Venger Posted July 8, 2015 Share Posted July 8, 2015 Torygraph whining article from our mate Anna: http://www.telegraph.co.uk/finance/budget/11724804/Buy-to-let-How-todays-Budget-will-affect-landlords.html Thought this comment in particular was amusing, it is very sad and the buy to leacher sounds rather anxious , hope you enjoy: I see Blanco is all Buts... (He's NLA Rep) http://www.landlords.org.uk/about-nla/staff-profiles/richard-blanco 2012 http://www.thisismoney.co.uk/money/mortgageshome/article-2190360/Is-boom-buy-let-really-safe-houses.html 2013 http://www.thetimes.co.uk/tto/life/property/article3796088.ece BTL Game \o/ \o/ \o/ \o/ \o/ Landlords win 4 ever - history shows it only goes UP 2014 http://www.thetimes.co.uk/tto/money/investment/article4111634.ece http://www.richardblanco.com/profile/ + loads MOAR Quote Link to comment Share on other sites More sharing options...
mmt Posted July 8, 2015 Share Posted July 8, 2015 Absolutely right. Also, it was clearly stated that buy to let is a risk to the economy. There must be some painful cognitive dissonance right now because landlords will have voted Tory en mass. Quote Link to comment Share on other sites More sharing options...
FreeTrader Posted July 8, 2015 Share Posted July 8, 2015 As best I can understand the term "given as a basic rate tax reduction" what I get is this, for a BTL paying 45% on rental income via self-assessment. I'm struggling to believe that I have this right, but I can't see another way to interpret it. If you're making good money from other income and operating a profitable BTL, you'll be paying the tax man to carry the investment. That would be my interpretation of the HMRC note. Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted July 8, 2015 Share Posted July 8, 2015 Also, it was clearly stated that buy to let is a risk to the economy. There must be some painful cognitive dissonance right now because landlords will have voted Tory en mass. Who stated that? I haven't watched the budget today so have no idea what was said as I assumed it would just be more house ramping stuff. Are you lot telling me that Osborne is going to tax BTLs in some way? I can see on this thread that he is removing the furnishing benefit in 2 years. What else? Quote Link to comment Share on other sites More sharing options...
mattyboy1973 Posted July 8, 2015 Share Posted July 8, 2015 http://www.landlords...-it’s-tenants Penny is (slowly) starting to drop for a few on that forum, and some of the numbers they are throwing out are staggering. Some of these highly leveraged guys with multiple BTL are going to get wiped out. How long before BTL mortgage criteria are revised? Quote Link to comment Share on other sites More sharing options...
Venger Posted July 8, 2015 Share Posted July 8, 2015 I think this is actually quite clever - The move won't affect (much, if at all) those with middle incomes who have bought one or two BTL as part of their pension. It probably won't affect pensioners who have a small number of BTL as most of their pension. But it does massively affect those who have a large BTL portfolio leveraged up to the hilt - and there aren't that many of these. I don't think the conservatives will lose many votes here, and they'll gain a few from right-of-centre younger voters. Markets move at the margin. If those who need/have to sell at lower prices, overwhelm buyer side.. finance changes, buyer demand cools.... the lower prices bring down all other house prices in an area. Average landlord has a stack, or at least I get that impression from reports and media articles; they've been buying into it to make young people their pension. Quote Link to comment Share on other sites More sharing options...
Si1 Posted July 8, 2015 Share Posted July 8, 2015 Indeed. It actually seems to work quite well. Low leverage landlords are penalised relatively little. But high leverage portfolios would be made non-viable. Small time conservatively financed landlord dabbling in a few income producing properties will be okay then, fair enough. For anyone with bigger more leveraged aspirations, they may need to run it in a company wrapper, and run proper accounts etc, and their finance costs will have to be based on this, so higher if I understand correctly. Current highly leveraged super landlords appear to have preferential interest rates based on their own personal ability to be loan payer of last resort, except with 100 mortgages this is impossible and the banks' risk models don't seem to take this into account. Which would of course put the banks in major bother in the event of a mass default. So the government have to let the air out if this bubble in order to better prepare us for the next recession. Quote Link to comment Share on other sites More sharing options...
Si1 Posted July 8, 2015 Share Posted July 8, 2015 Penny is (slowly) starting to drop for a few on that forum, and some of the numbers they are throwing out are staggering. Some of these highly leveraged guys with multiple BTL are going to get wiped out. How long before BTL mortgage criteria are revised? One way or another I think/hope this is pushing the rental market more towards institutional/corporate large scale landlords and not private BTLrs Quote Link to comment Share on other sites More sharing options...
Si1 Posted July 8, 2015 Share Posted July 8, 2015 Where sleephellofnights when you need his opinion? Quote Link to comment Share on other sites More sharing options...
Bland Unsight Posted July 8, 2015 Share Posted July 8, 2015 That would be my interpretation of the HMRC note. If this reading is right, IME Osborne just shut down the buy-to-let sector. Quote Link to comment Share on other sites More sharing options...
mattyboy1973 Posted July 8, 2015 Share Posted July 8, 2015 OK - this is a question posted on one of the LL forums. Anyone? Only scenerio I am struggling with is if property made a loss i.e.;£20,000 Rent£25,000 Mortgage interest£-5,000 LossWhat would happen then no tax be payable as loss had been made? Quote Link to comment Share on other sites More sharing options...
mattyboy1973 Posted July 8, 2015 Share Posted July 8, 2015 If this reading is right, IME Osborne just shut down the buy-to-let sector. Agreed. Although we all enjoy watching LLs squirm, the most important thing about this announcement is that it has effectively killed BTL for new investors. Yields are halved, or worse, for anyone with over about 70% LTV. Quote Link to comment Share on other sites More sharing options...
Venger Posted July 8, 2015 Share Posted July 8, 2015 That would be my interpretation of the HMRC note. You're smart FT. Quote Link to comment Share on other sites More sharing options...
Si1 Posted July 8, 2015 Share Posted July 8, 2015 OK - this is a question posted on one of the LL forums. Anyone? If they're a higher rate taxpayer then they'll pay (40-20)=20% net tax on the rental income Quote Link to comment Share on other sites More sharing options...
MattW Posted July 8, 2015 Share Posted July 8, 2015 Hallelujah! Bring it on! Quote Link to comment Share on other sites More sharing options...
mattyboy1973 Posted July 8, 2015 Share Posted July 8, 2015 Only scenerio I am struggling with is if property made a loss i.e.; £20,000 Rent £25,000 Mortgage interest £-5,000 Loss What would happen then no tax be payable as loss had been made? I'm going to take a stab at this. Tax relief is in any case capped at rental income (i.e., no -ve gearing). So you have 20k mortgage costs against 20k rental income, therefore you owe £2k in tax as a 40% tax payer. Could this possibly be the case? Imagine what is going to happen when IRs start rising! Quote Link to comment Share on other sites More sharing options...
mattyboy1973 Posted July 8, 2015 Share Posted July 8, 2015 (edited) If they're a higher rate taxpayer then they'll pay (40-20)=20% net tax on the rental income That's what I think! Even with 50k of mortgage interest against 20k rent. Edited July 8, 2015 by mattyboy1973 Quote Link to comment Share on other sites More sharing options...
Si1 Posted July 8, 2015 Share Posted July 8, 2015 Who stated that? I haven't watched the budget today so have no idea what was said as I assumed it would just be more house ramping stuff. Are you lot telling me that Osborne is going to tax BTLs in some way? I can see on this thread that he is removing the furnishing benefit in 2 years. What else? Apparently highly leveraged landlords are now preparing for the wurst. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.