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Savers Have Shunned Buy-To-Let Despite Pension Freedoms

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Or, most people withdrawing their pensions did not have enough to put 30%-50% down on a BTL

The prices have a long way to fall in many locations before you would consider buying one for a secure income after agents fees, repairs etc etc etc.

Once speculation for capital gain is removed there are not many cases (1 bed flats/hmos) where an investor would pay more than an emotionally attached owner occupier.

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The prices have a long way to fall in many locations before you would consider buying one for a secure income after agents fees, repairs etc etc etc.

Once speculation for capital gain is removed there are not many cases (1 bed flats/hmos) where an investor would pay more than an emotionally attached owner occupier.

Once speculation for capital gain and differences in financing are removed, as currently interest only buy-to-let lending allows investors to offer much higher purchase prices for the same monthly payment as an owner occupier on a repayment mortgage. Agreed that average yields are rubbish, but spyguy is also not wrong to suggest that many lack large enough pensions pots to even consider buy-to-let as an option. From the March 2015 Lords Select Committee on Economic Affairs Annual evidence session with the Governor of the Bank of England (emphasis added):

Dr Mark Carney: As you know, it is a different market. It is an investor market. The mortgages for buy-to-let are under different characteristics. We are watching this as you would expect; we are watching it as prudential regulators through the PRA in terms of where underwriting standards have moved in buy-to-let. We have not yet seen a sharp deterioration in those standards, but we are mindful of the possibility. We are mindful as well of some possibility, although it might sometimes be overstated, of the implications of the changes to annuities that could feed through. I say that because it is sometimes overstated that there is a relatively limited proportion of annuities or pension pots that unfortunately are large enough to make a down payment on a buy-to-let property. That is the unfortunate reality of some people’s pension arrangements. We are watching it. No one should interpret from that that there is any sort of imminent recommendation for action. As you are aware from your question, we distinguish between conventional mortgages and buy-to-let.

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There was an article in city-am yesterday that gave some figures: 2.5bn pension withdrawal and 2.3bn fixed income products purchased over the same time period.

Edited by goldbug9999

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It's not an investors market...it's a market for one of life's necessities.

People really will get angry soon IMHO.

What he means by that, I think, is that anyone who puts their money into buy-to-let doesn't warrant any consumer protection. They are investors and they are free to lose their shirts. No more bailouts.

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What he means by that, I think, is that anyone who puts their money into buy-to-let doesn't warrant any consumer protection. They are investors and they are free to lose their shirts. No more bailouts.

Believe that if you will.

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If you have the space and live in a popular area, using pension funds to extend the house for rentable space can be a better investment.

e.g. Build an annexe-style extension, rent out at £7200 a year tax-free. Sharing utility bills may also effectively increase income (e.g. council tax doesn't go up in proportion to number of residents)

In my area, you would need to provide ~500sqft to generate that level of rent. This would cost around £60K to build. The resulting 12% tax-free yields beats an annuity and you keep the capital.

(need to be careful about rent-a-room rules and council tax so don't have a separate kitchen, some sharing is required).

BTW: This is not the same as a BTL'r buying up housing stock.

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If you have the space and live in a popular area, using pension funds to extend the house for rentable space can be a better investment.

e.g. Build an annexe-style extension, rent out at £7200 a year tax-free. Sharing utility bills may also effectively increase income (e.g. council tax doesn't go up in proportion to number of residents)

In my area, you would need to provide ~500sqft to generate that level of rent. This would cost around £60K to build. The resulting 12% tax-free yields beats an annuity and you keep the capital.

(need to be careful about rent-a-room rules and council tax so don't have a separate kitchen, some sharing is required).

BTW: This is not the same as a BTL'r buying up housing stock.

Seek to rinse some tenants for £7,200 for an annexe-style extension slapped on against the main home? Even the £4,000 tax-free allowance or whatever it was pre Budget... for such an arrangement... doesn't sit right with me.

I'm thinking of some rentals I've looked at on RM and favourited just to remind myself how much I hate the market. Ok these technically stand-alone 'apartment- but still, how depressing. (Okay I accept rental prices v high in SE/London)

http://www.rightmove.co.uk/property-to-rent/property-33969119.html

http://www.rightmove.co.uk/property-to-rent/property-29925847.html

£7,200 should get you more housing than renting an annexe extension (how depressing) and having to share bits to qualify (kitchen etc). HPC.

And plan to spend £60K for this annexe-extension? That's a lot of money. Or it could be if we enter a real HPC vs some bod who has spent £60K on an extension annexe, and suddenly finds their main home plummeting in value.

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Seek to rinse some tenants for £7,200 for an annexe-style extension slapped on against the main home? Even the £4,000 tax-free allowance or whatever it was pre Budget... for such an arrangement... doesn't sit right with me.

The "rent a room" tax break (assuming thats what you are referring to) only applies if someone meets the legal definition of lodger i.e. have use of the main houses living room or kitchen, a tenant of a self contained annex would not AFAIK qualify.

Edited by goldbug9999

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The "rent a room" tax break (assuming thats what you are referring to) only applies if someone meets the legal definition of lodger i.e. have use of the main houses living room or kitchen, a tenant of a self contained annex would not AFAIK qualify.

That's what I would expect it to be, although I've not read up on it. £60K extension builds, whilst keeping within rules, to try get lodger in paying £7,200 'tax free' sounds high risk to me, but of course depends on area and whether HPC comes in. And that article suggests more baby boomers looking to downsize, perhaps freeing up larger homes at lower prices (fewer upsizers) where £60K extensions not required in future.

Only lodger I've known of around here was a teacher who had a room in the lady's large house, and use of the facilities, as you outline. Connie's lodger wants a landlord shakeout, it seems to me.

Reply to the comment left by “Harold Levine” at “29/07/2015 – 11:13“:

He could have 3 or 4 properties – that’s still modest. He provides homes for 3 or 4 individuals, put another way. He provides a service to enable those not able to buy yet to work, live and save.

It’s when normal profit, under this current system, is suddenly transformed and distorted, that’s the hideous bit. How could interest, a definite loss, suddenly be added to income? I think unless the calculations can resonate with those in a business, trade, that involves borrowing on a large scale (for diggers, fork lift trucks or other assets) I don’t think people will relate to the figures. I hope I’m wrong. My lodger thinks the landlords had it coming; they’ve been getting away with it for too long. Media reported it as a gravy train.

What he means by that, I think, is that anyone who puts their money into buy-to-let doesn't warrant any consumer protection. They are investors and they are free to lose their shirts. No more bailouts.

I'm reading it the same way Neverwhere.

I seem to remember reading an article suggesting £1Bn had been taken out after pension freedoms... but I can't.. ahh here is an alternative article, but it doesn't make the claim the money has gone into BTL.

Embarrassing question; Is this true? (Comment from May 2015, left on a May 2015 article).. pre Budget. It can't be, can it. I can believe it's true when I look at house prices around here, but logic says it can't be anywhere near true.

With the total value of UK property now equal to the total value of property in France Germany and Italy we are undoubtedly out of kilter.

http://citywire.co.uk/money/pension-freedoms-to-spark-buy-to-let-boom/a801062

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...Embarrassing question; Is this true? (Comment from May 2015, left on a May 2015 article).. pre Budget. It can't be, can it. I can believe it's true when I look at house prices around here, but logic says it can't be anywhere near true.

With the total value of UK property now equal to the total value of property in France Germany and Italy we are undoubtedly out of kilter.

http://citywire.co.u...et-boom/a801062

I'm not sure whether or not it's true. I can see how it might be the case if we assumed that every single property in the country could transact at current market prices, but of course they can't, as this low sales volume market attests.

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The "rent a room" tax break (assuming thats what you are referring to) only applies if someone meets the legal definition of lodger i.e. have use of the main houses living room or kitchen, a tenant of a self contained annex would not AFAIK qualify.

A friend of mine has done it. He largely built it himself. Technically the tenant can use the main house and there is a (lockable) door joining the main house, but it is a self-contained studio and nicer than the rest of the house.

I think about 500 Sq ft. Rents for £750. Bills included, obviously.

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