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Btl Investors: 'let Us Off Capital Gains Tax And We'll Sell To First-Time Buyers'


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HOLA441

The thing is most people want to live in a property with their own front door and don't just want a bedroom.

Investments in property only make sense if there is a steady stream of people willing to occupy the properties. If there were enough so that poor quality ones would be looked over, then the so called investments would fall apart.

Increasing the level of owner occupation to 100% would not solve anything at all. 95% owner occupation with 5% of homes standing empty because occupants could not be found would be a much better indicator. However even then, many people do actually want to rent. A significant driver to wanting to own a home in the UK is simply to try and participate in HPI. If there were too many houses and no increasing prices, many more people would suddenly decide they don't want to own a property.

To enable market forces to have an effect we need far fewer planning constraints. I just fail to understand why there so many people on this forum have an aversion to building far more homes, but instead think we can tax ourselves to a surplus of homes whilst also allowing the the population to spiral ever higher. It is the economics of a madhouse.

Most people have both a front door and more than one bedroom.

People have to live somewhere, they can't opt out of shelter. Investors create demand by outbidding people for homes and thereby forcing them to continue renting. Additionally investors buy properties and leave them empty to accrue HPI, or currently offset voids against their portfolio as a whole and MEW the capital gains without providing for an eventual CGT bill.

Noone is advocating 100% owner occupation but as the core problem is that people who want to own their own homes currently can't then obviously an increase in owner occupation would go a long way to solving that. There are no secure private rental properties in the UK as all private rental contracts are subject to no fault evictions. Most people would quite obviously prefer secure housing for themselves and their families, to suggest that this basic human desire is motivated primarily by greed is disingenuous.

Fewer planning restraints would be good. More building would be good. Fewer tax breaks would be good. Less socialism for landlords would be good. The key thing to understand is that building more without removing the "socialist paradise" that BTL landlords currently enjoy at the expense of the rest of society is that BTL landlords simply buy up all of that new supply and so it doesn't help solve the problem at all.

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HOLA442

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Bear, you're off message. Property investment always makes sense. Always. Always. ALWAYS. ALWAYS. ALWAYS. ALWAYS. ALWAYS. ALWAYS. ALWAYS. ALWAYS. ALWAYS. :D

By the way, you are totally wrong. If you over pay for the asset because you predicated your valuation on the ability of the rent to furnish the financing costs and neglected the fact that the financing costs can change without a corresponding change in the ability of willing renters' earnings to support those costs, you may be, in the fullness of time, royally screwed.

Obviously, if the Chancellor of the Exchequer f**ks you whilst you wait, matters are worse.

Still, I'm sure buy-to-let investors are hugely comforted by the idea that "there is a steady stream of people willing to occupy the properties"; nothing, I tell you, nothing impresses a prospective buyer like a squatter.

:lol::lol::lol:

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HOLA443

:lol::lol::lol:

Squatters will be the new twigs in vases, believe it. Now if you had a squatter and they'd put some twigs in a vase, you can basically name your price.

article-1344634-0CAB3D71000005DC-796_634

Fag ash in a beer can is at least thematically linked to twigs in a vase. It's a start. We need someone with more expertise to fill in the gaps. BalancedBear, what do you think?

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HOLA444

I have a friend on FB who has worked as an EA for a huge range of companies over the years. He's been on HUTH as an EA a few times too.

He's sold all his rentals already and one of his ther friends commented they are planning on getting out of BTL soon because of s e change to eviction processes.

I assume the slow tide will becme a flood when they realise wha their tax bill will be soon.

Property's too illiqiud.

He'd have to have put them up months, if not a year, ago.

They'll have been sold as, like most BTLers, they had a negative cash flow.

The claims of 'eviction changes', or 'tax changes' are just trying to rescue something from a stupid investment.

A FB contacnt of mine is very much 'in poperty' Worked for EA, then a builder, then the newspaper property pages. Convinced herself - well BF - to buy 2 flats in a horrible development. Both went up as holiday homes. Failed. Both went up as private lets. Failed. Manged to sell one at what appears to be a 20k loss. The other is still up for sale - 'If it sells' was her passing comment.

Apparently 'its time to invest my money elsewhere'.This is after a 20k hit, an ongoing 500/month mortgage on an empty flat. All in all they are down ~50k - providing the remaining flats sells at a similar loss.

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HOLA445

FTBs: "Knock 40% off your prices and we MAY be able / willing to buy off BTLers."

I plan to buy my first house off a BTLer post, or during the bleakest depths, of the hpc. Logic being that I would feel bad gouging OOers so will just limit my viewings to ex BTL stock.

Place will obviously need a refurb from slave pit to suitable family home but the savings will be so large there will be cash to spare.

Suspect this will happen across the country. Uptick in work for trades men will be huge!

Can't wait!

Edited by growlers
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HOLA446

[...]I don't see why pensioners who have large houses should be forced to downsize either. One day they will vacate the house anyway, when it will become available. If there is a shortage of family homes, then more should be built. Many decent family homes have been lost to developers converting them into flats or have been demolished to make way for new flats or several small houses. These are all symptoms of the planning system limiting land suitable for development.

The idea that older people don't see their homes as investments is a ridiculous self-serving platitude.

If that were true, the age demographics of landlords wouldn't be what they are, the daily mail wouldn't print the house price of every serial killer and murder victim, and house prices probably wouldn't be an issue.

Very few people can afford to ignore the value of their home, whatever their age, it's a key factor in everyone's decisions about housing.

I'll repeat my earlier point, in the hope that reading comprehension wasn't just a passing fad from my youth.

We live in a market economy, of sorts. The selling point of a market economy is that selfish decisions should lead to an optimal allocation of resources.

The distribution of housing is not optimal. Why?

The elderly ought to downsize. Not that they should be forced to, like in a command economy, but that it ought to be the outcome of their selfish decisions, and it isn't. That is a fact that needs explaining.

I claim that this can be explained by looking at the lack of incentives to move. Retired people don't downsize because:

1. They don't pay the costs of their decision, other people do.

2. Homes are investments, and the financial incentives beat the real economic incentives.

In other words, we don't have a free market for housing. An alternative position is that we do have a free market, but free markets don't work for some reason.

'Some older people are poor' isn't an alternative argument.

Nor is individual psychology, the relative mentality of demographic groups (as if such a thing even exists) or how anyone feels about anything.

Great post.

God forbid ,how dare people live where they want to.

They don't. That's the whole point of the thread.

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HOLA447

Too many houses have been built and bought by BTLers. Demand feeds back on itself that way to this 'shortage', and has in opinion of quite a few hpcers, a lot of the newbuild stock has been built (thrown up) in mind for the BTLer buyer rather than family OO buyer.

If CGT is due for those who want/must sell... then pay it. Not all change the rules, years/decades after life of rentierism and helping to fuelling the HPI/shortage.

Also many of us don't want BTLers FTB properties, rather than the family homes the BTLers might have to sell, at lower prices, when they are required to pay their CGT bill.

Another great run of posts. Maybe some of the over-leveraged landlords can downsize from £700K+ homes, to one of the FTB style properties.

Ho,ho,ho...just read the Telegraph puff piece for rentiers. Couldn't see the comments.

Amazing how all these LL's with 10s or 100s of BTL's , swear to a man (and women) that they haven't deprived any FTB by their actions. I guess it helps them sleep at night.

This one is typical.

Cathy Colston, a retired Boots executive who became a full-time landlord in 2010, owns around 20 properties in the western centres of Bath, Cardiff and Bristol.

“There are problems in the housing market and yes it is difficult for homeowners to buy,” she said. “But landlords are not the problem. Almost all the properties I want to buy are not the same as those wanted by owner-occupiers. People buying their own home are largely guided by their hearts – it’s about where they want to live.

Cathy, I hope you crash big style. Like your former company, Boots, who have moved to a tax exile status to avoid paying their fair share of tax in the UK.

I don't get it ..the properties she ''buys'' are not wanted by FTB's , who are the people renting from her then ?

They all say the same thing so literally they think that 1000's of properties owned between them every single one was unwanted by FTB or OO ?

********

I think that for some of them it's a psychological issue - they have a mental image of themselves as "nice" people and can't reconcile that with the idea that they've been forcing young familes and the like into insecure accommodation just so that they could make (or fail to make as the case may be) a profit for themselves, so they emotionally reject the notion out of hand.

To put a pop-culture reference to it; cognitive dissonance.

I'm sure they genuinely believe they've done no harm and are providing a 'service'. The realisation that is slowly dawning they might, with a real possibility, be morally bankrupt is a bitter pill to swallow.

I think that they are making a good point in some cases but it isn't an argument that works for them. When I was viewing flats to buy I was often up against BTL landlords as competition rather than FTB'ers.

Other FTB'ers didn't always want a small apartment, they wanted a house or a larger apartment with a balcony or a garden.

The blocks of flats were being sold to BTL landlords because the FTB was not willing to pay the price asked or was not interested in buying a flat as a family home. That left a smaller group interested and competing against the BTL'er. It's consisted of disabled adults (who were priced out of the bungalow market due to competition with the elderly downsizer) or single people or couples who wanted to live in an apartment until they started a family.

In time, as prices escalated and less homes were built, in the areas I was looking at, there were only apartments being built. The occasional house was marketed outside the price range for a FTB'er.

When I was viewing newbuild flats they were blatantly being marketed to the BTLer with advertising targeted to them. One company was guaranteeing their income for the first year. The marketing was not targeted at the FTB.

The demand from the BTL Landlord was determining what sort of properties were being built. Therefore restricting supply for the FTB'er.

So,

It is possible that the UK has an unwanted surplus of flats, masked by the fact that,

1 BTL demand caused flats rather than houses to be built in the first place.

2 Although not really suitable, priced outs rented them because suitable houses, were firstly over priced, but also, not built in the first place because of BTL demand?

It seems likely and it's certainly born out in my anecdotal experience, being based in London. I would expect such flats to least hold their value in a correction, especially if new entrant buy-to-let is effectively removed from the market via reduced tax perks, Basel III, BoE regulation, etc. If something's not really suitable and a massive compromise you wouldn't pay that much for it, would you?

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HOLA448

FTBs: "Knock 40% off your prices and we MAY be able / willing to buy off BTLers."

I plan to buy my first house off a BTLer post, or during the bleakest depths, of the hpc. Logic being that I would feel bad gouging OOers so will just limit my viewings to ex BTL stock.

Place will obviously need a refurb from slave pit to suitable family home but the savings will be so large there will be cash to spare.

Suspect this will happen across the country. Uptick in work for trades men will be huge!

Can't wait!

Hmm, only with a significant discount.

The BTL palces near me, of the 2002-2014 vintage, are totally knackered. Unpaied, repointing needs doing. Sh1t tips.

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HOLA449

Cmon; it's hilarious the last couple of months, since the budget, has seen so many BTLers (including many on 118) claim they haven't bought homes that FTBs would want.

Now this positioning that they will sell to FTBs if they (the BTLer landlords) are given CGT forbearance.

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HOLA4410

The most surprising one for me is Janet Strret Porter. As Lahndahn and tuned into the London media bubble as they come. 'Lived' in Yorkshire for over 30 years apparently. More a second home she's spent more and more time in I guess.

Pateley Bridge I think. 2nd home. Or 3rd.

I've avoided going there, just in case.

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HOLA4411

Time for a bump of this; You need to pay the CGT.

BTLer loads of properties lived the high life: I went over there one time - one time only! And I'm now the butt of every joke on every thread.

Lackey: Why don't you just stop lurking?

BTLer loads of properties lived the high life: How else am I supposed to learn about Capital Gains Tax?

If you are suffering with that, probably best to look away now. Satire alert. Just googling around, and it seems some cheeky sod made this:

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HOLA4412

You have done really well. I'm just wondering if most of the increase since 2007 has been via making money from your investments or from putting your salary away?

A bit of both. I keep detailed records now and publically post an update every quarter. This is my H1 2015 update which contains the following chart:

150718-2.png

The green is savings from salary and the blue is from investment return. I'm just in the process of writing my Q3 2015 update which I intend to publish tomorrow. It's showing for 2015 salary making an even bigger contribution with investment return now going slightly negative.

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HOLA4413

...

Increasing the level of owner occupation to 100% would not solve anything at all. 95% owner occupation with 5% of homes standing empty because occupants could not be found would be a much better indicator...

...

According to http://www.emptyhomes.com there are currently over 200,000 'long-term vacant dwellings' (more than 6 months) and over 610,000 total empty homes in England.

Why would you suggest this not-insignificant number of properties are empty?

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HOLA4414

According to http://www.emptyhomes.com there are currently over 200,000 'long-term vacant dwellings' (more than 6 months) and over 610,000 total empty homes in England.

Why would you suggest this not-insignificant number of properties are empty?

It is a significant number, but not as extreme as it is made out to be. 200k are long term and 410k are vacant for 6 months or less. It shows that around 400k homes are probably between tenancies, being improved, renovated or extended. This leaves 200k homes which can be focused on. Many of the 200k are probably severely run down and not habitable. A much smaller proportion will be "trophy homes" for mainly rich foreigners. In a country with nearly 70 million people, it is not a massive figure, and even if all 200k could be brought into use, it would not solve the problems in the market.

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HOLA4415

For England and Wales the ONS claims the total is more than 1 million (they say Britain in the headline which includes England, Wales and Scotland then say just England and Wales later on in the article).


http://

www.independent.co.uk/news/uk/politics/more-than-a-million-homes-currently-lie-empty-in-britain-9456263.html

Edited by billybong
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HOLA4416

It is a significant number, but not as extreme as it is made out to be. 200k are long term and 410k are vacant for 6 months or less. It shows that around 400k homes are probably between tenancies, being improved, renovated or extended. This leaves 200k homes which can be focused on. Many of the 200k are probably severely run down and not habitable. A much smaller proportion will be "trophy homes" for mainly rich foreigners. In a country with nearly 70 million people, it is not a massive figure, and even if all 200k could be brought into use, it would not solve the problems in the market.

In 1980, each house had to be shared by 2.7 people.

In 1990, it was around 2.5 people per house.

It is currently around 2.4.

From 2000-2013, 2.3M houses were built in the UK.

We have, therefore, built enough houses for around 5.5M people.

Over the same period, population increased by 5.2M people.

There is no shortage of housing. Housing has never been more plentiful.

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HOLA4417

In 1980, each house had to be shared by 2.7 people.

In 1990, it was around 2.5 people per house.

It is currently around 2.4.

From 2000-2013, 2.3M houses were built in the UK.

We have, therefore, built enough houses for around 5.5M people.

Over the same period, population increased by 5.2M people.

There is no shortage of housing. Housing has never been more plentiful.

Just to say that occupancy numbers might have got smaller (2.7 to 2.5 to 2.4) but that reflects the fact that new homes in the UK are the smallest in europe if not the world plus lots of larger existing homes have been converted into similarly small flats etc (new homes maybe the smallest in the world perhaps with the exception of the likes of Japan?).

So although on the face of it there seems to be plenty of ((tiny) homes in the UK (plenty in mathematical/statistical terms) there also seems to be a shortage of decent sized homes in the UK for each 2.4 to live in (compared to the rest of europe/the world).

If they keep reducing the size there never needs to be a statistical shortage - but it's not very good for general living standards especially at the current crazy prices.

Edited by billybong
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HOLA4418

In 1980, each house had to be shared by 2.7 people.

In 1990, it was around 2.5 people per house.

It is currently around 2.4.

From 2000-2013, 2.3M houses were built in the UK.

We have, therefore, built enough houses for around 5.5M people.

Over the same period, population increased by 5.2M people.

There is no shortage of housing. Housing has never been more plentiful.

i was have the same argument with a family member, please can you link me the report?

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HOLA4419

Just to say that occupancy numbers might have got smaller (2.7 to 2.5 to 2.4) but that reflects the fact that new homes in the UK are the smallest in europe if not the world plus lots of larger existing homes have been converted into similarly small flats etc (new homes maybe the smallest in the world perhaps with the exception of the likes of Japan?).

So although on the face of it there seems to be plenty of ((tiny) homes in the UK (plenty in mathematical/statistical terms) there also seems to be a shortage of decent sized homes in the UK for each 2.4 to live in (compared to the rest of europe/the world).

If they keep reducing the size there never needs to be a statistical shortage - but it's not very good for general living standards especially at the current crazy prices.

Indeed. I even find myself depressed when watching US tv series where normal and even "poor" people have kitchens big enough to put tables with seats around them, bedrooms big enough to have an office desk with chair and still plenty of space left etc etc. Not to mention that almost every house in the US outside a major city center is detached even in the poorer areas on a plot of land that would be considered "generous" in the UK (and yes I have actually been to some of these places and seen it for myself).

Edited by goldbug9999
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HOLA4420

So although on the face of it there seems to be plenty of ((tiny) homes in the UK (plenty in mathematical/statistical terms) there also seems to be a shortage of decent sized homes in the UK for each 2.4 to live in (compared to the rest of europe/the world).

there's tonnes of them - just lived in by 1.5 pensioners

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HOLA4421

I'm glad to see that we've moved on from pretending that there is a problem with the overall quantity of housing supply. The lesser problem of room sizes in new builds being smaller than people would like is entirely tied up with the number of investors in the market.

Firstly, investors - especially highly leveraged, interest only investors whose finances also potentially pose a signficant risk to the financial instability of the economy as a whole - push up land prices and thereby incentivise builders to cram in as many properties as possible because the land is their largest cost. Even where builders have been landbanking for a long time their land is still worth its current valuation to them. Selling the land undeveloped would often reap more profit during a bubble than building on it at low density and so the bubble itself encourages higher densities and smaller room sizes.

Secondly, investors are willing to accept smaller properties. They aren't going to live in them and so - with some exceptions - have a minimal interest in what the room sizes are beyond any requirements for licensing in their area (should such exist). Targeting investors means that builders can cram in more properties on the same size plots and thus take bigger profits, so this is exactly what they have been doing.

Neither of these problems can be solved without reducing the number of investors in the market. Only once investors are largely absent will builders have to solely target owner occupiers and so, over time, be forced to increase standards to meet the needs of the actual people who are going to be living in the properties. Hence reducing tax breaks for buy-to-let will help to solve the problem of quality of new supply.

However, these are all side issues.

Clearly the main problem, and the one that most desperately needs solving, is that a large proportion of private tenants are only renting because owning their own home is unaffordable (74% according to a recent survey by Paragon - h/t pipllman) and so would obviously prefer to be owner occupiers. That they are denied this option means they have no security of tenure, as the threat of no fault evictions hangs over the heads of all private renters, and they are unable to effectively save for the future as the most common way in which people do this is by buying their own home outright so that they have minimal housing costs in retirement and the opportunity to downsize and free up equity. Unlike with a repayment mortgage there is never a point at which the monthly rental payments are over and tenants are able to easily retire onto lower incomes without government help. An ever increasing number of renters means an ever increasing Housing Benefit bill as they retire and this is something that already stretched government finances can ill afford.

Buy-to-let is, at this point, the primary cause of this problem because it is the main obstacle to people owning their own homes as it both takes up supply, removing homes from owner occupation, and sets an excessively high floor under house prices through the use of interest only finance. What's more buy-to-letters appear to be predominantly reliant on government largesse in the form of tax breaks and benefits in order to survive (not to mention the government's underwriting of the risks taken by lenders in financing buy-to-let loans). Without this "socialist paradise" buy-to-let would be subject to capitalist market forces and would largely remove itself from the market.

There is no need to give buy-to-letters any more tax breaks in order to encourage them to exit. Less tax breaks would in fact be favourite. Buy-to-letters don't need a Capital Gains Tax exemption to encourage them to sell to first time buyers. If their investments are no longer profitable because the government's preferential treatment of them has become marginally less preferential (remembering that they still get 20% relief on finance costs where other investors get none, and they still benefit from Housing Benefit and the artificial floor it sets under rents) then they will have to sell to owner occupiers regardless.

All these calls for further tax breaks are just childish whining from people who have made investments to the detriment of wider society and who now want that wider society to carry even more of their costs than it already has done.

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HOLA4422

Local housing allowance is based on number of rooms, not square footage, so where that sets the value of local houses it makes economic sense for builders to cram as many rooms in as possible

Edited by Si1
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HOLA4423

Local housing allowance is based on number of rooms, not square footage, so where that sets the value of local houses it makes economic sense for builders to cram as many rooms in add possible

Yes, exactly. And that sets the value of local houses because BTLers are setting the floor price with interest only finance based on their ability to receive government benefits via their tenants.

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HOLA4424

Yes, exactly. And that sets the value of local houses because BTLers are setting the floor price with interest only finance based on their ability to receive government benefits via their tenants.

Precisely

Also may make some houses with larger rooms rather good value in future

Edited by Si1
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HOLA4425

Precisely

Also may make some houses with larger rooms target good value in future

Possibly, although I tend to think that the more tightly a property has been targeted at BTLers the better value it will be in the future, assuming all of the prospective changes around BTL come to pass and this segment of investor demand is effectively removed from the market.

Around my way in suburban North London there are a massive amount of new build flats and more on the way. A large proportion of the ones that have already been built appear to be empty and many of the others are rented out. For owner occupation they are far from ideal, having all of the drawbacks of living further in town, with none of the benefits. How many people want to move to the suburbs to live in a high density block of flats without a garden?

In a HPC I would expect these properties to be amongst the cheapest as they involve the most compromise for an owner occupier (still better than renting the same flat perpetually and being entirely reliant on the government for housing in later life though) and I wouldn't be surprised to see them fall below build and land costs as a result. Without BTLers to invest in them such poor quality developments may well become entirely unprofitable, hence why reducing government subsidisation of BTL is likely to increase new build quality over time as builders will have to build properties that owner occupiers are prepared to pay profitable sums for.

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