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

[BalancedBear]

We need a redistribution, via allowing the market to find its balance, including all the larger family homes, lived in by 1 or 2 pensioners. FCA is now making noises about that.

Maybe you will sell your BTL(s) too (?).

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.

I rent my own home and quite like the fact that there are quite a few rental properties about, as it has allowed me to keep my rent the same for years. The landlord does now want to risk loosing a good tenant. However, if there end up being far fewer rental properties, then rents are likely to increase. As I have said before we need far more homes just to cater for the demand created by years of immigration. Just the same as we need more roads and railways if the population keeps rising.

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.

[CityLAD88888]

Absolutely brilliant. They are terrified. Serious shadenfreude time folks.

Quality isn't it! "Oh sh*t, we've taken a huge, over-leveraged naked long position in one single illiquid asset class which will now be returning a negative yield ... pls help us get out of our positions without moving the market", too late: this article shows their fear, they've tipped their hand massively here. Still, there maybe a good business idea in helping these mugs get out of their positions in the next few years though not sure I'd want to catch the falling knife!

[Venger]

I rent my own home and quite like the fact that there are quite a few rental properties about, as it has allowed me to keep my rent the same for years. The landlord does now want to risk loosing a good tenant. However, if there end up being far fewer rental properties, then rents are likely to increase. As I have said before we need far more homes just to cater for the demand created by years of immigration. Just the same as we need more roads and railways if the population keeps rising.

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.

There's pages of posts with HPCers engaging you about that claim, pre and after link below - but you seem unwilling to accept possibilities rents won't rise if BTLers squeezed, and stock gets sold to OOs.

http://www.housepricecrash.co.uk/forum/index.php?/topic/205534-tax-relief-on-buy-to-let-mortgage-interest/?p=1102754789

Allowing market to rebalance would see some older owners (speculators even where they own outright) look to sell, instead of malinvestment because of supports (including 'let BTLers off CGT). Older owners who don't count their HPI can stay... but some HPC would sort out the owners and under-utilised houses from many older owners who decide to cash in via falling house prices.

[Venger]

I'm sure it is frequently the case that landlords have only outbid other landlords or not outbid anyone at all. Plenty of houses need a bit of tarting-up which many people are not interested in these days.

How do you know? Most dont even get the chance.

[Neverwhere]

If a rental property is sold into owner occupation then:

one less rental property + one less family renting = no change in the overall ratio of rental properties to renters

This is basic maths that a primary school child could do.

Edited October 8, 2015 by Neverwhere

[Venger]

Added to which this BTLers family home is now on the market. Eye on being hit with tax-increases and CGT payable on properties in his portfolio.

http://www.rightmove.co.uk/property-for-sale/property-54102203.html

I've read one other BTLer say he'll be selling his house (in London). Looks to have bought it for £750,000 in 2011.

Values are set at the margin. I don't necessarily want a BTL house 'suitable for FTB' either. Let's have some HPC at the top. More landlords selling their own family homes, fewer buyers willing/able to pay the prices = transactions at lower prices = HPC. Older owners with large homes and empty bedrooms can let hpc occur around them if they wish, but falling values likely to bring out others looking to sell.

[pipllman]

Why not instead abolish stamp duty for first time buyers?

They already tried that one!

Only for two years in the 2010 budget and only for FTBs up to £250k

Doesn't mean they can't / won't try it again I suppose

[Neverwhere]

There is no shortage of housing stock: the vast majority of housing stock is underutilised, a fact which is very easily confirmed with the Office of National Statistics.* To claim that there aren't enough properties is to either be ignorant of the facts or to be motivated by an agenda which would be undermined by acknowledging them. It's also quite illogical as if it were true we would ipso facto be experiencing a significant increase in out-and-out homelessness and yet there are only 742 rough sleepers in the whole of London. There is a logical fallacy in implying that freeing up existing buy-to-let stock for owner occupation wouldn't provide accomodation in the right places: if the properties are occupied they are clearly in viable areas. Some of those areas might not be that nice at present but an increase in owner occupation would be likely to change that.

* Homeownership and renting in England and Wales - detailed characteristics

[The Knimbies who say No]

Comes to something when even the industry lobby group is trying to find ways for its members to head for the exit.

[Si1]

If a rental property is sold into owner occupation then:

one less rental property + one less family renting = no change in the overall ratio of rental properties to renters

This is basic maths that a primary school child could do.

Yes but you don't have a self regarding forum name like balanced bear, or casual incestor, or sleep well in tights, so wtf can you possibly offer here by way of arguments based on facts and deduction? Edited October 8, 2015 by Si1

[dances with sheeple]

Comes to something when even the industry lobby group is trying to find ways for its members to head for the exit.

Yes it does doesn`t it?

[Guest_growlers_*]

This is great.

https://en.m.wikipedia.org/wiki/K%C3%BCbler-Ross_model

Now onto stage 3 bargaining. Moving on from anger.

[dances with sheeple]

There is no shortage of housing stock: the vast majority of housing stock is underutilised, a fact which is very easily confirmed with the Office of National Statistics.* To claim that there aren't enough properties is to either be ignorant of the facts or to be motivated by an agenda which would be undermined by acknowledging them. It's also quite illogical as if it were true we would ipso facto be experiencing a significant increase in out-and-out homelessness and yet there are only 742 rough sleepers in the whole of London. There is a logical fallacy in implying that freeing up existing buy-to-let stock for owner occupation wouldn't provide accomodation in the right places: if the properties are occupied they are clearly in viable areas. Some of those areas might not be that nice at present but an increase in owner occupation would be likely to change that.

* Homeownership and renting in England and Wales - detailed characteristics

I have long banged the drum about there not being the visible homeless ( and the riots that would follow) if the lack of housing was really the problem. Many HPI types don`t want to engage with this observation though, apart from just repeating the mantra that we are living in "more and more crowded conditions". Would have expected a few thousand rough sleepers in London though, but maybe the numbers mentioned are the ones who never use hostel facilities?

[Venger]

Balanced Bear, do you have other proeprty(s) that you rent out?

BogusBore, you're playing a good hand here, and I acknowledge that. You've significantly redirected the focus of the thread and now you've substituted landlords for buy-to-let investors, hence you've succeeded in taking the thread off-topic entirely.

BalancedBear, on 14 Jul 2015 - 10:02 PM, said:

I agree it does not make anything, that is obvious, but BTL landlords do provide a service. Whether you agree with it or not is another matter. Not everybody wants to own a property, even if they can afford one, so they do provide rental properties which would otherwise not be available to rent.

There are many businesses that only provide a service and do not make anything. The UK is full of them, but that does not mean they are not businesses.

[...]Let's be totally clear about this. You are confounding a method of financing the provision of residential property available for rent (buy-to-let mortgages) with the provision of residential property available for rent. This is idiotic. (For the avoidance of doubt, I am not saying you are an idiot. I am saying this line of argument is idiotic.)

Given that you've failed to push back on my points that your original argument regarding buy-to-let mortgages was witless and amounted to "It's not fair", should I therefore conclude that you concede both points?

If so, surely your contribution to this thread should be at an end and you should find somewhere else to spread your sweetness and light. Few posters here would be against a private rental sector. A system of crap banks, regulation of crap banks and tax incentives that allowed idiot spivs to use renters' earnings to outbid them for homes is something else entirely. That is what the BTL sector was before the advent of these changes, and that is why they've shut it down. You can't see it because you don't want to see it.

Yep Mark Wadsworth (used to post here). Pithy and correct.

""Nobody move, or the puppy gets hurt!"

Landlords on fine form in The Times: Landlords have threatened to raise their tenants’ rents if George Osborne uses the budget to end tax perks for buy-to-let borrowers.

1. We all know perfectly well that they can't, but if they could, why don't they do it now? Answer: because they are already charging as much as they can get.

2. They also know perfectly well that they can't - because if they could simply 'pass on' the higher tax bills then they wouldn't really care about the higher tax bills.
Compare them with the cigarette industry, they don't particularly like tobacco duty, but as supply is elastic and demand is price-insensitive they genuinely can pass on 99% of tobacco duty onto smokers, leaving their net profits pretty much untouched. Ditto petrol.

3. A tax is the opposite of a subsidy. How would landlords respond if Georgie Boy said "OK, keep your interest deduction, instead I will get that £5 billion a year back by halving the Housing Benefit you get". It's more or less exactly the same thing - but we know that if Housing Benefit were halved then rents would go down, however slightly.

4. They never say what non-leveraged landlords would do. Would they keep rents constant while leveraged landlords try to increase them? How's that going to work? Suffice to say, what would happen is that over-leveraged landlords, the highest cost operators, would sell up so we could argue that as a result, the average interest paid by landlords goes down so rents would go down (using their twisted and circular logic back at them).

5. In particular, it will be higher earning tenants who now buy the homes up for sale, meaning that remaining tenants have lower average incomes and so rents will come down to match.

6. If their logic were correct, they might as well call on the Chancellor to make all rental income entirely tax free.

In a letter to the chancellor, seen by The Times, the National Landlords Association warned that an assault on buy-to-let would damage the economy and work against first-time buyers.

Highly leveraged buy-to-let are a threat to the economy - even the Bank of England says so - not an assault thereon, we all know that as well, and how the f*** do they work out that squeezing a few buy-to-let landlords out of the market would not be interests of first-time buyers, i.e. the sitting tenants to whom the exiting landlords sell?

Landlords enjoy tax breaks that cost the exchequer about £5 billion a year, according to HM Revenue & Customs, the equivalent of more than a penny on the basic rate of income tax.

Yup. These greedy f****** are 'investors' not businesses when it comes to grubby little taxes like National Insurance and VAT, so unlike proper businesses they don't pay those. But unlike proper investors who invest in shares, they can deduct their interest expense from taxable income... just like proper businesses. Best of both worlds, that is called. And then there's the 10% wear and tear allowance/giveaway.

Buy-to-let borrowers are allowed to deduct the cost of mortgage interest payments from their tax bill, a perk that makes buying property cheaper for landlords than for first-time buyers.

No, false comparison. Owner-occupiers pay less tax on their homes than landlords; strictly speaking, owner-occupation gets the most tax breaks. But at least an owner-occupier is only getting it on one home.

The fair comparison is with people who invest in shares (who can't claim a deduction for interest paid, see above). A perfectly sensibly policy, because it discourages credit-fuelled speculation in shares, which is what caused the 1930s Depression.

The letter from the NLA states: “...Landlords would be left with no other option than to recoup their increased costs through higher rents.”

Option 1 - accept lower net returns, option 2 - sell up. And that is the more likely one.

As a counter-point to all this, there are some interesting facts and figures in This Is Money:

* Average interest rate paid on BTL mortgages down from 5.77% to 4.69% over the last three years - so if tax relief for interest were withdrawn, the effective interest rate paid would be the same as three years ago (i.e. 5.77% less 20% tax relief = 4.69% without tax relief). Did landlords reduce their rents to 'pass on' the interest saving..?

* Nope. Average rents up from £660 to £734 over the last three years. If their logic were correct, then rents would have fallen to about £600."

They got what they wanted. Now legislation is changing. No one forced them to buy in unregulated market, past 10 years+... to rent for glory returns. Some overleveraged BTLs having CGT to pay will have to sell their own homes... more supply to market and perhaps fewer upsizers, meaning some will be forced into asking price reductions and accepting lower price = HPC. Markets move at the margin.

[janch]

If you can't afford your tax bill then you're bankrupt. Time to call in the receivers. Anything else is completely unacceptable.

These landlords have already had billions in public money through housing benefit, favourable tax treatment, and massive forbearance on their loans due to the bank bailouts and the nationalisation of the dodgy loan books. Never mind sucking the life chances of their young tenants dry.

And even with all that they're telling us they can't make a profit and a CGT exemption is the only way they can 'exit' their position? What kind of idiots are these people? Why have imbeciles like these been allowed to muck up Britain's housing market?

How on earth can people be so stupid as to spend (sorry 'reinvest') their entire capital gain, as if no-one had ever heard of tax?!

I hope Osborne takes these benefit scroungers and tax-dodgers for everything they've got.

+1

I just voted in the Telegraph poll for no tax exemptions (along with 50% of the other voters)

[Neverwhere]

I have long banged the drum about there not being the visible homeless ( and the riots that would follow) if the lack of housing was really the problem. Many HPI types don`t want to engage with this observation though, apart from just repeating the mantra that we are living in "more and more crowded conditions". Would have expected a few thousand rough sleepers in London though, but maybe the numbers mentioned are the ones who never use hostel facilities?

AFAIK the numbers are for people who are literally sleeping on the streets so yes, if someone lives in a hostel then they aren't a rough sleeper (however, they are also housed, albeit potentially in cramped conditions - though not necessarily any worse than private rented, IME). This ties in with my anecdotal experience living in London which is that the number of visibly empty properties appears to be much, much larger than the number of people who lack a roof over their heads.

There are only 2,744 rough sleepers in the whole of England. The vast, vast majority of the population are housed. Many are over-housed as per the stats above. There is no housing shortage. The housing crisis is one of affordability and misallocation.

BTL landlords exiting the market will likely go some way to fixing this. What's more they don't need the encouragement of a tax break to sell to FTBers. Who else is going to buy from them if BTL is increasingly unprofitable? Some unleveraged landlords, some corporates maybe if yields become attractive enough (though I would think they'd prefer the build to rent option for ease of management), but given the number of BTL properties out there they are mainly going to have to sell to tenants looking to move into owner occupation, no incentives needed.

Edited October 8, 2015 by Neverwhere

[Neverwhere]

+1

I just voted in the Telegraph poll for no tax exemptions (along with 50% of the other voters)

Just voted, only 49% now

Clearly 118 are going to be flooding the poll, maybe it's worth more HPCers voting in order to counteract them?

[The Knimbies who say No]

The RLA are trying to float the idea that those sitting on huge capital gains from ages ago need an 'incentive' to sell, as if the gain in itself is not a major motivator, when combined with a finite human lifespan. i'd bet many of these people will gladly sell up if they wanted and CGT would be a minor irritation at best, and one which they have had a long time to prepare for.

The other reason these people need no incentive to sell is simply that there are plenty of highly leveraged types who will be forced to sell in the near future.

[Fairyland]

Just voted, only 49% now

Clearly 118 are going to be flooding the poll, maybe it's worth more HPCers voting in order to counteract them?

Just voted for a NO. 50% now.

[Fairyland]

Well they can sell it for the original price to the sitting tenant and not pay any tax or wait till HPC.

[Neverwhere]

Just voted for a NO. 50% now.

Good stuff!

[wish I could afford one]

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11916423/Buy-to-let-investors-Let-us-off-capital-gains-tax-and-well-sell-to-first-time-buyers.html

Dear Dave,

Please please give us moar subsidies.

hugz

btlers

Buy-to-let investors: 'Let us off capital gains tax and we'll sell to first-time buyers'

No go and f*ck yourselves

Signed

Call me Dave

Another propaganda piece by Richard Dyson. Does anyone know if this guy is up to his eyeballs in BTL? I can't believe any editor worth their salt allows this type of thing to be published.

When I set up my investment strategy I did plenty of research and stress testing. On thing this taught me that it's important to be diversified for many reasons - one of which is just in case the rules are changed. Another is to think about taxes at the other end of your investment cycle as you start to drawdown. It really isn't that difficult.

Edited October 8, 2015 by wish I could afford one

[BorrowToLeech]

There will be quite a few who do decide to sell and I'm quite sure there are unlevereged landlords who would like to sell too, to sell at the levels reached now and pocket the gains. No doubt some will go bankrupt too. However what all these issues discuss is the distribution of existing houses. None of the policies or tax changes is going to actually significantly increase the number of houses in the UK, which is what is really needed.

We have more houses, per person, than ever.

[lastlaugh]

There are some basic flaws and obvious unintended consequences of this whole idea.

Firstly, the thing stopping FTB buying is not CGT for BTLers. It's the price, stupid! Relieving sellers of CGT might increase supply, but it sure as hell won't increase demand. We know how that ends.

Secondly, the BTlers with the highest CGT bills aren't always the same BTLers who are screwed by the change to mortgage interest. It's just going to incentivise otherwise solvent landlords to sell up.

If you are looking for a trigger for a rush to the exits and HPC, well here it is my friends. Bring it on!

[dryrot]

A quote:

"Alan Ward, chairman of the trade body, said many long-term investors "need a way out of the market"."

WTF does that mean?