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

[BalancedBear]

So, no then

Does it make them wrong though? I don't see any evidence to support your opinion either.

[Venger]

While I agree that a CGT exemption will save the skin of some landlords and discourage some from selling up entirely, sooner rather than later. I am also certain that a CGT exemtion will encourage some other landlords to sell up. After all, you cannot take advantage of the CGT exemption unless a sale is made.

It's counterintuitive, but I don't think we should write off a CGT exemption as a totally bad thing. We should debate exactly what the best limited CGT exemption would be. The abolition of MIRAS triggered HPI. I think a time-limited CGT exemption will trigger HPC.

So you're making the case that all these 'average' BTLers don't know a spit about the budget changes, but want to offer them CGT relief in order to encourage them to sell up? Doesn't make any sense to me. At all.

Also I'm reading many a post on the 118/PT forums of BTLers coming to terms that their quest for all BTLers to join together is hopeless cause (petition), and more of them posting about selling up. I do agree that most not heard of 118/PT. Even Mark118 when he began 118 said he went through the mailing list of his brokerage to send out emails about his site/blog, and only converted something like 10% to readers/members (think it was on a podcast) - and he suggested most not internet 'savvy'. However markets move at the margin, so even the beginning BTL sellers will have some effect when they sell for lower prices, and the 'average' BTL will feel the shiver as time goes on - learn about it - as it feeds through to chatter on the golf courses, high end boutiques etc. Also when they begin getting tax demands.

[pipllman]

>lastlaugh

"The portfolio landlords have a point, nobody else wants to buy their crap, and nobody else wants to house their problem tenants."

This is true in some cases. In the last few months I have looked at a tenanted flat in Leeds and a tenanted HMO in Doncaster. Both at prices that would generate a good gross yield.

However, having seen them and considered the situation carefully, I concluded that even if either of the current owners had offered to give me the property for free, I would have said no thank you

I am sure they will find a buyer somewhere, sometime. But there is no good outcome for anyone concerned with those properties: not the current owners, not the future owners and not the tenants.

The only party associated with either that is likely to do OK out of it is the lender (both quite low LTV, mortgages in good standing and current owners good for the money anyway).

[Neverwhere]

Does it make them wrong though? I don't see any evidence to support your opinion either.

Evidence already posted here as you well know:

It would take a very simplistic mind indeed to fall for that given most housing in the UK is currently under occupied. Compare and contrast the number of bedrooms per household with the number of people per household:

Homeownership and renting in England and Wales - detailed characteristics

Again, very basic maths.

Clearly if most people have spare rooms than there cannot have been as much subdivition and overcrowding as you speculate about without providing any evidence for. Equally the claim that the government don't record EU migrants in significant numbers is a real stretch of the imagination given EU migrants are entitled to be here and so would have no reason to hide from the government. In fact if they are lower down the income scale they are incentivised to make themselves known to the government in order to claim working tax credits.

If you are going to make extraordinary claims that contradict the evidence already posted then you really do need to provide some evidence of your own if you wish to be taken seriously. As it currently stands your inability to provide any does strongly suggest that you are wrong.

[Neverwhere]

I agree we should be patient. But waiting for portfolio BTLers to spectacularly and publicly implode is going to take many years. These people are irrational, they believe positive thinking can trump reality, and will cling on to the bitter end. Their bankruptcy is inevitable, their rush for the exits isn't.

There is another class of BTLer, who has 3 or less properties, have other jobs, and with yields so low are not making much money from BTL. Every other person I meet seems to be one of these. They think the changes to mortgage interest wont apply to them. That's if they even know about it. But. they will be baffled in the future when their rental income restricts their tax credits or their pension contributions. These people have a vague plan to avoid CGT any way, but the process takes time and is complicated.

Personally, I think this legion of small time BTLers is the cause of the decade of HPI, and they ultimately will be the key to HPC. These people don't hang out at auctions buying up crap in Ashford. They've never heard of Property Tribes. They go through life as normal, but cling onto their old property everytime they move house. All but one of my 6 rentals in the last 20 years has been from one of these landlords. Buying a property to live in then moving on, but never, ever selling.

It's a different mindset to full-timers actively building a portfolio. We should really call them Let-to-Buyers! It is this legion of small scale property hoarders which are restricting supply, cashing in their paper gains through a BTL mortgage on their old place and bidding up the price of their next home. They are the engine at the heart of this ponzi.

The portfolio landlords have a point, nobody else wants to buy their crap, and nobody else wants to house their problem tenants. These portfolio landlords are screwed anyway. Their only hope is to sell now, sell everything, but they probably wont until it's too late. It'

While I agree that a CGT exemption will save the skin of some landlords and discourage some from selling up entirely, sooner rather than later. I am also certain that a CGT exemtion will encourage some other landlords to sell up. After all, you cannot take advantage of the CGT exemption unless a sale is made.

It's counterintuitive, but I don't think we should write off a CGT exemption as a totally bad thing. We should debate exactly what the best limited CGT exemption would be. The abolition of MIRAS triggered HPI. I think a time-limited CGT exemption will trigger HPC.

So you're making the case that all these 'average' BTLers don't know a spit about the budget changes, but want to offer them CGT relief in order to encourage them to sell up? Doesn't make any sense to me. At all.

Also I'm reading many a post on the 118/PT forums of BTLers coming to terms that their quest for all BTLers to join together is hopeless cause (petition), and more of them posting about selling up. I do agree that most not heard of 118/PT. Even Mark118 when he began 118 said he went through the mailing list of his brokerage to send out emails about his site/blog, and only converted something like 10% to readers/members (think it was on a podcast) - and he suggested most not internet 'savvy'. However markets move at the margin, so even the beginning BTL sellers will have some effect when they sell for lower prices, and the 'average' BTL will feel the shiver as time goes on - learn about it - as it feeds through to chatter on the golf courses, high end boutiques etc. Also when they begin getting tax demands.

I'm afraid I agree with Venger. I think the specific type of BTL landlord you're talking about - and I absolutely take your point about how much they are fuelling the current bubble - is unlikely to hear about a CGT exemption or to believe that they need one and take advantage of it if they do. They plan to avoid CGT already. The fact that their plans may take a long time to sort out probably doesn't bother them as they believe their BTL property will still be accruing further capital gains in the meantime and they probably plan to hold them until their retirement at least (it's their pension ).

I think there would have to be substantial price falls already occurring - substantial enough that they couldn't simply dismiss them as a blip in the market - in order for them to feel the necessary pressure to sell at speed that would encourage them to take advantage of a CGT exemption, thereby negating its purpose from our perspective.

[BalancedBear]

Evidence already posted here as you well know:

Clearly if most people have spare rooms than there cannot have been as much subdivition and overcrowding as you speculate about without providing any evidence for. Equally the claim that the government don't record EU migrants in significant numbers is a real stretch of the imagination given EU migrants are entitled to be here and so would have no reason to hide from the government. In fact if they are lower down the income scale they are incentivised to make themselves known to the government in order to claim working tax credits.

If you are going to make extraordinary claims that contradict the evidence already posted then you really do need to provide some evidence of your own if you wish to be taken seriously. As it currently stands your inability to provide any does strongly suggest that you are wrong.

You are talking about averages, but very few people are actually average. It is amounts to the same as quoting average salaries. You can half the country living with two spare rooms and the other half living two to a room and end up with an average that shows no overcrowding, despite there being lots of overcrowding in reality.

What we do know is that lots of older people do live in larger houses with spare rooms and lots of younger people live in house shares, bed sits and small flats.

[BalancedBear]

Evidence already posted here as you well know:

The evidence you give is being used to make assertions that that are not confirmed one way or another though.

[Neverwhere]

You are talking about averages, but very few people are actually average. It is amounts to the same as quoting average salaries. You can half the country living with two spare rooms and the other half living two to a room and end up with an average that shows no overcrowding, despite there being lots of overcrowding in reality.

What we do know is that lots of older people do live in larger houses with spare rooms and lots of younger people live in house shares, bed sits and small flats.

I'm very specifically not talking about averages. The figures that I provided detail the characteristics of all households in England and Wales. There is no possible interpretation of those figures which could have half the country living two to a room. There is in fact clear evidence that the vast majority of housing in this country is under occupied.

74% of owner occupied households have 3 bedrooms or more yet only 37% of owner occupied household contain 3 people or more. 37% of rental households contain 3 bedrooms or more yet even in rental properties only 34% of rental households contain 3 people or more. This is ignoring the fact that most couples choose to cohabit in the same bedroom, which makes the overall situation looking even less indicative of general overcrowding.

A minority of people, generally drawn from younger generations, live in overcrowded circumstances whilst some others live in ridiculously oversized properties or choose to leave their "investments" entirely empty (and no doubt some of them would sell such properties into better usage if they stopped earning them money through HPI) but there is absolutely no evidence that this situation follows from the physical amount of housing stock available.

[Neverwhere]

The evidence you give is being used to make assertions that that are not confirmed one way or another though.

Again, this is not correct. In what way have the assertions not been confirmed by the evidence?

[Neverwhere]

A lot of houses these days are bought for cash so BTL does not apply (I think it is something like 40%). And a lot are bought by foreign buyers who are not subject to MMR.

Cash purchases are misleading I think. Unmortgaged owner occupiers trading houses count as cash purchases. BTLers MEWing from their existing portfolios count as cash purchases. It's hard to see how many cash purchases are really non-equity dependent.

Foreign buyers are not subject to MMR but IIRC they are subject to ATED and CGT and could easily be in for further taxation in the current political climate. They're also subject to changing financial fortunes at home. I don't think I've seen anything to suggest they make up anywhere near as large a segment of the market as BTL but if you have any figures?

[BalancedBear]

I'm very specifically not talking about averages. The figures that I provided detail the characteristics of all households in England and Wales. There is no possible interpretation of those figures which could have half the country living two to a room. There is in fact clear evidence that the vast majority of housing in this country is under occupied.

74% of owner occupied households have 3 bedrooms or more yet only 37% of owner occupied household contain 3 people or more. 37% of rental households contain 3 bedrooms or more yet even in rental properties only 34% of rental households contain 3 people or more. This is ignoring the fact that most couples choose to cohabit in the same bedroom, which makes the overall situation looking even less indicative of general overcrowding.

A minority of people, generally drawn from younger generations, live in overcrowded circumstances whilst some others live in ridiculously oversized properties or choose to leave their "investments" entirely empty (and no doubt some of them would sell such properties into better usage if they stopped earning them money through HPI) but there is absolutely no evidence that this situation follows from the physical amount of housing stock available.

I have already covered this. Just because many people have spare bedrooms, does not mean that there is not a shortage of homes, as people don't just live in bedrooms. A better measure would be the number of lounges per household. Most couples and families do not want to share their main living accommodation with strangers, so these spare bedrooms remain locked up. All these figures confirm is that many people with homes have spare bedrooms. They do not indicate how many people are seeking homes because they are not happy with the accommodation they have already. Short of forcing anyone with a spare bedroom to let the bedroom to someone, there is no way of making these spare bedrooms available, and even if they were, how many people are there looking for a bedroom versus people looking for a house or flat?

Edited October 11, 2015 by BalancedBear

[Bland Unsight]

I have no doubt that BTL and other developer activity is responsible for many negative aspects of the housing market. However it is a symptom of the problems, not the cause. The conditions for BTL have been very attractive in recent years. They will become less attractive, of that there is no doubt, but the housing market problem of overpriced homes will remain.

Bear, what in your estimation is the root cause of the divergence of house prices from incomes? I've got my cards on the table, in terms of analysis, and my money off the table in terms of my view on prices. Where is your mouth, (i.e. what is your analysis)? And where is your money?, Are you long property and if so is that position financed with borrowed money, and if not, what is your financial interest in property, if you have any, if I might be so bold as to ask?

Crucially, you continually assert that BTL is not the driver, but you've never shown up to actually make the argument as to why, you just assert. A lack of supply cannot drive prices above what people are able to pay. When people pay with borrowed money the nature of the arrangements that apply to the borrowing of money would be expected to weigh heavily on prices. How can you rule out BTL as an important causal factor so casually? What is the analysis, and evidence to support it that gives you the confidence you have?

[Bland Unsight]

Short of forcing anyone with a spare bedroom to let the bedroom to someone, there is no way of making these spare bedrooms available, and even if they were, how many people are there looking for a bedroom versus people looking for a house or flat?

Cutting working tax credits and improving the rent a room allowance would be a start. Oh wait...

It's always incentives. Rules are for schmucks.

[Neverwhere]

I have already covered this. Just because many people have spare bedrooms, does not mean that there is not a shortage of homes, as people don't just live in bedrooms. A better measure would be the number of lounges per household. Most couples and families do not want to share their main living accommodation with strangers, so these spare bedrooms remain locked up. All these figures confirm is that many people with homes have spare bedrooms. They do not indicate how many people are seeking homes because they are not happy with the accommodation they have already. Short of forcing anyone with a spare bedroom to let the bedroom to someone, there is no way of making these spare bedrooms available, and even if they were, how many people are there looking for a bedroom versus people looking for a house or flat?

So your argument is that people are keeping multiple spare bedrooms whilst having no living rooms? That is a very extreme and illogical position and clearly requires some evidence. Do you have any?

Most couple and families are not sharing with strangers. Most households have only two people in them (63% of owner occupiers and 67% of renters).

Where are these imaginary people going to come from to demand all of the spare bedrooms? They're clearly not here already, hence why all these bedrooms are currently going spare.

[billybong]

Some interesting charts and figures in the link below

http://

www.dailymail.co.uk/news/article-2535136/Average-British-family-home-size-shrinks-two-square-metres-decade-increasing-numbers-forced-live-flats.html

[BalancedBear]

So your argument is that people are keeping multiple spare bedrooms whilst having no living rooms? That is a very extreme and illogical position and clearly requires some evidence. Do you have any?

Most couple and families are not sharing with strangers. Most households have only two people in them (63% of owner occupiers and 67% of renters).

Where are these imaginary people going to come from to demand all of the spare bedrooms? They're clearly not here already, hence why all these bedrooms are currently going spare.

No I'm not suggesting that at all. If you cannot grasp what I'm saying, it is a waste of time..

I'm not the one suggesting that there is much demand for these spare bedrooms. However likewise, the fact that there may not be huge demand for these spare bedrooms does not mean that there is no demand for homes with the usual collection of rooms and facilities.

[BalancedBear]

Bear, what in your estimation is the root cause of the divergence of house prices from incomes?

Low interest rates, Lax lending, parents providing financial help to children, the accepted wisdom that houses only go up, so over-borrowing does not seem like a problem. Mortgage fraud is still rife too. This has allowed prices to still be paid. Then there is also the spill-over from London allowing many nice houses in the South East to be bought for silly money by those selling up in London. The biggest issue is that people expect prices to keep rising so they don't care about the risks to buy with excessive debt.

[Neverwhere]

Buy-to-let is the laxest of lending currently available as it's effectively the last bastion of interest only finance. Therefore making buy-to-let less attractive will reduce the amount of lax lending being pumped into the market and is therefore likely to help reduce prices. Given the role of lax lending in over-inflating house prices there is no reason why those indulging in it should be given further tax breaks, or indeed any tax breaks at all.

Edited October 11, 2015 by Neverwhere

[BalancedBear]

Buy-to-let is the laxest of lending currently available as it's effectively the last bastion of interest only finance. Therefore making buy-to-let less attractive will reduce the amount of lax lending being pumped into the market and is therefore likely to help reduce prices. Given the role of lax lending in over-inflating house prices there is no reason why those indulging in it should be given further tax breaks, or indeed any tax breaks at all.

In some ways it is, but in other ways not. The LTV rates on offer for BTL mortgages are lower than residential mortgages and interest rates are usually higher. However it would certainly make life harder for people to enter this sector if further restrictions were placed on that form of lending. The fact that the government has not acted on that, but instead introduced increases in tax for landlords shows that they don't want prices reduced, but to keep them as high as possible.

[Neverwhere]

The government haven't increased taxes for landlords they have reduced tax breaks for buy-to-let mortgages. Literally the opposite of what you've just described is what's happening.

[BalancedBear]

The government haven't increased taxes for landlords they have reduced tax breaks for buy-to-let mortgages. Literally the opposite of what you've just described is what's happening.

You can call it what you will, but many landlords will pay more taxes in years to come. The removal of the wear and tear allowance affects landlords with and without BTL mortgages. In the case or mortgages interest, offsetting expenses incurred has always been seen as legitimate up until now, so whatever you call it, the government is expecting to raise more money. The higher rents and mortgages are, the more they will likely collect. They want high prices to remain.

Edited October 12, 2015 by BalancedBear

[BorrowToLeech]

I find it hard to believe that any such figures have much accuracy. Many EU migrants come to the UK just for a few months at a time. Slough council were mentioned in the news recently because they are inundated with people who do not appear on any official figures. I will accept that info before I accept the assertion of an individual posting on the internet.

No, you find it hard to accept, but it is correct.

At this point your argument is simply 'I will not accept any evidence that runs contrary to my position'.

Or, in other words 'I cannot win an argument based upon facts.'

[BalancedBear]

No, you find it hard to accept, but it is correct.

At this point your argument is simply 'I will not accept any evidence that runs contrary to my position'.

Or, in other words 'I cannot win an argument based upon facts.'

And your position is that "I have found some evidence to support my view and anything else is therefore wrong". Here is an article that describes how population figures are not particularly accurate:

http://www.theguardian.com/commentisfree/2010/dec/20/boundary-changes-census-millions-lose-out

[Imminent_plunge]

You can call it what you will, but many landlords will pay more taxes in years to come. The removal of the wear and tear allowance affects landlords with and without BTL mortgages. In the case or mortgages interest, offsetting expenses incurred has always been seen as legitimate up until now, so whatever you call it, the government is expecting to raise more money. The higher rents and mortgages are, the more they will likely collect. They want high prices to remain.

[Imminent_plunge]

You can call it what you will, but many landlords will pay more taxes in years to come. The removal of the wear and tear allowance affects landlords with and without BTL mortgages. In the case or mortgages interest, offsetting expenses incurred has always been seen as legitimate up until now, so whatever you call it, the government is expecting to raise more money. The higher rents and mortgages are, the more they will likely collect. They want high prices to remain.