Another Nail In The Btl Coffin

[olde guto]

Headline in the DM online: The death knell for buy-to-let?

http://www.dailymail.co.uk/news/article-3333159/George-Osborne-sets-Autumn-Statement-Spending-Review-20billion-cuts.html

Lets f-ing hope so!

[Guest_northshore_*]

Quote from original article: "Commercial property investors, with more than 15 properties, are expected to be exempt from the new charges."

(before I start I'm anti HPI BTL etc.) So if you're a common pheasant you have to pay more Stamp Duty for BTL or further properties. But if you are big business you pay less Stamp Duty for further properties. Why stop there? Why not make small business pay more tax than big business? and make incomes tax bands inversely proportional?

So now, houses may become cheaper and large companies can start buying. The real concern to me is how much this new competetive advantage to big business offsets the advantage to the single home buyer. I hope it doesn't.

Either way, in principal its is wrong. Have I missed something? what do you think of this?

I think docs said they'll be consulting on whether an exemption is appropriate. Another aspect I haven't seen addressed is overseas (non-company) buyers, as I don't believe they'd be classified as 2nd home owners? I don't think that's such a big deal personally, but many think it is.

[Drummer]

Having thought about it, the 3% BTL SDLT will not make much difference in the north IMO.

On a £100k property, it's £1,800 extra upfront. No biggy.

I accept it's different south of Watford.

[mattyboy1973]

Having thought about it, the 3% BTL SDLT will not make much difference in the north IMO.

On a £100k property, it's £1,800 extra upfront. No biggy.

I accept it's different south of Watford.

Remember in that many cases budding LLs will have a shortage of cash, so that £1800 has to come off their deposit. THe effect is that their buying power is reduced by their LTV - let's say 75% as an average. So that's 4x 1800 which is £7200 of spending power gone, and that's not trivial on a £100k house.

[olde guto]

Having thought about it, the 3% BTL SDLT will not make much difference in the north IMO.

On a £100k property, it's £1,800 extra upfront. No biggy.

I accept it's different south of Watford.

???

Stamp duty rate for a £100,000 property = 0%

Stamp duty rate for a BTL/2nd home = 3%

3% of 100,000 = 3,000

That's £3,000

Or are you talking about a deposit?

Assuming 75% (inc SD) a £77,250 will be required instead of £75,000, that's £2,250 more.

Or am I missing something?

Edited November 25, 2015 by olde guto

[adamLancs]

Quote from original article: "Commercial property investors, with more than 15 properties, are expected to be exempt from the new charges."

(before I start I'm anti HPI BTL etc.) So if you're a common pheasant you have to pay more Stamp Duty for BTL or further properties. But if you are big business you pay less Stamp Duty for further properties. Why stop there? Why not make small business pay more tax than big business? and make incomes tax bands inversely proportional?

So now, houses may become cheaper and large companies can start buying. The real concern to me is how much this new competetive advantage to big business offsets the advantage to the single home buyer. I hope it doesn't.

Either way, in principal its is wrong. Have I missed something? what do you think of this?

One rule for them and one for you. No doubt those with enough resources will probably find a way to dodge the tax as somebody else here has mentioned in another topic. I agree it's smacks of being unfair although my sympathy is more reserved for those who cannot afford to buy one house for their family.

Also 3% is pretty big. I'd even qualify it as new change of pants big. Not least because they haven't even made any effort to taper it up gently, which suggests to me there's more like that coming in the pipeline.

[Skipton Crash]

The SDLT thing means that people will need 3% more for a BTL deposit doesn't it? Isn't stamp duty payable upfront? And it's not like you can add it to the mortgage? I think it will have quite an effect, even in the north! Apart from anything else, it's the second unexpected assault on BTL/landlords in only 6 months. I'd be crapping myself if I were a leveraged landlord right now...The SDLT would have just knocked 3% off the value of my BTL empire unless I could somehow sell to the mythical "first time buyer". Landlords are the only people that have been buying for the past few months round here from what I can see! Nobody else can afford to!!

[interestrateripoff]

The BTL empire are just a sitting duck waiting to be squeezed. I'm still amazed HMRC haven't checked the land registry.

[Bland Unsight]

The SDLT thing means that people will need 3% more for a BTL deposit doesn't it? Isn't stamp duty payable upfront? And it's not like you can add it to the mortgage? I think it will have quite an effect, even in the north! Apart from anything else, it's the second unexpected assault on BTL/landlords in only 6 months. I'd be crapping myself if I were a leveraged landlord right now...The SDLT would have just knocked 3% off the value of my BTL empire unless I could somehow sell to the mythical "first time buyer". Landlords are the only people that have been buying for the past few months round here from what I can see! Nobody else can afford to!!

Worth stressing again, as has been pointed out on the main Autumn Statement thread, the leverage is at work here too. If you're 75% LTV you've only got 25% equity and that 3% is coming out of your end, hence it's 12% of the equity.

For some property up north where the original investment was at higher LTV and the prices haven't risen it could easily be 20% of your equity.

Buy-to-let has always been dancing in the dragon's jaws. The jaws are closing.

[Guest_northshore_*]

???

Stamp duty rate for a £100,000 property = 0%

Stamp duty rate for a BTL/2nd home = 3%

3% of 100,000 = 3,000

That's £3,000

It starts at 40k. A formula for excel (where A1 is cell containing price - it's an array so you need to press ctrl /shift /enter once typed or copied in formula to get it to work)

Owner occupier:

=SUMPRODUCT(--(A1>{125000;250000;925000;1500000}),(A1-{125000;250000;925000;1500000}), {0.02;0.03;0.05;0.02})

BTL:

=SUMPRODUCT(--(A1>{40000;125000;250000;925000;1500000}),(A1-{40000;125000;250000;925000;1500000}), {0.03;0.02;0.03;0.05;0.02})

[sPinwheel]

Stamp duty on a £115,000 property is £2,250. Trust me I checked. Twice.

[Harry Sacks]

Irate BTL landlord on R4 Moneybox Live just now. Described 3% increase as "legalised theft...taking from hardworking people to give to ne'er-do -wells.."

He was told his upcoming purchase of a fifth BTL (at £300K) would cost him an extra 9 grand. Not a happy man...

yeah well that's trading on margin bud

[olde guto]

It starts at 40k. A formula for excel (where A1 is cell containing price - it's an array so you need to press ctrl /shift /enter once typed or copied in formula to get it to work)

Owner occupier:

=SUMPRODUCT(--(A1>{125000;250000;925000;1500000}),(A1-{125000;250000;925000;1500000}), {0.02;0.03;0.05;0.02})

BTL:

=SUMPRODUCT(--(A1>{40000;125000;250000;925000;1500000}),(A1-{40000;125000;250000;925000;1500000}), {0.03;0.02;0.03;0.05;0.02})

Stamp duty on a £115,000 property is £2,250. Trust me I checked. Twice.

OK I see where my confusion has arisen from, misunderstood how SDLT worked (this was part of the earlier SDLT changes right? [You can see I've bought a house]) thought SDLT on a £150k property would be £3000 as opposed to the £500 it actually is.

Osborne is missing a trick if he applies the same rule to the BTL/2H SDLT, as opposed to a flat rate of +3% for everything above £40k. He'd bring in a lot more money and hurt would be BTL'ers and 2nd home owners even more.

[sPinwheel]

OK I see where my confusion has arisen from, misunderstood how SDLT worked (this was part of the earlier SDLT changes right? [You can see I've bought a house]) thought SDLT on a £150k property would be £3000 as opposed to the £500 it actually is.

Osborne is missing a trick if he applies the same rule to the BTL/2H SDLT, as opposed to a flat rate of +3% for everything above £40k. He'd bring in a lot more money and hurt would be BTL'ers and 2nd home owners even more.

SdLT on £150,000 is way more than £500...

Its about £3,800.

Edited November 25, 2015 by sPinwheel

[olde guto]

SdLT on £150,000 is way more than £500...

Its about £3,800.

I've used a couple of online calculators and normal SDLT on a £150,000 house is £500. With the higher rate of SDLT for BTL/2nd homes it becomes £3800 http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12016569/New-buy-to-let-stamp-duty-How-much-will-you-pay.html

[sPinwheel]

Sorry I thought you meant the new charge. Yes thats right

[bubbleturbo]

Worth stressing again, as has been pointed out on the main Autumn Statement thread, the leverage is at work here too. If you're 75% LTV you've only got 25% equity and that 3% is coming out of your end, hence it's 12% of the equity.

For some property up north where the original investment was at higher LTV and the prices haven't risen it could easily be 20% of your equity.

Buy-to-let has always been dancing in the dragon's jaws. The jaws are closing.

[adamLancs]

This is probably a lot to do with the influx of foreign buyers in the last year or two, particularly Chinese escaping their stock market. Similar to Uber raising their taxi fares in times of opportunity. Why not. Not many homegrown BTLs have to sell right now anyway.

[The Knimbies who say No]

This is probably a lot to do with the influx of foreign buyers in the last year or two, particularly Chinese escaping their stock market. Similar to Uber raising their taxi fares in times of opportunity. Why not. Not many homegrown BTLs have to sell right now anyway.

Plenty of homegrown BTL have to sell right now. They might not realise it for several months however.

[Si1]

Quote from original article: "Commercial property investors, with more than 15 properties, are expected to be exempt from the new charges."

(before I start I'm anti HPI BTL etc.) So if you're a common pheasant you have to pay more Stamp Duty for BTL or further properties. But if you are big business you pay less Stamp Duty for further properties. Why stop there? Why not make small business pay more tax than big business? and make incomes tax bands inversely proportional?

So now, houses may become cheaper and large companies can start buying. The real concern to me is how much this new competetive advantage to big business offsets the advantage to the single home buyer. I hope it doesn't.

Either way, in principal its is wrong. Have I missed something? what do you think of this?

I'm guessing this means people who run their business inside some kind of incorporated wrapper, whether REIT or otherwise.

These guys are privy to (higher) commercial lending rates and greater financial oversight due to not being able to secure their borrowing against their residential home so easily. Plus likely requirements to hold a proper set of company accounts and all that jazz.

Sure the little guy can incorporate his property business but my amateur guess is that the legal costs for a small property portfolio and tick box requirements would make it uneconomical even compared to the new sdlt rules, and likely he'd never get the commercial mortgage approved.

Edited November 25, 2015 by Si1

[Sancho Panza]

The death knell for buy-to-let? Osborne targets landlords, second-home owners

Fear sells.Wail seems to love it.

[SarahBell]

It will include 8,000 new housing association properties to help cope with Britain's ageing population and 135,000 houses available under a shared ownership scheme. Families earning up to £80,000 – or £90,000 in London – will be able to benefit.

Read more: http://www.dailymail.co.uk/news/article-3333159/George-Osborne-sets-Autumn-Statement-Spending-Review-20billion-cuts.html#ixzz3sb0YujMK

So who is paying for the new HO homes?

[mattyboy1973]

It will include 8,000 new housing association properties to help cope with Britain's ageing population and 135,000 houses available under a shared ownership scheme. Families earning up to £80,000 – or £90,000 in London – will be able to benefit.

Read more: http://www.dailymail.co.uk/news/article-3333159/George-Osborne-sets-Autumn-Statement-Spending-Review-20billion-cuts.html#ixzz3sb0YujMK

So who is paying for the new HO homes?

It's really astonishing sometimes when you stop and take stock. Here we are, offering people who earn 80 or even 90 thousand pounds a year help to buy a house, whilst also handing over 10's of thousands in benefits to families earning 20 or even 30k. How did it come to this?

[VeryMeanReversion]

I assume the BTL'r can then claim this as an expense at their marginal rate.

[pig]

Quote from original article: "Commercial property investors, with more than 15 properties, are expected to be exempt from the new charges."

(before I start I'm anti HPI BTL etc.) So if you're a common pheasant you have to pay more Stamp Duty for BTL or further properties. But if you are big business you pay less Stamp Duty for further properties. Why stop there? Why not make small business pay more tax than big business? and make incomes tax bands inversely proportional?

So now, houses may become cheaper and large companies can start buying. The real concern to me is how much this new competetive advantage to big business offsets the advantage to the single home buyer. I hope it doesn't.

Either way, in principal its is wrong. Have I missed something? what do you think of this?

BTL is the last dumb as shit boom lending product. Letting mugs play the housing market leveraged with £3 of borrowed money for each £1 of their own (75% LTV) is a recipe for disaster. What requires explanation is not the creeping barrage driving mugs out of leveraged property investment in November 2015, seven f**king years after the banks blew themselves up with shit like this, it is the fact that we had to wait six f**king years for them to start the shelling.

What you are missing is that interest-only lending to mugs to bet on house prices with essentially unlimited amounts of credit money (as we creep up on the zero bound) able to chase essentially fixed supply is a recipe for financial instability.

I think it's f**king brilliant. In principle and in practice. Sitting ducks, sitting pheasants. It's all the same to me, provided they get grapeshot.

Well, the 'sentiment' and the 'idea' is appreciated - it almost seems odd that the government hasn't made more out of the housing bubble.

Other than that it seems a bit meh. I guess there will be a little wobble in prices and as Arpeggio points out it will be the larger btl companies / foreign investors that benefit. Eventually I can see us all renting from a few large companies.