3% Additional Properties Stamp Duty Consultation --Multiple Merged Topics

[Bruce Banner]

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12019894/Buy-to-let-stampede-ahead-of-stamp-duty-hikes.html

Tens of thousands of people will rush to complete the purchase buy-to-let properties ahead of a stamp duty hike next year amid warnings that it will drag down property prices and push up rents.

George Osborne announced on Wednesday that April 2016 stamp duty on buy-to-let properties and second homes will rise by 3 per cent.

The Institute for Fiscal Studies condemned the move as "disproportionate" said that there will be a "rush" for buy-to-let properties before the new tax comes into force.

It said that the rise in stamp duty is unjustified and will in the long term depress the property market. It suggested that landlords are likely to pass the cost on to their tenants in the form of higher rents.

Stuart Adams, a Senior Research Economist at he IFS, said: "Properties will be worth less because potential landlords and potential homeowners won't be willing to pay as much for them.

[Guest_growlers_*]

I suppose it might make sense to rush for 2nd home owners if they can afford fund the purchase themselves.

Why BTLer would is beyond me. It's game over. Would have thought BTLers smelling the coffee and selling would outweigh 2nd homeowners rushing.

Who knows tho BTLers have proved stubborn in their stupidity.

[Inoperational Bumblebee]

What are the chances of this causing a marked increase in supply? It seems to have gotten headlines and the masses might start to get the message about BTL. Rush for the exits and all that? Might this small window of opportunity precipitate the crash we've been waiting for?

[Si1]

Miras

[The Knimbies who say No]

Should help the 118 crew offload some prior to the tax relief changes.

'Deputy Political Editor' penned this garbage.

[SarahBell]

Oh it makes perfect sense.. People rushing to avoid buying after prices have dropped....

If house prices drop 10% .. Then that's 18000 off the price of the average (just guessing as I suspect it's higher than 180k)

So rushing to avoid 3% doesn't really dd up.

But if your business plan is facked over by a 3% change then it wasn't much of a busines plan.

[Frugal Git]

So they are predicting there'll be a stampede to buy now to save paying a 3% surcharge, on something they also predict will drop in price, possibly by more than just 3% after the surcharge is brought in?

I suppose that stampede is indeed entirely likely given the maths ability of a typical buy to letter.

[Bland Unsight]

Wild speculation just to puts some pins in the map.

Recall this from the time of the Summer Budget.

Not to mention kicking them in the goolies with the housing benefit cuts.

It's almost as if Osborne sent his civil servants off with a photo of Fergus Wilson and instructions to create a plan to bankrupt this man.

Source

One of the ways in which both the mortgage interest treatment for income tax purposes and the SDLT surcharge has played is that the portfolio landlords have looked to incorporate, (they are responding to the SDLT surcharge by realising that if they are going to incorporate rather than sell up they need to do it now).

Now, if you want to implement Basel 3 and you do it to all BTLers that's about 2 million UK mortgages that blow up in your face, which is problematic.

However, if you implement Basel 3 in a staged way so that the first 'people' to get f**ked over are leveraged property companies, then it's all gravy. It's hardly going to be front page news.

Hence one tin foil hat interpretation of both the tax changes is that they are sifting the sheep from the goats. Single property mugs will be spared the worst (mortgage interest deductible at basic rate, no impact of SDLT, except perhaps on market liquidity and price) and Fergus Wilson types get keel-hauled (hit first on Basel 3 implementation, gutted by taxation of rental income).

It is not impossible that they are being shepherded into corporate structures so that they can be quietly eviscerated.

Edited November 27, 2015 by Bland Unsight

[dances with sheeple]

Oh it makes perfect sense.. People rushing to avoid buying after prices have dropped....

If house prices drop 10% .. Then that's 18000 off the price of the average (just guessing as I suspect it's higher than 180k)

So rushing to avoid 3% doesn't really dd up.

But if your business plan is facked over by a 3% change then it wasn't much of a busines plan.

The assumption as always though is that the price is the price, that can`t change, and they just take it as a given that the sheeple follow that meme. There are so many people in the UK, at all levels of society, who have never experienced a proper property price crash that it is going to be funny and scary at the same time when it actually happens.

[dances with sheeple]

The assumption as always though is that the price is the price, that can`t change, and they just take it as a given that the sheeple follow that meme. There are so many people in the UK, at all levels of society, who have never experienced a proper property price crash that it is going to be funny and scary at the same time when it actually happens.

OK, I re-read it, they do acknowledge that prices will drop, fair enough. A proper crash is still going to be like a 1980`s kid waking up in the middle of a Luftwaffe bombing raid though, it will be that far out of reality for most people.

[mikthe20]

Miras

This. Smells like teen spirit MIRAS. Bring it on.

[dances with sheeple]

What are the chances of this causing a marked increase in supply? It seems to have gotten headlines and the masses might start to get the message about BTL. Rush for the exits and all that? Might this small window of opportunity precipitate the crash we've been waiting for?

People with lots of voids might just say "F*uck it, not worth it anymore" and try to sell, but I think those with no voids or used to long term tenants might try the rent hike route first, it won`t just all collapse overnight. Then again I could be wrong, full on crash off the back of this would be nice.

[spyguy]

Really? Stampede? In or out of BTL?

You have ~5 months, with Xmas in a month.

If you think you'll get a mortgage and complete on house by April then go ahead.

[Bruce Banner]

It's not news, it's a prediction that doesn't really make sense.

Why buy an illiquid, depreciating, asset now to save 3% when the prediction is for price falls.

[Andy T]

So is the IFS full of BTL owners then, or are they just regurgitating the tripe that's in the newspapers? Imagine that the torygraph has twisted his statement somewhat.

[Venger]

It's not news, it's a prediction that doesn't really make sense.

Why buy an illiquid, depreciating, asset now to save 3% when the prediction is for price falls.

As per Cry&Regret remembering late 80s MIRAS stupidity of buyers dancing into the market and paying ever higher bubble prices before it was withdrawn (main part anyway) + Growlers recap of their minds....

Can't fully know if the chunky measures taken so far on BTL will get into BTL wannabee 'forever HPI' money-never-runs-out, 'tenants will be forced to pay higher rents' minded heads. Also so many are of the view of excuse bailouts coming to their rescue despite paying silly prices to outbid others... even class themselves as poor/capitalists/hard-working when they own 10s of houses. The breakdown squad with excuses (just wanted a home / led into it / victim of the banks / compensation culture) is something else which has given them coarse complacency.

Hopefully though the measures are enough, and if and when some owners accept lower prices and prices slide, sentiment will break a bit, leading to ever fewer would be people-farmers/buyers, with higher stamp duty and tax on turnover ahead.

[rxe]

I don't think either side can claim victory in this one, which is the whole point. As the post above suggests, any business plan that cannot that a few grand hit is not much of a business plan. George doesn't want a HPC, it would be a total disaster for him, his core vote would hang him out to dry if he triggered one. He's just identified an area of commerce where he can extract some tax without much political pain. The changes he made to mortgage interest a few months ago are far more significant, but again, part of the same strategy.

I think this is a daft change because it increases the transaction costs. If he wanted to do something efficient, stick a tax on rent receipts or similar. This will just make the market stickier, it is a disincentive to sell because getting back in will be more expensive.

[Le Grande Fromage]

All that will happen is houses will go down by the amount of the extra SD, as most landlords are in the upto the £200k bracket,they will just be a little better a getting a deal,2nd home owners are genarally minted so it may nor fuss them,in Jan I saved a grand on stamp duty cos they changed the banding,that also didnt cause a stampede to buy

[Venger]

I don't think either side can claim victory in this one, which is the whole point. As the post above suggests, any business plan that cannot that a few grand hit is not much of a business plan. George doesn't want a HPC, it would be a total disaster for him, his core vote would hang him out to dry if he triggered one. He's just identified an area of commerce where he can extract some tax without much political pain. The changes he made to mortgage interest a few months ago are far more significant, but again, part of the same strategy.

I think this is a daft change because it increases the transaction costs. If he wanted to do something efficient, stick a tax on rent receipts or similar. This will just make the market stickier, it is a disincentive to sell because getting back in will be more expensive.

Ah rxe.... flashback...

Facts remain rxe, you came onto this thread posting this.... like some normal good-timing homeowner, who now can't see hpc... talking about renters having a "life spent waiting" for hpc.

rxe, on 16 May 2015 - 07:27 AM, said:

I think this is very dependent on where you are. We bought in Berkshire, and only effect of the "crash" was to knock a few additional houses onto the market and the elimination of the nutters offering 20% over asking. I distinctly remember being very concerned about buying a house, but that was tempered by not being concerned about having a load of cash in the bank. Since then, it has been a relentless march upwards, no bargains round here. There may well be places in the country where there are bargains, but I'm not aware of them.

I honestly think anyone expecting 50% drops is going to spend a lot of their life waiting.

And I just reminded people you are a landlord. Just makes me very uneasy your positioning on housepricecrash. You're playing it to your own position as multiple property owner. You don't want a HPC. Your position if for yourself as a landlord/property investor. In that post you count your 25% a year HPI from the other year. I'm not going to take my market bearings from a dancing HPI-counting landlord posting on HPC, posting all his doubts here why hpc so unlikely to happen.

Also noted in that post is you bought and were concerned about not having much money in the bank when you bought a house in the dip (+ you're landlord with a rental property)

My view is many landlord types are going to get caught out with lots of property, for the demand and because HPC can never happen, and have no money in the bank to speak of. All in property. That you'll have your **** handed back to you.

rxe, on 24 Jan 2013 - 08:42 AM, said:

So how did I get on this particular gravy train? Simple, we didn't sell my wife's first house. All bought and paid for (I wrote a cheque for the remaining mortgage after we got married...), and the simple truth was that I did not know what else to do with the money. If we'd sold it, I'd have either stuck it in the bank (losing to inflation) or stuck it in the stock market (losing to everything). So instead we kept the house and let it out. The act of passive investment has produced the second best return on any investment I have made. On a purchase capital basis it is yielding close to 25% PA, on a current value basis, about 3% (ignoring capital appreciation). It is in a top SE location, strangely still rising in value (no I don't get that either), and I'm not overly worried about a crash - property would have to crash 80% before I lost money. Incidentally, the best investment I have ever made was also property - can you see why this has been so damn attractive over the last decade or so?

You're latest post again you give it the good old "how can there ever be a house price crash" with so many of the same complacent explanations read many times over. A woot woot locked-in HPI posting, and

And the brag that you'll be filling your boots buying more rental property if there were one.

Well let's see... two houses, and in your last purchase from 2008 you had some concern about it not leaving you much money left in savings.

Has your savings position massively improved since then. Many landlords see money in the bank as dead money. Seems to me you have one SE rental that's inflated in value + your current home with mortgage. What occurs in any HPC... both fall in value. I doubt you'll be filling your boots then with more investment properties. Just another landlord anti-HPC brag it seems to me. The BTL lenders even into HPC may not be willing to front you the mortgage you need, when you've already got 2 properties undergoing HPC.

Hmmm, I feel almost.....stalked...

Why am I on the forum - well I'm mainly on OT pontificating about cars, but the main forum is a good view of the news - between this forum and Zerohedge, the "questioning" news analysis is pretty covered.

Two thoughts:

- on the "how long have you got to wait" aspect - I do think it is true. There are loads of posts here railing against crappy rental deals, being kicked out, being unable to do what you want with the property - and eventually you just have to play the game or die waiting. In my case I wanted a place with some space before I got too old to manage the space.

[...]- I just don't see the prospect of a decent crash in the SE at least. Demand remains huge (loads of people needing a roof over their heads), just as the prices are insane. Everything that is built is bought rapidly, at all levels of the market. There's an awful lot of foreign money looking for a home, as direct investment, and this will not exit quickly - it is long term. If it was short term, they'd be buying something far more tradeable. And to be clear, if there was a proper crash, I would fill my boots this time round.

Do I see a justification for price rises to infinity - outside London, not at all. Inside London, I'm not sure as London is utterly detached from reality. Do I worry about a crash - only in the wider economic context. I have zero debt, and no intention of getting into debt.

Check out how some landlords think.... and this is not the worst of it by a long way. There was an astonishing thread not long ago full of landlords who felt their debt (and no savings) makes them safe, that banks won't repossess.. coarsely believing that they're too big and its too awkward for the lender to act against them. They even asked a specialist lender about it on video-link, on behalf of the growing number of landlords thinking this.. and he was taken aback... "It doesn't work that way."

When I say growing cash pile, I don't mean having it sat there looking at me earning 2% as that means it's growth will be stunted,and like our children it needs to be lovingly nurtured to grow big and strong.

I mean doing BTS to help it grow quicker. Investing in BTS, from purchase to getting the cash back is usually less than 6 months. I can't see anything changing that quickly that a 6 month or even 12 month timeframe is that critical. I have lots of empty credit cards for such emergencies as well as a bit of cash and a large overdraft. Or I could get a large loan to tide me over.

think we all have different views on what a cash pile means. I suppose for most people this is cash in an account. To me, it means if the winds change then in a reasonable timeframe I will also be able to have my cash sat in an account if I so wish, but in the meantime continue to invest it to grow it.

I'd rather buy 5-6 houses with cash with £300k and have the income, which will be far greater than the savings on the mortgage. I'd then consider 75% of this as available cash as it would only take a few weeks to remortgage and have access to it.

I can't think of a situation I'd need £225k in a timeframe less than this.

http://www.propertyt...-by-t-7480.html

[Noallegiance]

Most people won't realise the impact of all these changes coming in across many different areas.

What gets put out in MSM is incredibly diluted and high level. The situation created by previous governments to get us in this mess was for a long time spun and believed by the massed to be prosperity. Likewise, a promise of 400,000 homes and the odd tweak here and there will be spun as an increase on home volume provided by the government = job done as prices become 'more affordable'. Anything outside that can be blamed on the Fed/Europe/platipus mating habits.

That's as complex as it will get for the readers of Yahoo news.

[The Knimbies who say No]

Osborne's simply wants more Conservative voters- hence he wants both a price bubble (London HTB) and more homeowners (nailing BTL)

Taking various posts on property forums at face value, the tax relief alone will put many who followed the 'maximal leverage' strategy into a lossmaking position at a stroke and some are already trying to sell up in advance of the changes. The SDLT will help ensure those sales go to owner occupiers rather than BTLers.

Edited November 27, 2015 by Cry and Regret

[Venger]

I don't think either side can claim victory in this one, which is the whole point. As the post above suggests, any business plan that cannot that a few grand hit is not much of a business plan. George doesn't want a HPC, it would be a total disaster for him, his core vote would hang him out to dry if he triggered one. He's just identified an area of commerce where he can extract some tax without much political pain. The changes he made to mortgage interest a few months ago are far more significant, but again, part of the same strategy.

I think this is a daft change because it increases the transaction costs. If he wanted to do something efficient, stick a tax on rent receipts or similar. This will just make the market stickier, it is a disincentive to sell because getting back in will be more expensive.

The BTLers in number are astonished at their Conservative vote not mattering so much / having been betrayed.

You BTLers/older equity rich owners, are not the only people who matter.

Sometimes the system as a whole is led to outcomes that are tolerable only in comparison to alternatives that are even worse.

Gubbermint that only cares so much about older homeowners (many who have hpi massive valued houses but no mortgage debt, thus making banks no money - and someone at FCA apparently making noises want more downsizers) also has to look at other things, including solvency and getting financial system on its feet, which might include hpc and mortgages in volume for decades (and profits there of + stimulating effect of renter-savers making homes their own via shops/modernising rather than landlord shod fixes).

As always with a question that might be considered an economic question there are so many interlinked parts that an observation of a correlation is just another puzzle. I have to say the thing about the graph that surprised me is how 1997-2008 boom transaction volumes were so small compared to 1989 boom transaction volumes.

Worth pointing out that if the millions of homes that had been bought at stupid prices by BTL mugs had been sold at lower prices to owner-occupiers then there wouldn't be so much excitement about a lack of affordable housing, and that if people returned to selling the house they already owned when they a bought new one the transaction volumes would be higher, so if the 10:1 ratio held up you'd have more building, (if the same correlation continued to prevail)

[Si1]

Fwiw I think the govt whilst not wanting hpi don't want a nominal terms hpc either. Michael Green, in one of his rare apparently honest statements, said as much in 2010

[rxe]

Ah rxe.... flashback...

I'm honestly flattered by your ability to remember my posts. Why don't we focus on the questions?

1) Do you think George wants a crash? I happen to think he doesn't for political reasons. I think that he is simply extracting the maximum amount of cash from an easy target, but not too much. Its a bit like the first year tax on polluting cars. He could just effectively ban them (tax of 100K), but no, he just lifts a few grand from someone buying a £70K car. He recognises that a bubble cannot be limitless, so he is seeking to reduce growth, not crash it.

2) If you want to put a brake on BTL, would you rather increase transaction costs, or would you rather make rental income less attractive? I think the latter is a better plan. What do you think?

[zugzwang]

Fwiw I think the govt whilst not wanting hpi don't want a nominal terms hpc either. Michael Green, in one of his rare apparently honest statements, said as much in 2010

Meh. When have the Tories ever not been virulently pro-hpi?

In any case, Osborne's record speaks for itself.

Chart courtesy Nationwide.