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Number Of Uk Landlords Rises To 1.75 Million

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http://www.theguardian.com/money/2016/may/30/number-of-uk-landlords-rises-to-175-million#comment-75247371

"data from HM Revenue & Customs showed 1.75 million people declared income from property during the year, up from 1.63 million in 2012-13"

Britain is now a nation of landlords.

And to think, these figures only the landlords that are declaring their BTL income and also misses a couple of years of significant BTL lending.

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A nugget from The Times last year: "Departmental figures show that the vast majority of new housing in the UK since the turn of the millennium has been bought by landlords. Between 2000 and 2012, the private rented sector has accounted for some 2.5 million of the extra homes. Only 400,000 have been bought by occupiers."

http://www.thetimes.co.uk/tto/life/property/article4311161.ece?shareToken=15b2410d946d0a35bf4bb875d204d1d6

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Just another part of planet Ponzi waiting to unwind.

If the majority of property sales and mortgages are to the BTL sector and this market goes into reverse who is going to be the buyer ?

How much of this market is equity and how much is leverage ?

If this sucker goes down it will be the latter who feel the pain first but the lenders who will want to avoid a repeat of the 2008 financial crisis will want to collar the former.

The only thing protecting BTL from a potential massive washout is unfettered immigration and the taxpayer prop of HB. You have to laugh at the comments of some of the Guardinistas who rail against the iniquity of landlords who can't seem to grasp that it is it the things they love to promote which has helped to make BTL a one way bet up to now.

Having just read the Big Short I am more convinced than ever that any seemingly unstoppable trends in the financial system are simply ploys set up to rob the average investor which in terms of the markets is the group to which most BTL landlords belong. They are sheep waiting to be sheared but they just don't realise it.

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Considering how many landlords there are, you wonder why the Parasite118 campaign is going so badly.

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Prime quote from that Guardian piece which reveals the thinking behind BTL

Buy-to-let investments are a highly popular alternative to the volatility investors often risk when investing in the stock market.

Of course, it fails to add the corollary that the reason stock markets are volatile is because they are liquid.

They are very good at matching buyers with sellers very quickly

Property is probably the ultimate as an illiquid asset class which is why the CDOs tied to them proved so toxic in 2007- 2008. When the crash came they were next to impossible to unload.

Property also has a much higher cost of ownership than shares in terms of fixed costs such as taxes, repairs bills, wear and tear etc

All this is hidden in a rising property market but will become apparent if the tide starts to go out.

How many of these 2 million landlords have dangerous levels of leverage now ?

How many will find the leverage levels in the red zone if prices drop by 10% ?

People who have invested in an undiversified, illiquid asset class on margin to become rentiers deserve to lose every penny of their money.

Edited by stormymonday_2011

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At the risk of sounding controversial - if you had a spare wad of cash built up over your lifetime, in the environment of the last 5/6 years where you were getting zero return on savings accounts/bonds etc, and the stock market was volatile and unpredictable...what would you do with it?

I'm not defending them, just understanding where the behaviour has come from...

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What, borrow-to-let DEBTjunkies have been the marginal buyer of the past 15 years? Now they've been #purged like a boil on the **** end of the market.

Prices now surely have to meet FTB wages, thats a bloody #longwaydown.

What happens next?

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It's not just conventional BTL either, let's not forget the phenomenon of LTB now as well.

In the last 2-3 years I don't know anyone who has done the rather quant and old fashioned thing of selling their existing house to purchase a new one, I can think of at least 4 or 5 people who have all rented out their existing house to purchase their new one.

It's just house hoarding on an epic scale.

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At the risk of sounding controversial - if you had a spare wad of cash built up over your lifetime, in the environment of the last 5/6 years where you were getting zero return on savings accounts/bonds etc, and the stock market was volatile and unpredictable...what would you do with it?

I'm not defending them, just understanding where the behaviour has come from...

OK I will bite

They could have put the money to productive use in FTSE 250 stocks

The index was 11,972 one June 3 2011 and is 17,232 today plus you would have got some dividend yield if you had held stocks direct

You dont have to be a genius to be a successful buy and hold value investor. You just need to do some work.

The point is that no one but a fool would trade stocks as a retail investor using money borrowed on margin and relying on tax breaks to make it pay but that is precisely what many BTL 'investors' do,

Edited by stormymonday_2011

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OK I will bite

They could have put the money to productive use in FTSE 250 stocks

The index was 11,972 one June 3 2011 and is 17,232 today plus you would have got some dividend yield if you had held stocks direct

You dont have to be a genius to be a successful buy and hold value investor. You just need to do some work.

The point is that no one but a fool would trade stocks as a retail investor using borrowed money on margin and relying on tax breaks but that is precisely what many BTL 'investors' do,

I don't think you could get a particularly good mortgage deal on a share portfolio.

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I don't think you could get a particularly good mortgage deal on a share portfolio.

He was talking about investment not home owning

I dont consider the house in which I live as an investment any more than I do the food on my table

It is the attitude that houses are some kind of financial instrument rather than a roof over ones head which has created the steaming pile of faeces which is the British economy today.

Edited by stormymonday_2011

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He was talking about investment not home owning

I dont consider the house in which I live as an investment any more than I do the food on my table

Yes but the point is that most BTL investors have to borrow. So whether you are right or wrong the stock market is not an option for them.

Personally I think they are fairly morally corrupt simpletons who think they've made it, like people in a lot of other areas of life.

Because of their lack of understanding of basic maths and the housing market , we are going to see a lot BBC documentaries in a couple of years.

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At the risk of sounding controversial - if you had a spare wad of cash built up over your lifetime, in the environment of the last 5/6 years where you were getting zero return on savings accounts/bonds etc, and the stock market was volatile and unpredictable...what would you do with it?

I'm not defending them, just understanding where the behaviour has come from...

I'm sure that describes some BTL landlords. But the ones I most commonly meet don't have a "spare wad of cash built up over (a) lifetime".

More typically they're people in their 40's or 50's, often self employed or contractors, with minimal pension entitlements and expensive tastes. They've fallen out of love with their careers and are laying awake at nights worrying about retirement. They realise that seriously saving for a pension will put a massive dent in their current living standards, so they swallowed the BTL fairy story. Where by they get a couple of properties on very low deposits (so no "spare wad of cash"), the rents cover the mortgages, and in twenty years time the capital gains allow them to segue into a retirement full of Caribbean cruises and Range Rovers.

I was at a neighbour's barbecue last night with a few people there who fitted this description to a tee. When I asked about their thoughts on the recent BTL tax changes it was surprising how cloudy their awareness really was. "Is it really law, I thought it was just being debated in parliament?". "Yeah, I've heard about that but I leave all that stuff to the accountant". "If I followed every rumour in the newspapers I'd drop dead with worry".

Actually not that surprising, they just don't want to think about it so they ignore it. And for the time being they can ignore it. Reality won't force itself into their calculations for another year or two, but when it does there'll be absolutely no avoiding it.

That's why I'm not expecting much of a BTL exodus this year, maybe not even next year. But beyond that there'll be thousands, maybe hundreds of thousands, of BTL landlords who find themselves paying out increasing sums of money they don't have to keep their retirement plan afloat. Only then will they be forced to confront the hard facts of the new BTL reality. Instead of it being a leveraged purchase of a lifeline of retirement hope, it morphs into being a very expensive punt on a dubious and uncertain prospect.

My guess is that by 2018 or 2019, 2020 at the absolute latest, the brute force of monthly cash flow will drive a stampede to the BTL exit door.

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I think the media will start ramming 'sell now sell everything' down the BTL necks just as they did for all those years of 'buy now buy everything'

next year will be the crunch point. from end of this year onwards volumes should shot up, asking prices down.

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Most of the BTL lenders have built a considerable safety margin for themselves into most BTL loans including 25% deposits and gross rent to loan payments cover of up to 145% on new loans following the Chancellors tax changes.

One thing I would like to know a bit more about is what are these financial institutions going to do if house prices fall or interest rates go up and some of the margins on these loans are breached.

Are these margins going to get called in hard cash terms and how many landlords would be able to meet them if the equity on their 'investment' has been extracted from other properties including their own home ?

Somehow I cant see the banks forebearing on these agreements as they sometimes do with distressed payments from owner occupiers. I think they will call the margin, collar the equity and simply sell the house near par making their profit on the increased business turnover they will make on new loans to owner occupiers. I dont think it is just the government who have the BTL market in the cross hairs

Edited by stormymonday_2011

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I think the media will start ramming 'sell now sell everything' down the BTL necks just as they did for all those years of 'buy now buy everything'

next year will be the crunch point. from end of this year onwards volumes should shot up, asking prices down.

It`s already started around my way ,i will be the first to admit i was wrong on the timing i thought my neck of the woods would be one of the last places to see this happen but happening it is both on the volume front and price

Edited by long time lurking

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"My guess is that by 2018 or 2019, 2020 at the absolute latest, the brute force of monthly cash flow will drive a stampede to the BTL exit door."

The problem with that is by that time house prices (in the SE) could have risen another 20 - 50% and rents risen in parallel if you believe any of the predictions below. So someone buying a BTL at say 400k with 100k cash and 300k mortgage and rental income of £1400 a month rent, in 5 years could be looking at 300k equity and rent of £2000 a month income.

More needs to happen now, I think they should continue to raise stamp duty on 2nd homes and tax the hell on all BTL income, thats the only way this madness will stop. 2,3,4 or 5 years is too long for me.

http://www.savills.co.uk/resources/5-year-forecast/

http://www.getreading.co.uk/news/reading-berkshire-news/crossrail-effect-reading-property-prices-8919988

http://www.telegraph.co.uk/property/house-prices/which-areas-will-see-the-biggest-house-price-rises-by-2020/

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"My guess is that by 2018 or 2019, 2020 at the absolute latest, the brute force of monthly cash flow will drive a stampede to the BTL exit door."

The problem with that is by that time house prices (in the SE) could have risen another 20 - 50% and rents risen in parallel if you believe any of the predictions below. So someone buying a BTL at say 400k with 100k cash and 300k mortgage and rental income of £1400 a month rent, in 5 years could be looking at 300k equity and rent of £2000 a month income.

More needs to happen now, I think they should continue to raise stamp duty on 2nd homes and tax the hell on all BTL income, thats the only way this madness will stop. 2,3,4 or 5 years is too long for me.

http://www.savills.co.uk/resources/5-year-forecast/

http://www.getreading.co.uk/news/reading-berkshire-news/crossrail-effect-reading-property-prices-8919988

http://www.telegraph.co.uk/property/house-prices/which-areas-will-see-the-biggest-house-price-rises-by-2020/

I think that there is a fair chance that tax interest relief on BTL loans will disappear completely or be further limited

The pattern with OO mortgages back in the days of MIRAS was that the relief first got capped and then got abolished

I am pretty sure that the Treasury want to do the same this time

Moreover, current voting trends suggest that renters out numbering owner occupiers is potential electoral death for the Tories in London and the SE so I expect politicians albeit reluctantly to come on board as well.

BTL investors are basically running out of chums.

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