Number Of Uk Landlords Rises To 1.75 Million

[stormymonday_2011]

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.

Point taken

They probably dont understand that leverage cuts both ways or that they might get a margin call by their lenders if the market drops

I suspect they might have been lined up as patsies by the banks who can simply collar their equity in a down turn without taking a hit themselves.

I think a lot of boomers who sunk their savings into BTL may get wiped out which should cheer some on here.

We shall find out before too long now I think

Edited May 30, 2016 by stormymonday_2011

[winkie]

2.5 million homes!!

Good lord those will make a difference if only 10% come on the market. I can see bank out 2 is going to hurt.

Many of those homes were once owned and were being paid for by owner occupiers, most of them first and second time buyers, just goes to prove how poor the bottom end of society is becoming......more people having little stake in society or community.....many streets have turned into bedsit land, uncared for gardens with few repairs being done.....will be even less when prices fall, income falls and or debt costs rises, when mortgage debt becomes a mortgage liability.....low hanging fruit........last time they were handing the keys in.

[long time lurking]

Point taken

They probably dont understand that leverage cuts both ways or that they might get a margin call by their lenders if the market drops

I suspect they might have been lined up as patsies by the banks who can simply collar their equity in a down turn without taking a hit themselves.

I think a lot of boomers who sunk their savings into BTL may get wiped out which should cheer some on here.

We shall find out before too long now I think

The ones late to the party are for sure ,the lack of outrage /lobbying by the banks concerning the recent changes to taxation ,and lending criteria is all the proof anyone needs . that it`s all been planned for sure

Edited May 30, 2016 by long time lurking

[Exiled Canadian]

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.

I have a sneaking suspicion that GO's next move will be to accelerate the implementation of S24.

The political backlash to the concept of S24 has been almost non-existent (compared with the withdrawal of HB for spare bedrooms for example). Once the principle has been established the timing of introduction seems like a small detail.

The BTL sector has proven amazingly resilient in the face of adverse changes to the tax code. Neither S24 nor the SDLT increase on 2nd homes seems to have made a significant dent in thelevel of new entrants into BTL. The level of financial illiteracy of the average BTL investor (demonstrated anecdotally in Silver Surfers post) seems to suggest that whatever GO's policy objective he needs to hit the sector harder and faster. If he's after a rebalancing of the housing market in favour of OO's then that's not yet happening; if that's not the case and this is just about revenue raising then the BTL sector has demonstrated an amazing resilience in the face of higher taxation that may well tempt him to come back for a second bite at the cherry.

[nome]

^^ Very accurate assessment, BTL has been extremely resilient to the current and proposed changes, it's not even made a dent in BTL purchases in my area at least.

Need to be hit far harder.

[Venger]

And very financially capable, highly financially qualified BTLers. I refuse to accept a senior equity partner (solicitor in London) who has spent 30 years in commercial property and was already reeling from WB's tracker hike, is financially illiterate, with his 10 BTLs. Greed and egotism.

How we see the world, and how we see other people - BTLers of all levels of intelligence (core voters). Recently an article I read about an accountant who appears to be hard into BTL. Seems as into it, and the pushback, as all his BTLer clients of the past 15 years.

If BTLers have some financial squeeze, they can look too sell their own homes to make whole debts to the bank, and see where the upsizers/buyers are.

We don't need an exodus. Just fewer buyers and more BTLers willing to accept lower prices, to bring values down.

Been planned? So many HPCers on here been waiting for the BTLers to burn themselves out. It's not exactly a surprise (S.24 and other measures). Let greed devour itself.

It seems that you cannot or will not accept that borrow to let is just one type of business, and thus had its own unique risk profile. You don't have to consider every eventuality, no. But you should be at least marginally intelligent enough to recognise the clear ones if you go into any business.

The risks with borrowing to let were entirely obvious from the beginning - the biggest of all being the eventual taxation target. From the point of view of the business side of it - not the ethics, that was the *first* thing that came to mind for me when discussing its 'merits' with people on that basis.

Playing with leverage was a close second, but that is beside the point. Legislation legislation legislation.

If it was obvious to someone who had no desire to do it, wtf were people who actually signed up to borrow money smoking if they couldn't spot that their terms were more favourable then they were getting on their own home? Did they genuinely think that was fair? That it wasn't eventually going to be spotted?

Especially due to the not inconsequential nature of it growing out of control site to the previous favourable terms, and housing being unlike running a widget business in that whilst a widget is a discretionary purchase, a place to live isn't. And the general public tend to eventually get angry when their ability to shelter themselves becomes increasingly difficult.

Building is part of a solution - no doubt. But levelling the playing field, rather than just building on it is even better.

Edited May 30, 2016 by Venger

[Tempus]

^^ Very accurate assessment, BTL has been extremely resilient to the current and proposed changes, it's not even made a dent in BTL purchases in my area at least.

Need to be hit far harder.

March must have been just about the biggest month ever for BTL, if you look at the graph at http://www.thisismoney.co.uk/money/buytolet/article-3594457/Buy-let-loans-rocketed-142-March-stamp-duty-rush-hit.html And that is just mortgages, I'm sure plenty of cash purchasers rushing to beat the April deadline too.

So in the face of this supposed plan to hit BTL, it has surged.

[Venger]

And case in point... we've got SS coming back deffo HPC, when just a year or so, was thinking this, which many BTLers could allow themselves to believe as well.

I disagree. I think the forthcoming tax changes will absolutely cripple demand for BTL in it's current guise.

Apply the realities of reducing tax deduction for mortgage interest to the kind of BTL mentality evidenced here http://www.property1...ment-mortgages/ and you can see what an almighty kick has been delivered to BTL's balls,

Bad news for BTL landlords, but very good news for first time buyers and commercial operators such as this http://thestudenthousingcompany.com

What's more the really uplifting message from that article is that if I'm wrong, and "rampant demand for buy-to-let investments" doesn't cool, then "policymakers could take further action". How wonderful is that! So if by some slim chance this kick in the balls doesn't work, then the government will swing their size 12 Doc Marten back and take aim for another mighty blow!

---------------

There's no let off for core-voters of all levels of intelligence, if they've doubled-down into this type of thinking. Generation Rent, no HPC, forever rent and high prices forever.

What a great article. And he's absolutely right, ultimately there is only one solution...build more houses.

But as that's not going to happen any time soon the only rational conclusion is that any meaningful fall in house prices is probably a generation away.

Now isn't a good time to buy. But tomorrow won't be much better.

House prices are way too high in most of the UK, but with ultra low interest rates set to continue for many more years there's no reason why prices won't stay high for many years to come.

The only exceptions are areas like the North East where some isolated pockets of sanity exist. Although there's a good argument that says even there prices may drift down further so you could still be better off waiting.

Unless you really want to own a property for non financial reasons, and can afford to buy outright, then the rational thing is to reconcile yourself to a lifetime of renting and structure your personal affairs accordingly.

[...]I'm sure some inheritances are squandered, or the recipient is a cat's charity as the deceased has no living relatives. But a very large percentage of those inheritances will surely flow straight into the UK property market. Especially as Picketty pointed out the tendency in the UK to pass on wealth via gifts rather than wait until bequests after death. It all suggests a more sinister interpretation of the Bank Of Mum And Dad, a future where if you're lucky enough to have the right parents you can expect a substantial helping hand into a property of your own. But if you're not that fortunate then you either have to rent for your entire life or accept a sharply lower standard of living as you're saddled with repaying a crushing mortgage debt.

Edited May 30, 2016 by Venger

[RentingForever]

Are we reaching the point where there are so many landlords they become, politically, 'too big to fail'? Cue lots of 'help to landlord' and 'support for landlord interest' bailouts?

Edited May 30, 2016 by RentingForever

[Venger]

Are we reaching the point where there are so many landlords they become, politically, 'too big to fail'? Cue lots of 'help to landlord' and 'support for landlord interest' bailouts?

It may have been what the BTLers already believed, with their core-voter mindset, as they kept doubling down. (We've got other HPCers who don't see prices falling back much, for them see a world of money to buy on any dip.)

They've attempted to play on it hard already, time after time...

It seems their biggest advantage is the number of HPCers projecting them as innocents / financially illiterate / victims of the banks and politicians in a set up - having no stomach to accept greed exists from BTLers are also very intelligent people.

Open-Letter-George-Freeman-MP-Conservative

Dear Mr Freeman

I have been a Conservative voter for my whole life and have used the influence of my property forum and blogs (200,000 subscribers) to encourage my peers to vote the same way.

I would very much like to meet with you to discuss my concerns regarding the budget, in particular the impact on lending institutions and a hardcore of Conservative voters who invest into buy-to-let property.

...However, the consequences of the budget are that an established private landlord using a high gearing business model could now end up falling into the 45% tax bracket even if his rental portfolio is only breaking even and even if he has little or no other income or resources with which to service that increased tax burden. Please see the example below:-

http://www.housepricecrash.co.uk/forum/index.php?/topic/205642-btl-scum-regrouping-and-on-the-offensive-merged/

They've only got one vote each. Although on Twitter they've been trying to get homeowners on their side, pointing to fact that house prices will fall under Section 24 etc.

A lot of new homeowners have votes too, when going from renter to genuinely more affordable homeownership, and upsizing at lower/affordable hpc prices.

A culture which does not value its young and presumes that they are somehow less than human - that they lack basic human desires for home, security, family - and should bear the majority of the costs of society with few of the benefits is deeply unhealthy, and ultimately self-destructive.

No fully functioning human adult is so stupid that they can't learn to practice caution if they know that noone else is watching their back, and that the consequences of their poor decisions won't be forced onto those who actually are innocent of making them.

The only way for them to successfully learn that is for them to be allowed to fail. Those who believe that society will always protect them from the consequences of their own actions will always be able to find something so ingeniously foolish and foolhardy that it was not accurately predicted or immediately understood by those who should supposedly be protecting against it.

“A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.” - Douglas Adams, Mostly Harmless

Do I need to post up the new BTLers who bought a 1 bed flat just before Budget 2015 for £500,000 - having seen the value of their own London flat rise from £85K to £670K????????????????????????????????????????????????? "Just like our own home we think it will be a long term good investment."

Never enough. Greed. No empathy for the priced out renter savers. Actually a main part of pricing them out. Creating the rental demand itself, from the BTLers, and big part of having set bubble prices.

HPC seemed to work for John Major in 1992.

Edited May 30, 2016 by Venger

[spyguy]

And very financially capable, highly financially qualified BTLers. I refuse to accept a senior equity partner (solicitor in London) who has spent 30 years in commercial property and was already reeling from WB's tracker hike, is financially illiterate, with his 10 BTLs. Greed and egotism.

...

A friend of my partner works at one a market town, long standing EAs - No chins, all corduroy.

Buffoons the lot of them.

Up until 2002, the only skin they had in property were doing the circuit of lawyers/EAs summer parties - the free photo ops they insist in doing for the free mags.

Theyve been through a few property cycles so the ought to know how it goes.

This time, they've all gone balls deep into leverage - 2-3 BTL each, holiday let.

Previously theyd have not touched anything more than the OOO and the odd commercial shed.

The commercial side is doing horrendous. Demand for commercial and units is about the same of a prossie riddled with clap.

The interweb has destroyed retail in the sticks.

Commercial stuff is bad. There's the odd mega warehouse deal but these people can afford to beat them down to pennies.

Despite 'being in propery' they are finding the whole BTL game horrendous. Cannot keep tenant, suffer from non-paying.

One had a house condemn by the LA because it was unsafe.

The removal of tax thing will crucify them.

They do not draw much income but put in rentals from 2-3 houses and they are above the 40% limit.

[spyguy]

Are we reaching the point where there are so many landlords they become, politically, 'too big to fail'? Cue lots of 'help to landlord' and 'support for landlord interest' bailouts?

No.

LL are still far + few between. Thank God.

At best post-2010 LL is going to get their money back when they sell up.

At worse they'll get the BTL + own home repo'd.

[stormymonday_2011]

Are we reaching the point where there are so many landlords they become, politically, 'too big to fail'? Cue lots of 'help to landlord' and 'support for landlord interest' bailouts?

Never going to happen.

By definition there are always going to be more tenants voting than landlords.

Most UK landlords aren't big enough financial players to qualify as one percenters and the voting trends in London don't suggest they are going to be winning the popular vote anytime too.

The BOE is only concerned about systematic failure and the equity margins required by most BTL lenders mean it is nearly always the borrower who is bearing the risk in the BTL market not the financial institutions.

Anyone who thinks the government, the City, the banks or big financial corporations gives a f*ck about this or any other class of small to medium sized investor really needs to go and read Michael Lewis's books.

Edited May 30, 2016 by stormymonday_2011

[silver surfer]

And case in point... we've got SS coming back deffo HPC, when just a year or so, was thinking this, which many BTLers could allow themselves to believe as well.

Yes, I've changed my mind, from a position of long-term flatlining prices to a position where declining BTL will probably trigger a meaningful price correction. Changing your mind is just the sensible response when the facts change, and the facts have now changed mightily,

-disappearing tax relief for mortgaged landlords

-no more automatic 10% "wear and tear" allowance

-much stricter standards for granting BTL mortgages

-the BTL tax amnesty probably signals a forthcoming BTL crack down by HMRC

Given that BTL constitutes the majority of UK property transactions I can't see how any rational observer could believe that this package of changes will not have an impact.

However, I'm still sceptical that we'll see big changes quickly, I've been caught out before by the persistence of BTL landlords, their stubbornness in 2007/8 largely scuppered the benefit from my STR move, so I wouldn't be surprised if it's two or three years before this all becomes apparent on Rightmove. However, even if the wheels grind slowly it's now baked in, so slow or fast I'm pretty much convinced a material price decline will happen.

[frederico]

There are just loads of BTLERS who are doing it because it represents a pressure free, skill free way to join the jet set.

Most are ordinary folk who spotted a way to get 'rich'

I was talking to someone the other day who set it cost 10 grand or something to buy a flat in London, I was somewhat sceptical and pressed further, they didn't count the 250k loan as a cost because the rent paid it.

[stormymonday_2011]

There are just loads of BTLERS who are doing it because it represents a pressure free, skill free way to join the jet set.

Most are ordinary folk who spotted a way to get 'rich'

I was talking to someone the other day who set it cost 10 grand or something to buy a flat in London, I was somewhat sceptical and pressed further, they didn't count the 250k loan as a cost because the rent paid it.

It is understandable in so far as property is the only type of investment most people think they 'understand' and it the only investment class where they can get that type of leverage. Thus it gives most of them the illusion that they have arrived as financial players. The problem is that leverage can kill even the most sophisticated financial insider as Bear Stearns and Lehman Brothers found out. I think the UK property market would have imploded in 2008 but the need keep the banks afloat via the bailouts essentially saved it. I am not sure it is going to happen this time. Both the political environment and financial sentiment are different now.

[spyguy]

There are just loads of BTLERS who are doing it because it represents a pressure free, skill free way to join the jet set.

Most are ordinary folk who spotted a way to get 'rich'

I was talking to someone the other day who set it cost 10 grand or something to buy a flat in London, I was somewhat sceptical and pressed further, they didn't count the 250k loan as a cost because the rent paid it.

Covered the IO mortgage at 4%

Wait til the Basel 3 risk weighting s kick in and IRs go up.

[Venger]

Yes, I've changed my mind, from a position of long-term flatlining prices to a position where declining BTL will probably trigger a meaningful price correction. Changing your mind is just the sensible response when the facts change, and the facts have now changed mightily,

-disappearing tax relief for mortgaged landlords

-no more automatic 10% "wear and tear" allowance

-much stricter standards for granting BTL mortgages

-the BTL tax amnesty probably signals a forthcoming BTL crack down by HMRC

Given that BTL constitutes the majority of UK property transactions I can't see how any rational observer could believe that this package of changes will not have an impact.

However, I'm still sceptical that we'll see big changes quickly, I've been caught out before by the persistence of BTL landlords, their stubbornness in 2007/8 largely scuppered the benefit from my STR move, so I wouldn't be surprised if it's two or three years before this all becomes apparent on Rightmove. However, even if the wheels grind slowly it's now baked in, so slow or fast I'm pretty much convinced a material price decline will happen.

It's okay for you to change your mind now (you don't have any BTL) - although at the time you may understand why your position severely irritated me vs the imbalances in the market.

Like we needed any less hope on HPC, vs our ever more priced out positions vs runaway HPI (and BTLers big part of that doubling down, haven taken the bait about HTB.... an incentive for speculators). It didn't bother me that much. Full belief the BTLers were dancing into their own destruction.

The facts have changed mightily.

Yet you didn't see it coming as you projected young people's future as a choice between renting forever or whack-off back-breaking large mortgages - and thinking about those lucky enough for some help from bomad.

That's a difference. If something can't go on forever it will stop. And we were always nearing that point - but some could not see it.

Also perhaps you didn't properly weigh up the need for HPC in the economy. The the good of it. And for the good of the banks into volume lending to younger people after the HPC. Churn, high transactions, mortgage volumes, profits.

My position is many long wave HPIers have also held such a blindness, of focus on themselves - about the market going forwards and forever high prices with young people having lifetime of renting, and thus why doubled down into BTL. All levels of intelligence. You haven't gone into BTL, but you bought into the same mindset of younger people up against it with forever high prices.

Bland Unsight: The mechanics of all the leverage and the incentives for the lenders to murder their customers are extraordinary.

It's not just you. 20+ years owners (no mortgages) tip up here frequently, and see the market in their own terms - often with zero perspective from renter-saver side.

I think buy-to-let (meaning lenders and borrowers both) is coming into the limelight simply because it's one of the most significant remaining problems. BTLers are the largest segment of speculators still acting in the market. Much of the previous speculation by owner occupiers - in the form of liar loans, interest-only lending, and 100%+ LTVs - has already been knocked on the head.

Help to Buy is an issue but the volumes are so low that I don't think it can hold up prices without speculators taking up a significant portion of the market. It's mainly a sentiment driver and speculators are likely the strongest reactors to sentiment drivers, hence without the speculators it has substantially less teeth to drive prices. MMR has limited loans to income for owner occupiers and Carney has indicated he expects to see an increased spread between base rates and market rates due to lenders meeting the increased costs of higher regulatory and capital requirements, so low base rates should also be less of an issue. This is especially true if the amount of speculators in the market is reduced, as this would seriously curtail the other consequence of low base rates on the housing market: yield chasing. Supply of actual physical homes is arguably meeting direct demand but falling short of speculative demand, and thus reducing speculative demand would also help with this issue.

Equally there are BTL landlords who have and will get out with massive unearned gains, just as there are other speculators of all stripes who stand to lose it all and more in a BTL-induced correction. The world is not just. While it's good to try and work out the truth of what's happened what's most important is that the situation gets solved and people who are not to blame at all stop having to suffer the consequences of the actions of those who do share in the blame and are currently living the life of Riley.

You've had a massive HPI ride already, Silver Surfer.* That's fine and good for you. I just want younger generations to have level of house price fairness you experienced - level prices, and no hpi after HPC. This market is not house price fairness at all.

Seeing the same people (your neighbours for example) and others into BTL (own home risen in value from £85Kish to £670K, and bought a 1 bed BTL for £500K just before Budget 2015)......

How much do some people need? Double down core voters, no hpc, forever high prices. When they've gone into BTL with that mind, as many have, they are active market participants, in unregulated BTL lending.

I quoted you to push back against the idea that BTLism is just financially illiterates or tricked into BTL by banks/gov - when extremes between the haves-and-have-even-mores vs the professionals productive workers renting-from BTLers, is extreme. The BTLers made their own decisions, and could have practised caution. They could see the difference between haves-mores and have-nots, in a housing supply/price crisis, but would always push 'build more houses'. Never been able to build houses faster than speculators could speculate on them, and turn would-be buyers into renters.

What we're going to see is BTLers, who made their own decisions, and had the same type of thinking you did, in more of a pincer. That's good with me, and they made their own decisions.

*

I bought my first house in the very early 1980's. It was three bedroomed terraced house in a decent part of Sheffield, it cost about £10,500 and my pay was about £5,750.

After a couple of years my job took me to London, in price terms I virtually swapped my Sheffield house for a one bedroom flat with an SW1 post code, Sloane Square was less than a five minute walk away and the nearest "off licence" was Berry Brothers & Rudd.

A couple of years after that I paid about £22,000 for a two bedroom flat in Fulham, I think at the time my wages had topped £10,000. Property costs can't have been too much of a burden because soon after I bought a Porsche.

Incidentally, I had no student debts and a rock solid final salary pension that subsequently allowed me to retire at 55.

Absolutely none of this is available to my children. They're fortunate in that I can afford to match for them the benefits that I was lucky enough to enjoy, but anyone from my generation who thinks their own hard work and industry were the keys to their good fortune is just taking nonsense. We were the most privileged generation that has ever lived.

Quite amusing how the Dyson piece gradually works its way into CML lobbying against tightening of credit underwriting on regulated mortgages.

IMO from a pro-hpc perspective we want as much new BTL lending as possible as soon as possible. All this buy-to-let is going belly-up shortly, after even a mild move in interest rates or a mild recession. In the meantime these good people are shoring up the banks' balance sheets one BTL deposit at a time. By increasing the depth of supply they are weakening the ability of landlords to effectively coordinate and drive up rents. And when the gap between income and expenses forces them to sell up the fact that there are so many of them will increase the extent to which they move prices downwards, turning a correction into a crash. The first act was BTLers making out like bandits, this is the second act. The final act is them crying into their beer once they finally understand that the leverage enabled a small correction in prices to wipe out all their capital and and leave them owing money to the bank - probably not the best kind of pension planning. Ever thus to deadbeats.

[eek]

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.

The panic will hit in October 2018- Jan 2019 as the first year of tax returns at 25% are filled in, they suddenly have to pay tax and discover it's even higher that year

[Digsby]

March must have been just about the biggest month ever for BTL, if you look at the graph at http://www.thisismoney.co.uk/money/buytolet/article-3594457/Buy-let-loans-rocketed-142-March-stamp-duty-rush-hit.html And that is just mortgages, I'm sure plenty of cash purchasers rushing to beat the April deadline too.

So in the face of this supposed plan to hit BTL, it has surged.

It's just brought future demand forward, is all.

[Bland Unsight]

The panic will hit in October 2018- Jan 2019 as the first year of tax returns at 25% are filled in, they suddenly have to pay tax and discover it's even higher that year

I think this is possible and I agree that the punters won't anticipate the tax change; they will only react once it has largely tapered in.

However I also think that the tax change is potentially not what is going to move the market, because something else may get there first.

PRA rules may make SVR mortgage prisoners out of swathes of existing buy-to-let Q3 this year. I'd have thought that there are good odds that BCBS risk-weights may start moving BTL SVRs up during Q1 2017 so by Q2 2017 you could have people going to their mortgage brokers hoping to remortgage on the ridiculous low rates currently available and finding that they are bounced to a 6% SVR at which point the investment no longer works, so you get sales, which soften prices, creating more mortgage prisoners and so on. (Of course the coming tax change is part of how the PRA rules will create the mortgage prisoners, so the separation of the two causes is perhaps a little contentious.)

How could all of this possibly be an accident?

[renting til I die]

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.

I've seen the same thing, all the while taking back chat about my own lack of property and how renting is dead money... you can't lose on property, innit!

[renting til I die]

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.

Good post. Could indeed be the perfect storm as the next recession approaches.

[spyguy]

I think this is possible and I agree that the punters won't anticipate the tax change; they will only react once it has largely tapered in.

However I also think that the tax change is potentially not what is going to move the market, because something else may get there first.

PRA rules may make SVR mortgage prisoners out of swathes of existing buy-to-let Q3 this year. I'd have thought that there are good odds that BCBS risk-weights may start moving BTL SVRs up during Q1 2017 so by Q2 2017 you could have people going to their mortgage brokers hoping to remortgage on the ridiculous low rates currently available and finding that they are bounced to a 6% SVR at which point the investment no longer works, so you get sales, which soften prices, creating more mortgage prisoners and so on. (Of course the coming tax change is part of how the PRA rules will create the mortgage prisoners, so the separation of the two causes is perhaps a little contentious.)

How could all of this possibly be an accident?

Looking at business loans, I'd expect something closer to 8% at the mo.

And that would be for BTL with a reasonable (75%) LTV.

90%_ LTV are gong to get totally bled dry.

WTF were they thinking?

[eek]

It's okay for you to change your mind now (you don't have any BTL) - although at the time you may understand why your position severely irritated me vs the imbalances in the market.

Like we needed any less hope on HPC, vs our ever more priced out positions vs runaway HPI (and BTLers big part of that doubling down, haven taken the bait about HTB.... an incentive for speculators). It didn't bother me that much. Full belief the BTLers were dancing into their own destruction.

The facts have changed mightily.

Yet you didn't see it coming as you projected young people's future as a choice between renting forever or whack-off back-breaking large mortgages - and thinking about those lucky enough for some help from bomad.

That's a difference. If something can't go on forever it will stop. And we were always nearing that point - but some could not see it.

Also perhaps you didn't properly weigh up the need for HPC in the economy. The the good of it. And for the good of the banks into volume lending to younger people after the HPC. Churn, high transactions, mortgage volumes, profits.

My position is many long wave HPIers have also held such a blindness, of focus on themselves - about the market going forwards and forever high prices with young people having lifetime of renting, and thus why doubled down into BTL. All levels of intelligence. You haven't gone into BTL, but you bought into the same mindset of younger people up against it with forever high prices.

It's not just you. 20+ years owners (no mortgages) tip up here frequently, and see the market in their own terms - often with zero perspective from renter-saver side.

Oh I'm surprised you've managed to save anything. You make it out that every penny you earn is spent on renting a hovel the greedy landlord just about deems you worthy to rent... And every six months they up the rent and if you don't pay merrily turf you out and you start hunting again..

There may be a lot of sarcasm in the above..

Edited May 30, 2016 by eek