Extend Rtb To Prs - Only Way To Get Out Of Btl Mess?

[Fairyland]

A full blown HPC could be bad for individuals, banks and economy.

Has BTL become too big too fail?

Is, extending RTB, with heavy discount(40%), the only way to get out of BTL mess? That way only a few investors will suffer but others will keep the economy, housing market and taxes ticking.

[The Knimbies who say No]

Missing the words 'a minority of' in your first line. I say this as someone who is now in the process of purchasing a house. Prices gotta get smashed, no special flowers I'm afraid. Owned outright, BTL, mortgaged, whatever. Not sure how your policy would work in practice anyway, setting prices in streets kinda sets the values anyway.

[Fairyland]

Sorry my post did not come out well. I am all for a big HPC.

What I meant to say was, those who are in control will avoid HPC st any cost. Mass BTL sale would trigger HPC. The smart people should know that hebce HTB and similar schemes. So what will be the next move? PRS RTB came to my mind.

[The Knimbies who say No]

Sorry my post did not come out well. I am all for a big HPC.

What I meant to say was, those who are in control will avoid HPC st any cost. Mass BTL sale would trigger HPC. The smart people should know that hebce HTB and similar schemes. So what will be the next move? PRS RTB came to my mind.

Oh I see, apologies. Yes, the extent to which Govt is happy to go with in policy terms has been surprising, to put it mildly. Wonder if the tax relief changes amount to a RTB in any event?

[Venger]

What I meant to say was, those who are in control will avoid HPC st any cost. Mass BTL sale would trigger HPC.

Perhaps in your view and view of many other market participants. It's a perception, and one many are certain about, as BoE have got banks capitalised behind the scenes during the past few years.

Hope it all goes smoothly Knimbies, and trust you found some good value. Saw an inheritor cut and cut asking price during 2012, to 2002/03 level. Then accept £17K below that asking price from and FTB. That sale alone wasn't enough to impinge on wider market, but the FTB got great value. Then came HTB and BTLer double down... but now policy is turning on those BTLers. So it's possible we may see more such opportunity for instances of hpc value.

[spyguy]

BTL is concentrated in minor players now.

There's the LL OO to go after for the shortfall.

[justthisbloke]

If RTB (BTL) were to happen, it would most likely be in a manner that you really don't want.

HMG would become the buyer of last resort - putting a floor on house prices.

For prices to fall you need real financial suffering and raw, unhindered terror in the faces of investors. Government employees wandering around with cheque books is something you really don't want.

[The Knimbies who say No]

Perhaps in your view and view of many other market participants. It's a perception, and one many are certain about, as BoE have got banks capitalised behind the scenes during the past few years.

Hope it all goes smoothly Knimbies, and trust you found some good value. Saw an inheritor cut and cut asking price during 2012, to 2002/03 level. Then accept £17K below that asking price from and FTB. That sale alone wasn't enough to impinge on wider market, but the FTB got great value. Then came HTB and BTLer double down... but now policy is turning on those BTLers. So it's possible we may see more such opportunity for instances of hpc value.

Cheers, it's a case of making ones bed and living in it. Value, good question. I've avoided a doer upper, utter folly from what I saw on Rightmove and at a couple of viewings. Well inside 2*single earnings mortgage. As much as we want/need on a 25 year view. As with much of the housing stock in the UK however, it could/should/hopefully will be much cheaper in future. Sparse stats, but will also lower comparables in area fwiw.

[Patient London FTB]

RTB not the only way in my view. There will be many ways for BTL to exit and only some will leave them with their finances intact.

I think we (I'm including myself) are in danger of falling into the trap that because we've been thinking about this a lot everyone else has too and they are prepared to quickly choose a simple solution from a menu of options.

It's not going to happen like that and the first phase will be a period of fudging and 'extend and pretend'.

BTL lenders will be pressured and incentivised to practice forebearance on landlords so there are no forced sales and no tenants put out on the street. If the BTL lenders look too vulnerable they will be rolled up into the bigger banks or a new UKAR.

No forced sales will be the mantra and that will go for distressed developers too.

This won't stop prices falling, because we'll still get the demand shock of everyone waking up and realising that BTL is an utterly stupid investment, but politicians and bankers will do their best to let the market down gently.

Meanwhile, individual landlords will get the breathing space to come to their senses and sell in a relatively orderly market. I don't think there will be any 'offer to landlords' made by government at this point as that would clearly be counter-productive and lead to BTLers delaying sales in the hope of blackmailing the government into a better offer. Instead, the government will just hold out the stick of lower prices and say 'sorry, no carrot for you, it wouldn't be fair'.

What happens after that I don't know, probably no point in speculating at this stage.

Sorry if this sounds depressing to everyone. It is to me. But that's the way of the world. In 2008 the speculators were bailed out just when it appeared we were going to get a fair market, and for me that was a major lesson to expect the initial reaction to be to defend house prices at all cost.

[Frugal Git]

The crazy thing is 40% isn't any sort of magic gift at these insane prices. That'd take the 500k house I think looks like a reasonable home round here down to 300k, which is still stupid money compared to my piddling going nowhere income.

Oh and if it means crystallising a buy to letters gains with tax money, then f**k that.

But do come back when you can match the 75% that people get on a council house. Might just be enouth to adjust my moral code.

Actually no it wouldn't. This is a terrible road to walk down just as it was when they did it with council houses. Too much moral hazard.

[Bland Unsight]

A full blown HPC could be bad for individuals, banks and economy.

Has BTL become too big too fail?

Is, extending RTB, with heavy discount(40%), the only way to get out of BTL mess? That way only a few investors will suffer but others will keep the economy, housing market and taxes ticking.

The poster child for TBTF was AIG. If, as a creditor, it had been unable to discharge its obligations to the Wall Street banks that had hedged bets with its credit default swaps, it would have taken some of them down with it. This is contagion red in tooth and claw.

Can buy-to-let meaningfully be compared to that?

Take two identical, tiny and crappy Birmingham city centre flats. One was purchased in 2007, 90% LTV for, say, £150k. It is now worth £120k - the lender is overlooking the negative equity because the rent covers the mortgage. The second was purchased in March 2016 for £125k, 75% LTV. The first is actually part of a portfolio of five flats owned by an out of work hairdresser presently living in an HMO with the rent paid by LHA (laying it on a bit thick now for comedy effect). The second is a little property punt by a pair of fifty-somethings with a £1.2m terraced house in Tufnell Park, owned outright, and a combined pre-tax income from employment of £120k per annum.

Let us suppose that we have a recession and a move in house prices down by 10%.

The hairdresser finds that two of his five flats go into arrears and UKAR, who hold the mortgages, repossess, sell up and book the hit to their balance sheet. The Londoners' tenant works as a trainee for an insolvency practitioner, always pays the rent on time and the rent covers the mortgage and leaves a little over. They have a modest uncrystallised capital loss on the punt and a stream of pin money to soften the blow.

The BTL sector has heterogeneity and lots of little victims. A BTL run will hammer house prices and there will be losses for the banks, but it is not a systemic threat. The so-called 'wealth effects' of house prices collapsing can't be avoided. We can't follow a crash forestalled with another bubble and pretend that a hope to keep rolling double sixes forever is a plan. It's always been when and not if.

Edited July 5, 2016 by Ghost Bird

[Patient London FTB]

My worry is this sounds too clean:

"The hairdresser finds that two of his five flats go into arrears and UKAR, who hold the mortgages, repossess, sell up and book the hit to their balance sheet."

The messy bit is what happens to the tenant. Are they evicted? When? By who? Won't they be perceived as a victim who needs to be helped to stay in their home for a bit?

Could we end up with a UKAR that is part "bad BTL bank" and part "benign landlord"?

The hairdresser meanwhile is released from the heavy burden of tending to his renter charges, lucky him.

[spyguy]

My worry is this sounds too clean:

"The hairdresser finds that two of his five flats go into arrears and UKAR, who hold the mortgages, repossess, sell up and book the hit to their balance sheet."

The messy bit is what happens to the tenant. Are they evicted? When? By who? Won't they be perceived as a victim who needs to be helped to stay in their home for a bit?

Could we end up with a UKAR that is part "bad BTL bank" and part "benign landlord"?

The hairdresser meanwhile is released from the heavy burden of tending to his renter charges, lucky him.

On the first, two new units of accommodation become available. They get repriced.

On the second, released. Of course she does - just post the keys back. Assuming this is a typical hairdresser, the bank will repo her car, her own house, her business and any other asset she has.

[olde guto]

Be careful what you wish for, you might just get it.

RTB in the PRS would probably result in people being turfed out every 6/12 months and probably an end to rolling contracts unless drastic changes are made to ASTs to prevent this (the devil is in the detail as always). In some cases would make little difference, but when you find a decent enough house/flat and landlord you tend to stick around. When I was in early 20's moving every year didn't bother me much, but as you get older it becomes a pain and if you've got kids it adds yet another complication.

[Motor_Blade]

Be careful what you wish for, you might just get it.

RTB in the PRS would probably result in people being turfed out every 6/12 months and probably an end to rolling contracts unless drastic changes are made to ASTs to prevent this (the devil is in the detail as always). In some cases would make little difference, but when you find a decent enough house/flat and landlord you tend to stick around. When I was in early 20's moving every year didn't bother me much, but as you get older it becomes a pain and if you've got kids it adds yet another complication.

Completely agree, every policy decision by TPTB tends to have a set of unintended consequences that more often than not cause bigger problems than the original problem.

[Patient London FTB]

Two new units of accommodation become available. They get repriced.

Great if the property becomes available on the open sales market, but will it? The political reaction may be 'we have to protect the tenant', which is laudable, but what if the way they do that is for BTL-UKAR to take over as a landlord? That keeps a property off the market and in the rented sector and keeps FTBs off the ladder.

A slightly more nuanced take on that is that there will be some properties that can easily be sold by BTL-UKAR on the open market and some tenants for whom it won't be a big deal to move on, and there will be some properties that can't easily be sold by BTL-UKAR where it will probably be tasked with being a forbearing landlord.

[TheCountOfNowhere]

A full blown HPC could be bad for SOME individuals, SOME banks and economy the rich .

You're on the wrong site mate

[Fairyland]

You're on the wrong site mate

Check my post no.3.

[TheCountOfNowhere]

Check my post no.3.

Still not brutal enough. Venger wont like the namby pamby approach and I tend to agree.

The UK needs a massive HPC.

it will be great for the economy. The only people that will get hurt are the investors and the greedy. Neither of whom should have any consideration.