When Will The Sipps U-turn Kick In

[sam]

Last month Gordon Brown did a U turn on allowing property into Sipps, apart from Giving the BOE the powers to control interest rates, this is the only sensible thing i have ever seen from him.

I never believed that Sipps was going to reignite the property market, but i do think it was(and had been) holding up the property market.

I honestly believe that many of the houses/flats that were due to be bought for the purpose of Sipps will at some point be flooding the market.

Do any of you have any opinion on when this will be reflected in the monthly stats.

Sam

[eek]

Last month Gordon Brown did a U turn on allowing property into Sipps, apart from Giving the BOE the powers to control interest rates, this is the only sensible thing i have ever seen from him.

I never believed that Sipps was going to reignite the property market, but i do think it was(and had been) holding up the property market.

I honestly believe that many of the houses/flats that were due to be bought for the purpose of Sipps will at some point be flooding the market.

Do any of you have any opinion on when this will be reflected in the monthly stats.

Sam

My believe that those that have not been sold will be hard to sell.

Those which have been sold off-plan will remain sold as the builders take buyers to court to ensure that they complete.

Those who have bought will be stuck with the property for years as they will not have the available money to crystalise or cover the loss (i.e. while they may wish to sell lenders will simply not allow them to, as there won't be sufficient money to repay the negative equity). This will probably end up in court as lenders try to add second /third/ fourth charges onto the BTLers primary property.

[El_Pirata]

Those who have bought will be stuck with the property for years as they will not have the available money to crystalise or cover the loss.

If you didn't get the tax break you expected and can't cover the mortgage with the rent (a lot of these places are sitting empty), I actually think it will be hard to hang on to them. The negative cash flow will be a killer. A I expect many will bite the bullet and get repossessed.

[delite1]

Last month Gordon Brown did a U turn on allowing property into Sipps, apart from Giving the BOE the powers to control interest rates, this is the only sensible thing i have ever seen from him.

I never believed that Sipps was going to reignite the property market, but i do think it was(and had been) holding up the property market.

I honestly believe that many of the houses/flats that were due to be bought for the purpose of Sipps will at some point be flooding the market.

Do any of you have any opinion on when this will be reflected in the monthly stats.

Sam

Sam,

I think the significance has been grossly under-estimated. Many of those new build blocks you and I see daily which say 80% or so sold yet have no residents have been bought purely because the tax payer was going to pay a large chunk so who cares if there was no rent or even capital gain as long as the place was still worth roughly what you paid for it you were making a killing.

I think we will see the effect of this in this first quarter 2006.

[eek]

If you didn't get the tax break you expected and can't cover the mortgage with the rent (a lot of these places are sitting empty), I actually think it will be hard to hang on to them. The negative cash flow will be a killer. A I expect many will bite the bullet and get repossessed.

If they take that approach the whopping great loss will end up attached to their primary residence. I can see many BTL landlords receiving helpful warnings from their lenders (you do know that we will sell this for whatever and go after your main property for the rest). Then we really will see high street spending drop, they'll have no choice but to put all their cash into that monthly repayment.

Unless of course they have so many properties in Negative Equity that they house won't cover the shortfall. Two years down the line it won't surprise me if 2 small flats bought in 2003 isn't enough to destroy your entire wealth.

Edited January 3, 2006 by eek

[AteMoose]

I think the double wammy will be the extra costs, that still need to be paid if noone is living in the flat. The maintanance costs for these new flats tend to be astronomical, and may help to make these flats unsellable for a long time...

Edited January 3, 2006 by moosetea

[sam]

Sam,

I think the significance has been grossly under-estimated. Many of those new build blocks you and I see daily which say 80% or so sold yet have no residents have been bought purely because the tax payer was going to pay a large chunk so who cares if there was no rent or even capital gain as long as the place was still worth roughly what you paid for it you were making a killing.

I think we will see the effect of this in this first quarter 2006.

Hi Delite 1

Exactly, many people who were about to buy these new build flats for example would have had to change their business plan overnight. There is a lot of property out there gathering dust(or soon will be), so my question now is how long before it feeds into monthly drops, soon i suspect.

Sam

[NJP]

I think the significance has been grossly under-estimated. Many of those new build blocks you and I see daily which say 80% or so sold yet have no residents have been bought purely because the tax payer was going to pay a large chunk so who cares if there was no rent or even capital gain as long as the place was still worth roughly what you paid for it you were making a killing.

While I'm glad that GB prevented people from investing residential property in SIPPs, to prevent another 'gold-rush', there is a lot of misinformation about the subject.

Although it's true that it's the worker's pre-tax earnings that are invested into a pension, that doesn't mean that the tax payer contributes towards it. In fact, the tax would be payable on the income received from the pension, which may well be more than the original price of the property.

You wouldn't make a killing investing property in your SIPP, either, unless it increased substantially in value, just like any other pension investment.

[aclwalker]

If you didn't get the tax break you expected and can't cover the mortgage with the rent (a lot of these places are sitting empty), I actually think it will be hard to hang on to them. The negative cash flow will be a killer. A I expect many will bite the bullet and get repossessed.

Getting repossesed inside a pension sounds nasty!

[NJP]

Getting repossesed inside a pension sounds nasty!

You could only borrow 50% of your pension pot to use as a mortgage, so I can't imagine a scenario where many people would have ended up with their property reposessed.

But, of course, the u-turn means that those who jumped the gun without looking into it properly may well have landed themselves in trouble.

[Jason]

Last month Gordon Brown did a U turn on allowing property into Sipps, apart from Giving the BOE the powers to control interest rates, this is the only sensible thing i have ever seen from him.

I never believed that Sipps was going to reignite the property market, but i do think it was(and had been) holding up the property market.

I honestly believe that many of the houses/flats that were due to be bought for the purpose of Sipps will at some point be flooding the market.

Do any of you have any opinion on when this will be reflected in the monthly stats.

Sam

I am glad that buying a property tax free inside a SIPP was reveresed. I don't think it would of helped house prices rise, but it did deifinately help sentiment, and sentiment is key - of which I think alot of us underestimate.

But it does surprise me how many articles they were saying SIPPs would provide a boost, and now there is a u-turn they were tripping over themselves to say it would have done nothing.

Taking all this into account, I think the recent pick-up was because of SIPPs and the expectation of lowering interest rates. I expect the next 3 months to adjust back to the downward trend. When the headline figures are negative (both halifax and nationwide) I expect far bigger falls - but this may be another year yet?!?

[Take me to the cleaners]

From what I hear in Leeds, a lot of the ghastly 2br new builds have recently been sold to a brother and sister team. I wonder what they intend doing now? There are no purchasers and few renters. Anyone know?

To tell you the truth I occasionally feel sorry for the saps that have bought into this City Centre newbuild "scam". But only for a second or so.

[oracle]

Last month Gordon Brown did a U turn on allowing property into Sipps, apart from Giving the BOE the powers to control interest rates, this is the only sensible thing i have ever seen from him.

I never believed that Sipps was going to reignite the property market, but i do think it was(and had been) holding up the property market.

I honestly believe that many of the houses/flats that were due to be bought for the purpose of Sipps will at some point be flooding the market.

Do any of you have any opinion on when this will be reflected in the monthly stats.

Sam

march or april.

we'll most likely get a perilously close to negative YOY from the HBOS& co early this year,but I have several reasons why I've earmarked march or april for the drops.

[ʎqɐqɹǝʞɐɥs]

march or april.

we'll most likely get a perilously close to negative YOY from the HBOS& co early this year,but I have several reasons why I've earmarked march or april for the drops.

Are these other reasons a secret?

[oracle]

Are these other reasons a secret?

not really,I've been ranting on about the reasons on other posts and people seem to think I'm nuts.

(war with iran)

....my rationale for this is it will make a very nice scapegoat,and add the threat of higher oil+gas prices,plus a shock rise in IR's to cover it.

not exactly what your up-to-the-neck-in-debt homeowner wants to hear.

if you saw the impact on the oil/gas price when russia BRIEFLY turned off the tap,picture what a year or two of supply outage in iran(5% global oil output) will do.

to be honest I think that could be a conservative estimate too,potentially it could be worse if saudi militants flare up.

Edited January 3, 2006 by oracle

[apom]

You could only borrow 50% of your pension pot to use as a mortgage, so I can't imagine a scenario where many people would have ended up with their property reposessed.

But, of course, the u-turn means that those who jumped the gun without looking into it properly may well have landed themselves in trouble.

you didn't have to buy the whole thing..

some investors were buying up new build plots of many flats..

you could buy a share of a flat..

guess that had to hurt..

Ouch..

[ʎqɐqɹǝʞɐɥs]

Read the article in this thread

[FTBagain]

not really,I've been ranting on about the reasons on other posts and people seem to think I'm nuts.

(war with iran)

....my rationale for this is it will make a very nice scapegoat,and add the threat of higher oil+gas prices,plus a shock rise in IR's to cover it.

not exactly what your up-to-the-neck-in-debt homeowner wants to hear.

if you saw the impact on the oil/gas price when russia BRIEFLY turned off the tap,picture what a year or two of supply outage in iran(5% global oil output) will do.

to be honest I think that could be a conservative estimate too,potentially it could be worse if saudi militants flare up.

War with Iran. No chance. A bit of gun boat diplomacy perhaps, but all out war, a la Iraq, no.

Why? Not enough troops to go around. America has a huge percentage (circa 25% or more) of its regular strength deployed in Iraq. The rest are training to go, or are on respite. Neither the yanks or the Brits can go kick ass for a long time to come. We are bogged down.

[mightytharg]

Last month Gordon Brown did a U turn on allowing property into Sipps

...

Do any of you have any opinion on when this will be reflected in the monthly stats.

Sam

I think it already has. The recent increase in house prices could be due to the people who were waiting for Sipps no longer waiting.

[johnnyw]

I think it already has. The recent increase in house prices could be due to the people who were waiting for Sipps no longer waiting.

Anyone remember the old property based buisiness expansion schemes which cost investors chasing tax advantages a fortune during the last crash?

It went something like this:

You set up a company which borrowed the money to buy a slum from some wide boy for twice what it was worth at the time but it was ok cos you got tax relief at 40% on the purchase price so you only had to borrow 60%. Then when the slum halved in value so it was worth a quarter of what you paid for it you had to repay the 60% and ended up loosing all your money.

But because you had got 40% tax relief the financial advisors told you that it had still not been all bad and it wasnt their fault anyway because they didnt know there was going to be a crash.

Actually thinking about it again didnt you buy a 10% share in each of 10 slums?

Maybe things arent as excessive this time as you are thinking?

Edited January 4, 2006 by johnnyw

[MRMX9]

We are about to move into a nice top floor 1 bed rented flat in a brand new development in East London. Including service charges etc I estimate that we would be paying at least £550 more per month if we bought the flat at its current 'value' of £220k (Olympics bubble!).

There are well over 50 flats in the development but when I walk past there in the evenings there are only a handful of lights on. Only two of the allocated parking spaces (out of 16 available) ever have cars parked in them.

I'm sure it will fill up eventually when the buy to letters eventually find tenants but am looking forward to a very peaceful few weeks (months?) in a virtually empty development.