Thursday, September 13, 2007

Be our guest, chase the market down

Landlord website confirms buy to let investors are panic selling

"Our in-house research suggests that many of the 14,000 landlords registered with our site are selling their properties at once. It seems that UK landlords are looking to buy more property but a lot have decided to cash in on their domestic investments, with some of them making £80,000 profit in six years from a simple two bed terraced house. They have decided that market conditions are looking bleak here, so they're paying off debts and trying their luck abroad. However, many have failed to allow for capital gains tax, which has hit some hard."

Posted by converted lurker @ 07:39 PM (2430 views)
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20 thoughts on “Be our guest, chase the market down

  • But weren t btletters in “for the long run”?
    weren t these punters very skilled investors, as our long-time friend Dean of landlordexpert.com used to portray them?

    as a matter of fact I have checked Dean’s site and came across some Comical Ali’s pieces stolen from those other geniuses of Azzezt

    PM, Thur 13th Sept – Great article explaining the GOOD state of buy to let!
    http://www.landlordexpert.co.uk/index.php?news=1154

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  • Without BTL net acquisitions, current prices cannot be sustained – the BTLers have replaced FTB’s as they were priced out – now the FTB’s have to priced back in again – which means prices have to fall – and by a lot…

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  • Forget about Capital Gains Tax, all of my colleagues who BTL simly don’t declare their BTL to the Inland Revenue, so lets face it, there are so many of them that only a few will get caught and will simply plead ignorance and then just offer to pay the tax. They see Tax Evasion as Tax Avoidance and the Revenue will simply be grateful for the few they catch. The subtle difference of course, is that the former is illegal and should result in prosecution. I have yet to see any of my colleagues prosecuted !!!!

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  • Tim Warrington of Landlord.co.uk today said:-

    “We can understand landlords wanting to cash in on the money they’ve made over the last few years. Unfortunately, their desire to dump their UK properties may start a ‘domino effect’ with other landlords. If the majority follow suit, it could be very damaging for the UK housing market.”

    On the 6th of September he also said:-

    “For the investor with imagination, Lapland is a ‘hot property’. Neighbouring Finland’s economy is booming and the Finns love nothing better than a skiing holiday in sunny climes. This creates an increasingly strong demand for log cabin-type accommodation to attract domestic tourists – and also to cater for winter sports enthusiasts from the UK and US, who are turning up in greater droves.”

    So that’s where the money is upping sticks to.

    Notes for editors; Landlord.co.uk was set up by businessman Tim Warrington and his bank manager, Bruce Biddle, in April 2006.

    See http://www.pressdispensary.co.uk/releases/c991351.php for more info on Tim and his vast team of experts.

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  • converted lurker says:

    these are the guys who have suggested molgolian areas more suitable and used to nomadic tents before today, (I’m not joking)

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  • captain sensible says:

    bearshare1616. Can’t see most BTL sellers escaping CGT for long. Unlike the plumber who does an hour’s work for cash but otherwise declares most income to the revenue and so is unlikely to be caught, BTLrs with a mortgage will have declared themselves to the revenue to gain tax relief, there will be a clear record when the property is sold (Land Registry and Stamp Duty) and the amount of tax to be collected per transaction is likely to be relatively high. I think the Revenue will see this as a very easy source of extra money and if they think they are losing out will come down hard on potential evaders.

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  • crash bandicoot says:

    If I understand this theory correctly now is a good time to make a BTL investment because:

    1, More people are unable to afford rising mortgage costs meaning that they need to rent.

    2, More people are selling their houses because they see a peak in prices and need to rent somewhere to live.

    The points that the “experts” are missing are that if the people from 1, cannot afford to pay their mortgage, they also cannot afford to pay a BTL landlord’s mortgage in the form of rent. And in instance 2 it takes little imagination to realise that if there really is a peak in the market (as suggested in the article) it is really not the best time to be buying.

    I see this more as a rallying call “If we all hold firm we can see them off!” Oops I think I’ve gone back to that Zulu stuff from a few days ago

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  • The CGT problem lies in the fact that many landlords remortgaged to the maximum possible amount as their property price increased. This means that when they come to sell, when they pay off the mortgage, there isn’t enough money left for the CGT bill.

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  • dohousescrashinthewoods says:

    So, in the US, they have poor people and FTBs getting gradually repossessed, but clinging on, causing a gradual decline.

    In the UK, we have no FTBs, but a drove of BTLs who are cutting and running at the rate of 20 properties per person, in the space of a couple of months.

    Armageddon by Christmas, anyone?

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  • Armageddon by Thanksgiving – I would reckon

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  • Ihopeitgoeswithabang says:

    Since everything is computerised it would be very simple for the Inland Revenue to ask the Land Registry to compare information with the Council Tax lists for the last 10 years and see if the person who actually sold the property has actually been living in it. Even i can do that with a credit card and an internet browser!!! If they have not then it is a clear case for a tax bill. I know there are lots of reductions available for various reasons.

    But anyone who thinks they have ‘got away’ with it may well have done now. But thats no guarantee of not getting caught out later. You could be looking at paying tax + a 100% penalty. I.e. paying £40k Tax and then paying a £40k fine. They should have of course been filling out self assessment forms and declaring their interests and earnings from rental anyway!

    The Inland Revenue know only too well that this is going on. If they ever decide to check back, then those people will have to pay back what they owe and are quite likely to face hefty fines for avoiding tax.
    Its a dangerous game to play when all the evidence anyone needs to convict u is just sitting on a computer database waiting to be picked out.

    Revenue Roulette!!!!!! Play it if u dare…….

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  • I think this christmas will be great for FTBs and STRs but pretty dire for recent buyers, and probably the most depressing point of BTLs lives.

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  • Nah end of next year.

    I’m holding off the insolvency course until about April/May time next year. Then I may invest in mugging up on my knowledge (after the election of course)!

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  • Having read this site for a couple of years (but rarely contributing), I have to say that I feel the worm is starting to turn. The once very bullish press is turning quite rapidly IMHO (even auntie in the last couple of weeks). This is tipping point material, and I guess alot of nerves are being held, some at more strain than others, whoever blinks first is going to start an avalanche.
    I left the market years ago (renter to rentee) and have been scorned by friends and acquaintances for my ” but they’re just not worth that ” & “its all going to end in tears” attitude. So okay my timing was awful, but I have watched with increasing dread the slow motion train crash we are involved in. Yes I want affordable housing, but at what cost, who wants to buy a house in a wasteland no matter how great the extension, fitted kitchen etc.
    @ Bearshare – These people (well most) are amateurs and maybe going to the wall . No matter the taxman will get alot of them and some may even have to do time. The shiesters with cash, they may creep away (well don’t they always and didn’t they contribute to this mess in the first place).
    @dhcitw – Xmas looks good to me I think we are going to see fear like never before. As has been said before “This time its different!!” well I agree this time it is different.. this time its going to be a whole lot worse.

    “Life don’t talk to me about life”

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  • I would hang on to your cash for longer than that unless you are buying at auction 😉

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  • Inbreda, I wish you were right about BTLs, but unfortunately I can see high demands for rental and rents going up outstripping any mortgage rates rise… for the moment.

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  • @magnifico – Dream on. It’s a renters paradise at the moment. We’re spoiled for choice and BTL’ers are getting desperate to get somebody into their property paying *something* rather than month after month of nothing.

    I can walk out of my place today and rent a bigger property for less by tomorrow. I can’t be bothered with moving hence not doing so atm.

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  • what is your analysis on the rents for the next coming months ???

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  • dohousescrashinthewoods says:

    I think the rise in rents is a blip. As soon as negative equity sets in, people are trapped and STR is no longer an escape route.

    Besides, if the cost of owning drops below the cost of renting, it can only go one way (albeit at the rate people wake up to the fact).

    I think the effect of desperately haemorrhaging BTLs offloading properties and trying to rent them at any cost at he same time could bust both markets simultaneously.

    I don’t see myself buying for a good few years. Just sit tight and watch the carnage. then again, if prime property starts undercutting te price of cars, I could be tempted.

    One question – if property collapses and property/MEW is the greatest component of UK wealth, does that mean we have deflation on our hands?

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  • People are missing the point. Buy to let rents are going up correct interest rates are rising and with the banking crisis the pundits are pegging it to end up at around 8.5%. If this brings on a crash and it follows some of the cities predictions you could see and avarage of 33% wiped of your assets look at the states. Now if you own them then great just let the rents keep pouring in and wait the usual 8-10 years for the rise again. If you owe 85% on the properties value then all of a sudden you are in negative equity you owe more than you own. If then mortage rates are at a high rents are just about in line at 8.5% you are working for nothing for a long time. And lets face it buy to let isnt the easiest way to make money. I have been in the property game since 1998 and lukily have paid most of mine off but with out rising assets which is the whole point it turns buy to let on is head.

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