Wednesday, Dec 16, 2015

He obviously doesn't like it

BBC: Carney promises action on buy-to-let property market

Carney still thinks BTL is a threat to economic stability.
Having sat out a 25% drop during the middle of the "ten years" in the 1990s because I actually needed somewhere to live (despite not liking the house) I (and Carney) wonder how many BTL "investors" would be prepared to do the same.

Posted by tenyearstogetmymoneyback @ 08:02 AM (7267 views)
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1. jack c said...

It's fair to say in this instance "talk is cheap" and IMO falls into the same camp as Mr Carney and his team raising interest rates ie seeing is believing.

Wednesday, December 16, 2015 09:09AM Report Comment

2. mombers said...

All the more reason to professionalise the industry. A company dedicated to renting out properties isn't going to rush for the exit.

Wednesday, December 16, 2015 09:25AM Report Comment

3. mountain goat said...

High time the screw was tightened on mom and pop BTL and the generational housing gap it fosters.

Wednesday, December 16, 2015 09:32AM Report Comment

4. judgandury said...

Carney is being a bit sneaky because he knows that the 'action' is imminent from someone else - although he undoubtedly had a hand in it. This is the 'action' he is talking about:

The Bank of International Settlements has just said that it is tightening its requirements for banks that have buy-to-let mortgages on their books. Banks will now have to apply a risk weight of between 70% and 120% of the value of the asset for BTL mortgages, versus 25% to 55% for normal residential mortgages.

This means that BTL mortgages will soon be more expensive. More legislation coming from the govt. It really is the beginning of the end for small scale BTLers.

Wednesday, December 16, 2015 10:31AM Report Comment

5. libertas said...

Apparently they are simply shifting BTL from sole trader to LTD. where you can avoid many of these issues, and where the limited status removes a certain part of the risk.

Yes, regarding #4, the mortgages may be about to get expensive but, demand for rentals will not subside, and for those who can get a mortgage, with less competition, they may make even more money. Plus, if oil and other commodity prices keep falling, we may yet see an emergency interest rate cut if deflation heads towards -1%. We barely got 0.1% this month, before the impact of sub $40 Brent Oil has had any effect.

Wednesday, December 16, 2015 11:11AM Report Comment

6. libertas said...

What people forget, is this recent plunge in oil prices co-incides with the Paris economic suicide meeting where countries agreed to bind their feet and not burn oil that releases CO2 that plants breathe. A trading range of $10 to $20 oil will become the norm as the invisible hand of the market attempts to rout not American shale producers, but the political opposition to fertilising the earth with standards of living boosting hydrocarbons.

Wednesday, December 16, 2015 11:13AM Report Comment

7. icarus said...

Nothing here about what the BoE is doing other than 'discussions' with Osborne about regulating BTL mortgages but 'no word', after several months, about which options are on the table.

Carney defended forward guidance? How? So far it has just misled to the point that when he next cries 'wolf' nobody will be listening.

How could he possibly predict oil price falls and yuan devaluation? The speculation unleashed by massive QE and ZIRP by BoE, Fed, ECB and BoJ was always going to cause some such instability in world markets.

And who fuelled BTL, along with high prices and unaffordable rents, in the first place?

Wednesday, December 16, 2015 12:00PM Report Comment

8. mombers said...

@5 my understanding is that it is harder for a Ltd company to borrow - rates are about 0.25% higher I think I read somewhere.
Regarding there being less competition as a result of this, remember that any supply that leaves the BTL sector is matched by a reduction of demand as a renter becomes an owner so I don't see this leading to higher rents.

Wednesday, December 16, 2015 01:22PM Report Comment

9. Chrisvow said...

@6 Luckily for us there will be no shortage of CO2 to fertilise crops(30% increase in yields they say) as there is already plenty to spare in the atmosphere without having to burn more oil. Why else do you think the world population is increasing? Is that what you want?

Wednesday, December 16, 2015 02:18PM Report Comment

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11. judgandury said...

Transferring ownership of a BTL property to a limited company is an expensive non-starter in almost all cases. It would trigger stamp duty and capital gains taxes. There would also be early redemption fees, admin costs and higher interest rates.

If a Ltd company is used to buy a new BTL property there could be small tax savings under certain circumstances but these savings would often be lost when the profits were used for personal income and taxed accordingly. There would also be higher admin fees and higher interest rates. The government has got it in for them such that they are not even going to get all the tax benefits of a normal Ltd company. There's plenty of moaning about that.

The 3 main changes being phased in will combine to create a situation (by 2020) where it will not make much financial sense to have a mortgage on a BTL property. That ends the BTL dreams of a huge chunk of the market. Game over

To put things further into perspective, the government expects to raise an additional 6.3 billion per annum from BTLers due to the latest raft of taxes and measures getting phased in over the next few years. In other words, the BTL business is about to be 6.3 billion pounds less profitable. It's no coincidence that the amount being taken from BTLers is very similar to the amount being given directly towards affordable house building for first time buyers. It's a deliberate shift in power.

Wednesday, December 16, 2015 07:09PM Report Comment

12. tenyearstogetmymoneyback said...

8. I have never understood how we went from a situation where having more than one mortgage required a bridging loan with punitive interest rates to BTL being considered lower risk than someone buying a place to live in. Completely agree with the comment about demand. Jack C since I recall you have mentioned being involved in Mortgages when did BTL start. Something I remember well was Tony Blair selling his house for what now seems a modest sum when he moved into No.10.

He obviously didn't think about renting it out back then.

Going back to a previous thread I am surprised how much the site is being advertised on local radio (Wave105).
The other advert which keeps being repeated is one reminding renters that they should test their smoke alarms as the landlord won't.

After posting the article I did some research on Mr Carney to try and find out his exposure to the property market. The most recent article I found was

which implies he wasn't happy with the 3750 a week rent.

Even if he has now bought it is good that he has had experience of the rental market and doesn't appear to have a string of BTLs himself (unlike some MPs).

Wednesday, December 16, 2015 10:01PM Report Comment

13. mombers said...

@9 The extra 6.3bn might just tip the PRS into being a net taxpayer - 10bn in Housing Benefit currently exceeds the approx 5bn currently collected...

Thursday, December 17, 2015 10:47AM Report Comment

14. Paulfay said...

@8 Mombers - I'm not sure that your analysis will come to pass. I can envisage a situation whereby landlords cannot afford to accept rent so they evict the tenant whilst they attempt to sell. Many tenants are simply not in a position to buy, hence we get a situation were there is reduced supply that is not fully offset by the lack of demand. In the short term at least this will increase homelessness and the need for emergency B&B, thus increasing the cost in housing people.

Longer term the forced sale of BTL properties will put huge pressure on the bottom end of the housing market which I would expect to put pressure on the next rung of the 'housing ladder' with decreasing pressure the higher up the value chain you go. I expect the market to act in a similar manner to the BTL boom but in a deflationary manner.

I suspect that the banks will find themselves in trouble again as the HPC that many (myself included; although I capitulated long ago) have long expected, materialises. Measures should have been taken long ago to prevent the post 2007 reinflation of houseprices but GO did exactly the opposite with HTB and I feel sorry for the people that he suckered in. They acted logically given Government policy but the latest policy will have many unintended victims; if it comes to fruition . Personally I believe that it is so badly thought out that some one with a modicum of common sense may influence GO and result in a watering down of the proposals.

Friday, December 25, 2015 11:53AM Report Comment

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17. Paulinuk said...

Goverment/s should have stopped property price rises what good do they do

Sunday, December 27, 2015 10:31AM Report Comment

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