NPR

It's a long term; multi-faceted problem; & as such; greedy, & corrupt politicians shouldn't be let anywhere near it !

fishfoodie wrote: ↑Wed Apr 14, 2021 11:34 pm It's a long term; multi-faceted problem; & as such; greedy, & corrupt politicians shouldn't be let anywhere near it !

So no politicians then.

Rent control

Calculon wrote: ↑Thu Apr 15, 2021 7:20 amRent control

Looks like another thread to attack white, middle aged English high earners!

Seems to me there are just too many vested interests in keeping property prices artificially inflated. Only an economic collapse a la subprime would bring a meaningful fall in values.

tabascoboy wrote: ↑Thu Apr 15, 2021 8:20 am Seems to me there are just too many vested interests in keeping property prices artificially inflated. Only an economic collapse a la subprime would bring a meaningful fall in values.

But what would that meaningful fall in values mean to the wider economic model? How would interest rates change, effect on money markets, change in disposable income and the effect on trades and general consumer spending? Is the pension market at risk meaning retirement incomes also being hit?

You cannot discuss these matters in isolation as the interconnectivity is huge and the wider impact could be hugely negative in a single country and outside entities and their behaviours could exacerbate that.

Good topic, but a little superficial.

Calculon wrote: ↑Thu Apr 15, 2021 7:20 amRent control

5% interest rates would have a good effect too.

Was watching Escape to the Country last nigh. A tiny little 2.5 bedroom attached was price at £320k

obviously there are huge discrepancies in the market across the UK, but the average price for a house is quoted at £250k.

Lending is now capped at, I think 4.5 x salary. If you have a deposit of, say £50k (dog knows where that is coming from, mind) you can borrow the other £200k provided you have an income, single or combined, of £45K, there is no wiggle room for fees, building works, etc in this.

If the market crashes and house prices fall to 50% of their previous value, new first time buyers are looking at the same house for £125k, which is more affordable, but our original buyers are now left with £75k of negative equity, or debt as most others outside the property market call it.
Many people funded a lifestyle by borrowing against the rising house prices, but we'll ignore that for the time being.

We've painted ourselves into a bit of a corner here in the UK.

The simple answer is Non-recourse mortgages. If the banks want to hand out ridiculous loans, let them carry the risk !

fishfoodie wrote: ↑Thu Apr 15, 2021 9:45 am The simple answer is Non-recourse mortgages. If the banks want to hand out ridiculous loans, let them carry the risk !

Banks only take risks with other people's money.

Tichtheid wrote: ↑Thu Apr 15, 2021 9:47 am

fishfoodie wrote: ↑Thu Apr 15, 2021 9:45 am The simple answer is Non-recourse mortgages. If the banks want to hand out ridiculous loans, let them carry the risk !

Banks only take risks with other people's money.

I think you'll have to flesh this one out

Calculon wrote: ↑Thu Apr 15, 2021 7:20 amRent control

Zero empirical evidence that they work, 100% agree that house prices need to move to a lower multiple of income but capping rents merely allows rent seeking landlords to take their properties off market and just allow the capital growth to assuage the income component.

Those who can't afford the servicing sell up and more property ends up in the hands of the best off who use the capital growth to lower lvrs.

It also splits renters into two classes: those that rent after the law is passed (who pay far more) and the previous set who never move- ends up jamming up city property as the latter set always live in the better areas and it acts as a further constiction on supply.

A land tax payable by owners of the property is far more effective: drains multiple property owner liquidity and they're largely forced to sell. The sale process is gradual so doesn't leave a destabilising macro event in the housing market and ensures a more equitable distribution of property ownership.

Caley_Red wrote: ↑Thu Apr 15, 2021 12:41 pm

Calculon wrote: ↑Thu Apr 15, 2021 7:20 amRent control

Zero empirical evidence that they work, 100% agree that house prices need to move to a lower multiple of income but capping rents merely allows rent seeking landlords to take their properties off market and just allow the capital growth to assuage the income component.

The flaw in that being multifold, not least that if they are taking in no rents and still servicing the borrowing, they are probably losing money at a rate greater than the rise in prices. Also, they can't access any increase in value without either selling or remortgaging and even the UK's greedy banks are not lending on BTLs which are deliberately unoccupied.

Caley_Red wrote: ↑Thu Apr 15, 2021 12:41 pm

Calculon wrote: ↑Thu Apr 15, 2021 7:20 amRent control

Zero empirical evidence that they work, 100% agree that house prices need to move to a lower multiple of income but capping rents merely allows rent seeking landlords to take their properties off market and just allow the capital growth to assuage the income component.

Those who can't afford the servicing sell up and more property ends up in the hands of the best off who use the capital growth to lower lvrs.

It also splits renters into two classes: those that rent after the law is passed (who pay far more) and the previous set who never move- ends up jamming up city property as the latter set always live in the better areas and it acts as a further constiction on supply.

A land tax payable by owners of the property is far more effective: drains multiple property owner liquidity and they're largely forced to sell. The sale process is gradual so doesn't leave a destabilising macro event in the housing market and ensures a more equitable distribution of property ownership.

The rent controls introduced in Berlin, which have just been declared illegal by the German Supreme Court, appear to have been pretty disastrous. The supply of flats covered by the controls (those built before 2014) dried up completely as existing tenants reaped the benefit of drastically reduced rents, while the cost of unregulated post 2014 flats rocketed because they were the only ones available to new renters.

Construction of new properties also stopped, as builders were worried that rent controls might be extended to cover new properties, thereby increasing the scarcity of supply of new flats for rent,

A further problem in Berlin was that some landlords started to charge tenants shadow rents, in the expectation that the controls would be declared illegal, while other tenants may now be hit with demands for backdated rent increases covering the period when the illegal controls were in place.

It would help if little old ladies didn't maintain their independence by living,eating and sleeping in the front room of the family home as nursing care either stays or visits. The fact that the family moved out 30 years ago and most of the house is empty, and is slowly not in great nick because the owner can't keep it repaired is neither here nor there.

Mind you, half the time it's the kids insisting dear old mum stays at home so they can cream off the profits of decades of insane house price increases when she dies. Quite often tax free, or at a pretty low rate on the total value of the estate.

Tichtheid wrote: ↑Thu Apr 15, 2021 9:41 am obviously there are huge discrepancies in the market across the UK, but the average price for a house is quoted at £250k.

£336k for England and Wales at Feb i.e. ignoring Scotland.

sorCrer wrote: ↑Thu Apr 15, 2021 9:21 am Was watching Escape to the Country last nigh. A tiny little 2.5 bedroom attached was price at £320k

Hate that show!! "...and here's a nice 6 bedroom cottage in Wiltshire"

Cottages are small, they don't have 6 bedrooms and 7 bathrooms you cnuts!!!

Slash the taxes that house-building firms pay on every house they build. This will increase supply and drive prices down. Also build on every piece of land in Witney so that cnut Cameron can have his life ruined.

Sandstorm wrote: ↑Thu Apr 15, 2021 2:20 pm Slash the taxes that house-building firms pay on every house they build. This will increase supply and drive prices down. Also build on every piece of land in Witney so that cnut Cameron can have his life ruined.

We want to depopulate the world...not cram it full of humans...think about the resources

What is the incentive currently for BTL landlords?

As far I can make out, if you have £50k in cash you could get a 75% LTV BTL mortgage on a £200k property at say 2.5% it'll cost you about £670/month over 25 years. If you can rent that out for £750/month (outside South East) you'll clear roughly £25k in income over the period (minus income tax, repairs etc.). If the value of the property grows by 2.2% per year (historical average, but again, outside the SE) you'll end turning the £50k into a property worth about £370k plus the £25k additional income for a total of roughly £395k.

If you took that £50k and stuck it in a S&S ISA in a diverse index fund for 25 years gaining 8.3% (historical average stock market growth over the last 30 years) you'd have £395k but no empty periods, tennants skipping rent, tennants not leaving, damage, neighbours wanting you to chip in for their repairs, roofs leaking in the middle of the night, boilers packing in when you're on holiday etc. (you could always eat some of your BTL profits for a letting agent to deal with those for you, but the point remains). And you'd also have access to your money if you need it.

What am I missing? I seems like a no-brainer?

If we tax income rental (either personal income or revenue in a SPV Ltd company) to an extent that it tips the balance even more strongly in favour of alternative forms of wealth accumulation then you'd go some way to reducing the BTL investors hoovering up all the new 2/3 bed new builds and remove their need for their property price to increase to make their investment (and effort!) worthwhile.

MoreOrLess wrote: ↑Thu Apr 15, 2021 2:58 pm What is the incentive currently for BTL landlords?

As far I can make out, if you have £50k in cash you could get a 75% LTV BTL mortgage on a £200k property at say 2.5% it'll cost you about £670/month over 25 years. If you can rent that out for £750/month (outside South East) you'll clear roughly £25k in income over the period (minus income tax, repairs etc.). If the value of the property grows by 2.2% per year (historical average, but again, outside the SE) you'll end turning the £50k into a property worth about £370k plus the £25k additional income for a total of roughly £395k.

If you took that £50k and stuck it in a S&S ISA in a diverse index fund for 25 years gaining 8.3% (historical average stock market growth over the last 30 years) you'd have £395k but no empty periods, tennants skipping rent, tennants not leaving, damage, neighbours wanting you to chip in for their repairs, roofs leaking in the middle of the night, boilers packing in when you're on holiday etc. (you could always eat some of your BTL profits for a letting agent to deal with those for you, but the point remains). And you'd also have access to your money if you need it.

What am I missing? I seems like a no-brainer?

If we tax income rental (either personal income or revenue in a SPV Ltd company) to an extent that it tips the balance even more strongly in favour of alternative forms of wealth accumulation then you'd go some way to reducing the BTL investors hoovering up all the new 2/3 bed new builds and remove their need for their property price to increase to make their investment (and effort!) worthwhile.

In all honesty, there is little incentive now to join the b2L brigade.
The tax change on what you could claim on mortgage interest means it’s now a tax on turnover really and not profit, which is a nonsense way to encourage an industry. It just means I pay a few k more in tax than I did previously , and the numbers don’t really stack up for me to buy a fifth rental property now. I can’t be the only person who isn’t buying any more places and doing them up, so that means the supply of rental property & it’s quality will decrease (and keep rents as high as possible)

Further registration costs are being passed onto renters too , both on their end and from landlords seeking to cover their increasing local authority registration costs.

However , you miss one of the main advantages of owning a rental - as it appreciates, you can tap into this and remortgage to release funds , the increased interest of which the tenants are paying . Filing in a few forms and then having £115k moved into your account , was handy for me and allowed me to extend my house, pay off some of my own mortgage, and buy another flat. This keeps the LTV on my own home low, and debt as high as possible on the rentals.

Your 8.3% as an average sounds very high there tbh, and investors rarely ‘hoovered up all the available property’ as is often claimed. There are about 4 million private rented households in the uk, out of 28million, or about 15%
Of course there will be certain areas that attract investors , just as there will be areas investors won’t touch. But at national level, it’s not reallly hoovering up

‘An industry’ is a fascinating way to describe BTL. I can think of other ways...

Paddington Bear wrote: ↑Thu Apr 15, 2021 7:49 pm ‘An industry’ is a fascinating way to describe BTL. I can think of other ways...

Perhaps, but it is still an industry: requires capital, employs people, has costs, provides a vital service and hopefully makes a profit. If everyone kept their property in good condition then there wouldn’t be nearly as many opportunities for investors, so blame the game and not the players.

MoreOrLess wrote: ↑Thu Apr 15, 2021 2:58 pm What is the incentive currently for BTL landlords?

As far I can make out, if you have £50k in cash you could get a 75% LTV BTL mortgage on a £200k property at say 2.5% it'll cost you about £670/month over 25 years. If you can rent that out for £750/month (outside South East) you'll clear roughly £25k in income over the period (minus income tax, repairs etc.). If the value of the property grows by 2.2% per year (historical average, but again, outside the SE) you'll end turning the £50k into a property worth about £370k plus the £25k additional income for a total of roughly £395k.

If you took that £50k and stuck it in a S&S ISA in a diverse index fund for 25 years gaining 8.3% (historical average stock market growth over the last 30 years) you'd have £395k but no empty periods, tennants skipping rent, tennants not leaving, damage, neighbours wanting you to chip in for their repairs, roofs leaking in the middle of the night, boilers packing in when you're on holiday etc. (you could always eat some of your BTL profits for a letting agent to deal with those for you, but the point remains). And you'd also have access to your money if you need it.

What am I missing? I seems like a no-brainer?

If we tax income rental (either personal income or revenue in a SPV Ltd company) to an extent that it tips the balance even more strongly in favour of alternative forms of wealth accumulation then you'd go some way to reducing the BTL investors hoovering up all the new 2/3 bed new builds and remove their need for their property price to increase to make their investment (and effort!) worthwhile.

Property has several aspects that make it attractive versus other 'asset classes' (I use inverted commas because I think of property as a place to live rather than a tool of speculation):

It allows you immense access to leverage, sometimes owning as little as 10% which means that when prices nominally rise by 10%, your actual return (assuming you paid 2.5% of the outstanding value in that time and your net yield is a stingy 2% and rates a stingy 3%) for a 500k house is not 10%, it's actually closer to 70% on the capital aspect alone. You'd also be making money from the yield which covers all the above and have someone else servicing the debt. You'd have to be knee deep in CFDs and options to access that sort of leverage and the vast majority of people are rightly banned from accessing these as an investment.

Every time prices start to fall, the central bank creates accommodative measures and/or the government comes up with some hairbrained scheme to prop up demand. Your risk is broadly underwritten by the wider tax base.

UK laws (not just a UK problem) mean that supply is deeply constrained versus what a free market would do and the housing market will never be a supply-side free market due to perverse incentives for the builders, hence, the gov't must build the majority of houses every year to prevent prices rising inexorably. Every gov't promises they will and never do and I can't see this changing for a number of years. This provides long term security in capital growth, particularly in places people want to live that can't accommodate any more houses e.g. central Edinburgh.

Those historical returns represent the golden age of returns on equity, equity markets (pre-pandemic) have been poorer in recent years. Gov't bonds returns are negative in real terms and even the spicier end of the market- HY, EMD, MBS, ABS have pretty derisory yields. The government has an interest in ensuring this happens as it lessens the burden of debt serviceability- this depresses returns across all fixed income unless risk premia changes. Hence, without significant and persistent inflation, difficult to see how the relative set of alternatives offer as much a return as property.

Also worth bearing in mind that most people are completely unsophisticated: even ISAs represent something unfamiliar and scary (big news stories about equity markets tanking etc.), however, everyone understands and is familiar with property to some degree. Never underestimate that effect.

Mind you, I long for the days of UK property prices, Australia's prices are an absolute joke and their housing standards are utter garbage compared to the UK. The amount of schemes over here to keep this bubble going make the UK pale by comparison (specific tax incentives for investment property, tax base underwrites speculation risk to a large degree, 1 in 10 people is a landlord etc.).

Yeeb wrote: ↑Thu Apr 15, 2021 6:56 pm
In all honesty, there is little incentive now to join the b2L brigade.
The tax change on what you could claim on mortgage interest means it’s now a tax on turnover really and not profit, which is a nonsense way to encourage an industry.

You miss the point entirely. This was the first step by the Govt in curtailing hobby BTL landlords. They want them out of the market to be replaced by corporates/professionals i.e. their mates.

Caley_Red wrote: ↑Fri Apr 16, 2021 1:13 am Property has several aspects that make it attractive versus other 'asset classes' (I use inverted commas because I think of property as a place to live rather than a tool of speculation):

It allows you immense access to leverage, sometimes owning as little as 10% which means that when prices nominally rise by 10%, your actual return (assuming you paid 2.5% of the outstanding value in that time and your net yield is a stingy 2% and rates a stingy 3%) for a 500k house is not 10%, it's actually closer to 70% on the capital aspect alone. You'd also be making money from the yield which covers all the above and have someone else servicing the debt. You'd have to be knee deep in CFDs and options to access that sort of leverage and the vast majority of people are rightly banned from accessing these as an investment.

Every time prices start to fall, the central bank creates accommodative measures and/or the government comes up with some hairbrained scheme to prop up demand. Your risk is broadly underwritten by the wider tax base.

UK laws (not just a UK problem) mean that supply is deeply constrained versus what a free market would do and the housing market will never be a supply-side free market due to perverse incentives for the builders, hence, the gov't must build the majority of houses every year to prevent prices rising inexorably. Every gov't promises they will and never do and I can't see this changing for a number of years. This provides long term security in capital growth, particularly in places people want to live that can't accommodate any more houses e.g. central Edinburgh.

Those historical returns represent the golden age of returns on equity, equity markets (pre-pandemic) have been poorer in recent years. Gov't bonds returns are negative in real terms and even the spicier end of the market- HY, EMD, MBS, ABS have pretty derisory yields. The government has an interest in ensuring this happens as it lessens the burden of debt serviceability- this depresses returns across all fixed income unless risk premia changes. Hence, without significant and persistent inflation, difficult to see how the relative set of alternatives offer as much a return as property.

Also worth bearing in mind that most people are completely unsophisticated: even ISAs represent something unfamiliar and scary (big news stories about equity markets tanking etc.), however, everyone understands and is familiar with property to some degree. Never underestimate that effect.

Mind you, I long for the days of UK property prices, Australia's prices are an absolute joke and their housing standards are utter garbage compared to the UK. The amount of schemes over here to keep this bubble going make the UK pale by comparison (specific tax incentives for investment property, tax base underwrites speculation risk to a large degree, 1 in 10 people is a landlord etc.).

Very good. Someone gets it!!!

I should add that on "central bank creates accommodative measures and/or the government comes up with some hairbrained scheme to prop up demand", its deeper than that. When the banks f**k up, the Govt use the taxpayer to bail them out. So we have a situation of banks lend recklessly and
- if they make huge profits, they get to keep them (and pay f**k all tax but that is another debate)
- if they f**k up and over reach, instead of going bust, we prop them up

Go figure.

BTL landlords are just moving away from Yeeb and to banks/PE funds etc.

The growth asset class in the UK is sheds and beds. Professional PE funds are developing multi family homes - essentially student halls - for families to rent rather than own.

I was once in a meeting discussing this exact tactic. The PE fund was building student accommodation, young professional accomodation, multi family accomodation and then retirement living. So you could live your entire life paying them rent.

Torquemada 1420 wrote: ↑Fri Apr 16, 2021 8:28 am

Yeeb wrote: ↑Thu Apr 15, 2021 6:56 pm
In all honesty, there is little incentive now to join the b2L brigade.
The tax change on what you could claim on mortgage interest means it’s now a tax on turnover really and not profit, which is a nonsense way to encourage an industry.

You miss the point entirely. This was the first step by the Govt in curtailing hobby BTL landlords. They want them out of the market to be replaced by corporates/professionals i.e. their mates.

Taking small players out of the rental market and having a smaller number of large firms that control large amounts of housing would, I suspect, be a better deal for renters. Incidentally Orwell made this point in The Road to Wigan Pier and it's still true today - the nightmare for a renter is a well meaning landlord without access to capital who cannot and won't fix issues with the property.

shaggy wrote: ↑Thu Apr 15, 2021 9:00 am

tabascoboy wrote: ↑Thu Apr 15, 2021 8:20 am Seems to me there are just too many vested interests in keeping property prices artificially inflated. Only an economic collapse a la subprime would bring a meaningful fall in values.

But what would that meaningful fall in values mean to the wider economic model? How would interest rates change, effect on money markets, change in disposable income and the effect on trades and general consumer spending? Is the pension market at risk meaning retirement incomes also being hit?

You cannot discuss these matters in isolation as the interconnectivity is huge and the wider impact could be hugely negative in a single country and outside entities and their behaviours could exacerbate that.

Good topic, but a little superficial.

Exactly. I keep having to say this but no one seems to take it on board and they witter on about types of housing being built, planning regs, rent controls, blah, blah, blah.

So here it is again

HIGH HOUSE PRICES ARE FUNDAMENTAL TO THE ECONOMIC MODEL.

Anything else that's discussed on this is frilly irrelevance around the edges.

Yeeb wrote: ↑Thu Apr 15, 2021 7:55 pm

Paddington Bear wrote: ↑Thu Apr 15, 2021 7:49 pm ‘An industry’ is a fascinating way to describe BTL. I can think of other ways...

Perhaps, but it is still an industry: requires capital, employs people, has costs, provides a vital service and hopefully makes a profit. If everyone kept their property in good condition then there wouldn’t be nearly as many opportunities for investors, so blame the game and not the players.

Don't hate the player hate the game is certainly true in this situation, I'm sure I'd do the same in your position.
What I would say is I'd actively like to see government policy discourage BTL, and encouraging landlords to sell up. People owning 4+ properties is a contributory factor to plenty more owning none.

Biffer wrote: ↑Fri Apr 16, 2021 8:56 am So here it is again

HIGH HOUSE PRICES ARE FUNDAMENTAL TO THE ECONOMIC MODEL.

Anything else that's discussed on this is frilly irrelevance around the edges.

100%. Once Gordo and the banks had built the entire economy upon a foundation of house prices, no-one could afford to pull it away.

Doesn't mean it won't all crumble but don't expect policymakers to sacrifice their edifice to the needs of genuine house buyers.

I've been actually managing to save money during lockdown and am approaching "reasonable deposit" levels of savings. I quite like the idea of owning a house, and with our company really embracing WFH for the forseeable I don't need to be as close to central London any more.

My gf doesn't earn a lot at the moment so I can't rely on her income - we've basically decided that the effort was all well and good, but buying in the next 12 months is just asking for trouble. It feels like there's too high a risk of being caught in the crash, and putting it on the backburner makes sense.

Am I being stupid? Is this just going to continue indefinitely? I find it very hard to judge the risk here and am erring on the side of caution.

Torquemada 1420 wrote: ↑Fri Apr 16, 2021 11:23 am

Biffer wrote: ↑Fri Apr 16, 2021 8:56 am So here it is again

HIGH HOUSE PRICES ARE FUNDAMENTAL TO THE ECONOMIC MODEL.

Anything else that's discussed on this is frilly irrelevance around the edges.

100%. Once Gordo and the banks had built the entire economy upon a foundation of house prices, no-one could afford to pull it away.

Doesn't mean it won't all crumble but don't expect policymakers to sacrifice their edifice to the needs of genuine house buyers.

The political question on this is how long it lasts for (your analysis is clearly right atm). Homeowners are probably at around the peak of their political power now, based on demographics. In a couple of elections time there will be a good chunk of people heading to 40 still renting. The Tory Party are the great political survivors, at what point do they flip on this?

Torquemada 1420 wrote: ↑Fri Apr 16, 2021 11:23 am

Biffer wrote: ↑Fri Apr 16, 2021 8:56 am So here it is again

HIGH HOUSE PRICES ARE FUNDAMENTAL TO THE ECONOMIC MODEL.

Anything else that's discussed on this is frilly irrelevance around the edges.

100%. Once Gordo and the banks had built the entire economy upon a foundation of house prices, no-one could afford to pull it away.

Doesn't mean it won't all crumble but don't expect policymakers to sacrifice their edifice to the needs of genuine house buyers.

Longer than that. Started in the eighties, continued in the nineties. It's not a particular party that's done this, it's a particular brand of economic theory that's been dominant for forty years.

JM2K6 wrote: ↑Fri Apr 16, 2021 11:26 am I've been actually managing to save money during lockdown and am approaching "reasonable deposit" levels of savings. I quite like the idea of owning a house, and with our company really embracing WFH for the forseeable I don't need to be as close to central London any more.

My gf doesn't earn a lot at the moment so I can't rely on her income - we've basically decided that the effort was all well and good, but buying in the next 12 months is just asking for trouble. It feels like there's too high a risk of being caught in the crash, and putting it on the backburner makes sense.

Am I being stupid? Is this just going to continue indefinitely? I find it very hard to judge the risk here and am erring on the side of caution.

It's a sellers market atm. We bought our current house 3.5 years ago and have made over 10k on it. The valuation is 20k over when we bought it. In fairness we have had new windows put in which has added value.

Sounds simple...and since it was written 5 years ago, bet it isn't!

HOW DO WE FIX THIS?

1. Achieving a pluralism of housing models and improving options for debt-free homes across the UK
Support the growing tenants’ movement to professionalise the private rented sector, making it more secure and priced according to people’s incomes
Boost the stock of non-market housing including homes with social rents and community-led schemes, and develop new models of no-debt or low-debt ownership
Rebalance demands on space with regional development strategies and investment in jobs and infrastructure outside London and the South East

2. Deterring speculative investment in property and land
Develop a new tax to capture the rising value of land for the public good
Support schemes where land is held by either a public body or community, separating the cost of land from the cost of homes
Develop secure, attractive pensions and alternative savings and investment options, to reverse the growing dependency on housing wealth to pay for retirement and old age care

3. Building a more diverse banking sector and tackle excessive mortgage credit
Ensure banks hold more capital against mortgage loans and keep the loan until maturity, rather than packaging up and selling on
Build a mortgage market that serves principally to enable people to organise their finances for the long term, for example by removing teaser rates, interest-only periods and by favouring loans with long-term fixed interest rates
Reduce banks’ preference for mortgage lending by diversifying the financial sector to include public and other stakeholder banks

https://neweconomics.org/2016/04/the-fi ... f-uk-homes

Yeeb wrote: ↑Thu Apr 15, 2021 6:56 pm

MoreOrLess wrote: ↑Thu Apr 15, 2021 2:58 pm What is the incentive currently for BTL landlords?

As far I can make out, if you have £50k in cash you could get a 75% LTV BTL mortgage on a £200k property at say 2.5% it'll cost you about £670/month over 25 years. If you can rent that out for £750/month (outside South East) you'll clear roughly £25k in income over the period (minus income tax, repairs etc.). If the value of the property grows by 2.2% per year (historical average, but again, outside the SE) you'll end turning the £50k into a property worth about £370k plus the £25k additional income for a total of roughly £395k.

If you took that £50k and stuck it in a S&S ISA in a diverse index fund for 25 years gaining 8.3% (historical average stock market growth over the last 30 years) you'd have £395k but no empty periods, tennants skipping rent, tennants not leaving, damage, neighbours wanting you to chip in for their repairs, roofs leaking in the middle of the night, boilers packing in when you're on holiday etc. (you could always eat some of your BTL profits for a letting agent to deal with those for you, but the point remains). And you'd also have access to your money if you need it.

What am I missing? I seems like a no-brainer?

If we tax income rental (either personal income or revenue in a SPV Ltd company) to an extent that it tips the balance even more strongly in favour of alternative forms of wealth accumulation then you'd go some way to reducing the BTL investors hoovering up all the new 2/3 bed new builds and remove their need for their property price to increase to make their investment (and effort!) worthwhile.

In all honesty, there is little incentive now to join the b2L brigade.
The tax change on what you could claim on mortgage interest means it’s now a tax on turnover really and not profit, which is a nonsense way to encourage an industry. It just means I pay a few k more in tax than I did previously , and the numbers don’t really stack up for me to buy a fifth rental property now. I can’t be the only person who isn’t buying any more places and doing them up, so that means the supply of rental property & it’s quality will decrease (and keep rents as high as possible)

Further registration costs are being passed onto renters too , both on their end and from landlords seeking to cover their increasing local authority registration costs.

However , you miss one of the main advantages of owning a rental - as it appreciates, you can tap into this and remortgage to release funds , the increased interest of which the tenants are paying . Filing in a few forms and then having £115k moved into your account , was handy for me and allowed me to extend my house, pay off some of my own mortgage, and buy another flat. This keeps the LTV on my own home low, and debt as high as possible on the rentals.

Your 8.3% as an average sounds very high there tbh, and investors rarely ‘hoovered up all the available property’ as is often claimed. There are about 4 million private rented households in the uk, out of 28million, or about 15%
Of course there will be certain areas that attract investors , just as there will be areas investors won’t touch. But at national level, it’s not reallly hoovering up

Fair one, I hadn't really considered the leverage aspect. It's probably the most accessible way to extend credit on your investments as a private individual if you don't already have enormous wealth / deep knowledge of investments.

The 8.3% was from a quick google....but right now (or over the last few years) something like VWRL would average >10% a year. Although this is a different discussion for another day....

Paddington Bear wrote: ↑Fri Apr 16, 2021 8:51 am

Torquemada 1420 wrote: ↑Fri Apr 16, 2021 8:28 am

Yeeb wrote: ↑Thu Apr 15, 2021 6:56 pm
In all honesty, there is little incentive now to join the b2L brigade.
The tax change on what you could claim on mortgage interest means it’s now a tax on turnover really and not profit, which is a nonsense way to encourage an industry.

You miss the point entirely. This was the first step by the Govt in curtailing hobby BTL landlords. They want them out of the market to be replaced by corporates/professionals i.e. their mates.

Taking small players out of the rental market and having a smaller number of large firms that control large amounts of housing would, I suspect, be a better deal for renters. Incidentally Orwell made this point in The Road to Wigan Pier and it's still true today - the nightmare for a renter is a well meaning landlord without access to capital who cannot and won't fix issues with the property.

I assumed the same. At scale, fixing small problems in a property isn't so big an issue and the corporates are likely to be aiming for manageable growth. As opposed to the private landlord with a handfull of properties and every new boiler or replacement roof is another year until they can retire off their income.

JM2K6 wrote: ↑Fri Apr 16, 2021 11:26 am I've been actually managing to save money during lockdown and am approaching "reasonable deposit" levels of savings. I quite like the idea of owning a house, and with our company really embracing WFH for the forseeable I don't need to be as close to central London any more.

My gf doesn't earn a lot at the moment so I can't rely on her income - we've basically decided that the effort was all well and good, but buying in the next 12 months is just asking for trouble. It feels like there's too high a risk of being caught in the crash, and putting it on the backburner makes sense.

Am I being stupid? Is this just going to continue indefinitely? I find it very hard to judge the risk here and am erring on the side of caution.

Take this FWIW because it's me but I would be very wary of buying anywhere that was considered a hotspot ATM. One of my friends sold her Lanhdahn house for £1.8m (Cheese-wick) and I've told her to go into rented and watch and see.

Since you are almost as anal as I am on facts/data, you might want to use this site
http://www.acadata.co.uk/downloads/

to see if the localised stats there help guide you. There are other dynamics to be wary of. There is a trend now (COVID + WFH) for Londoners to want to move out of the circle and so you are seeing odd discrepancies like prices within London falling but rising on the periphery of the M25 or decent rail links in.

If it were my money, I'd sit on it for the moment.