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Credit deflation and the reflation cycle to come (part 2)


spunko

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Talking Monkey
16 hours ago, DurhamBorn said:

The threat of extra tax is more reason to structure yourself in the best way.£12.5k from income or pensions,the rest in an ISA.They will likely introduce a cap on ISA,but probably the same as pensions about £1mill.The asset they are likely to go after is property.BTL property that is.

The UK wont be too bad though because we are very well placed for the next cycle in many ways.The massive wind power in Scotland will drive hydrogen production and that will drive industry.Electric will drive the economy,but not as most think.It will be used to power homes as now,but also to produce hydrogen.The bus and lorry fleet will be first big gainers.Im expecting public transport costs to go down as private driving costs go up for around 10 years.

One of the reasons i like Drax is because i think they will end up producing hydrogen in their stations units and SSE because their power links are really well placed to move the power for hydrogen production.

I hope they do go after BTL but was wondering how can the people with portfolios predominantly paid off be disgorged of the properties they are hoarding, in the bust they won't face a margin call and in the reflation the rising interest rates will not impact them. It is truly unethical the hoarding of an essential which has been allowed over the last 25 years

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On 10/12/2019 at 01:39, sancho panza said:

Jsut got back from SA and whilst I'm not inside these companies,noone in SA is under any illusions about Eskom.Lot of verage Joe's have contingenices in place so wouldn't surprise me if the big miners were ready for load shedding.

QUite.............seems unreal people having those sorts of allocations.

I am in SA at the moment, the black-outs are very real, 4 to 6 hours a day here; businesses are screaming, understandably. We have just had telephone and internet restored after two days without, as someone stole the telephone cable from the poles in the next town...

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14 hours ago, MrXxxx said:

So why do you own them then (not being sarcastic, genuine question)?

Because it's just a risk and no risk is 100%.  They have clear advantages (e.g. accessing certain markets, costs, tax) so I hold some where buying a share portfolio is difficult or costly, although I would like to move to more share holdings.  I also double up on ETFS (e.g. hold iShares and Vanguard FTSE trackers) to reduce institutional (not systemic) risk.

I was burnt once on an ETF when AIG when bust.  No liquidity.  Price collapsed.  Hence my caution.

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13 hours ago, UnconventionalWisdom said:

I wish we learnt more about finance and investment at school. We'd be in a much better position and the country would also benefit. I've met people with economic degrees and people working in finance that don't understand the manipulation of the economy that taken place. 

Tin foil hat goes on: maybe they want to keep us from knowing so they can make out like bandits. 

Mr Carter was my teacher at school.  Did Economics (including more personal finance) and metalwork.  Taught us fallacies like get rich quick.  Think he was old enough to be ex-WWII.  Worldly wise.  Always wore a suit, white shirt and thin tie.  Very 1950's.  Absolutely great man (a few other teachers were the same).  I aced Economics the rest of my life.  Received top marks for metalwork too which is proving equally valuable later in life!  I owe him a lot.

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16 minutes ago, Tdog said:

Such as £100bln train lines to get from London to Brum 15 minutes quicker. Though bumbling Boris did say he wants to get it done cheaper. So subtract £50.

True, but it's still infrastructure not consumer spend!

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2 minutes ago, Loki said:

True, but it's still infrastructure not consumer spend!

I get that, but the whole process has been needless.

Apparently, counterfeit is now legal.

So they sell money printing machines on Amazon?

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30 minutes ago, Tdog said:

Such as £100bln train lines to get from London to Brum 15 minutes quicker. Though bumbling Boris did say he wants to get it done cheaper. So subtract £50.

There's a spot of land at the end of the proposed Heathrow runway still waiting for that guys arse!  Never been many a more pressing time to hunker down for the next five years than now, regardless of this week's result.  People sucked into the political circus at the expense of steady financial and other planning will get a right ripping.  Polos are not our friends and will not save us.

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6 minutes ago, Noallegiance said:

Me thinks the next few years are going to see some old fashioned character-building stuff on many fronts.

Stories for the grandkids. Hopefully.

I think anyone posting on this thread has enough 'character' already and it's time for the others to have their share!

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2 hours ago, Noallegiance said:

It's going to happen isn't it:

https://www.bbc.co.uk/news/business-50579897

I'm not sure I've ever felt how I feel now. Isolated. Concerned. Lost. Depressed. 

This really is unfathomable.

It needs to happen, there is not enough cash flowing around the real economy so companies are starting to go insolvent at a very rapid pace.  The number of companies with millions of money owed to them by customers, a big overdraft from the bank and zero to very little cash is actually scary.  Even a mild recession will tip god knows how many small to medium businesses over the edge.

Too much of the UK's money is tied up in overpriced assets which don't actually produce anything of value, the economy cannot exist on everyone selling each other houses.

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2 hours ago, Ponty Mython said:

I am in SA at the moment, the black-outs are very real, 4 to 6 hours a day here; businesses are screaming, understandably. We have just had telephone and internet restored after two days without, as someone stole the telephone cable from the poles in the next town...

Yeah they have two massive power stations that they've messed up with apparently.We were down in the Western cape.Only lost power hte once for about 4 hours over two weeks.

Where are you?Joburg?

The cable theft is a real issue.Farm we were on got rid of it's landline after thieves kept nicking the cable.

Like I said though,I suspec thte bigger players with land avaliable have decent size diesel generators ready.Not ideal but it is what it is.

Can't imagine what financial businesses in Joburg would do.

 

Edit to add-water shprtage in teh Cape was pretty bad last year.People in multimillion pound homes collecting shower water to flush the toilet with.

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reformed nice guy
13 minutes ago, Majorpain said:

It needs to happen, there is not enough cash flowing around the real economy so companies are starting to go insolvent at a very rapid pace.  The number of companies with millions of money owed to them by customers, a big overdraft from the bank and zero to very little cash is actually scary.  Even a mild recession will tip god knows how many small to medium businesses over the edge.

Too much of the UK's money is tied up in overpriced assets which don't actually produce anything of value, the economy cannot exist on everyone selling each other houses.

Agree complete Majorpain.

The MMT is daft in many ways, but if the central premise is that governments can print as much money as they need, then the logical outcome would be to stop taxing people and businesses. That is when you realise that it is a political belief and not an economic one - taxation is then solely used to punish. It makes you realise that taxation is wielded as a form of punishment whether they will admit it or not.

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45 minutes ago, reformed nice guy said:

Agree complete Majorpain.

The MMT is daft in many ways, but if the central premise is that governments can print as much money as they need, then the logical outcome would be to stop taxing people and businesses. That is when you realise that it is a political belief and not an economic one - taxation is then solely used to punish. It makes you realise that taxation is wielded as a form of punishment whether they will admit it or not.

The idea behind MMT is that the govt, unlike a regular person or business, can print any amount of money.

 

Which is obviously false. I can print as much money as I like just well. I could print 1 Gazillion Kibucodollars at any moment. The only problem is, people would not accept it as payment, as they would have no reason to trust that Kibucodollar has any value. Why value something that can be created in unlimited supply at a whim? At best, they would accept it at the value of the paper it's printed on.

 

And the same logic applies to govt money, too.

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On 10/12/2019 at 00:15, Errol said:

Soemthings afoot.Worth remembering how many UK banks caved in 07/early 08.The proverbial canary.

3 hours ago, Talking Monkey said:

I hope they do go after BTL but was wondering how can the people with portfolios predominantly paid off be disgorged of the properties they are hoarding, in the bust they won't face a margin call and in the reflation the rising interest rates will not impact them. It is truly unethical the hoarding of an essential which has been allowed over the last 25 years

Very few of teh bigger LL's I know,operate without leverage.A surprising number are in the processof getting mullered by section 24.

For the sensisble ones with little leverage,it doesn't take much before you're paying 40% tax.They will though ultimately make it through the other side.

BTL got blown sky high by it's favourable tax treatment,the exclusion of hposue rpices from inflation measures and the easy credit poured into it by banks and buidling societies that priced out the members they supposedly represent.

A lot of the BTLers I know-includsing most likely, my own landlord , are blissfully unaware that their own home is at risk in the default chain.

3 hours ago, Noallegiance said:

It's going to happen isn't it:

https://www.bbc.co.uk/news/business-50579897

I'm not sure I've ever felt how I feel now. Isolated. Concerned. Lost. Depressed. 

This really is unfathomable.

I think it is,but it may not be in the form many expect.The big issue going forward is inflation and when it rears it's head.

A lot of CB's have printed money and got away without inflation because quite simply,the way that Western govts measure it,doesn't include the things that have risen in the CPI basket over the last twenty years, like

1) housing-ONS only measures rents which are imputed into GDP and a rental equivalence measure included in CPIH-main govt measure is CPI9therefore excludes rents)

2) Hedonic adjustments-eg as new cars improvce in qulity eg electric widnows,any rise in price is offset by a hedonic adjustment whihc reflects the increase in value the ONS percevies to result from it having leccy windows.Reality is that for people who use a car to get from A to B,then the rise in price is actually a rise in price-leccy windows or not

3) inflation by income decile-differnet sectors of the population suffer the effects of inflation differently.This may seem obvious,but to the bottom 30%,food price rises affect them disporportionately compared to the top 30%.For me the tell here is that voter turnout in the 70's was 80% and 95% of thsoe voted for the big two.It's now down at 65% and the rise from 60% since 1997 has mainly been because smaller parties are growing in vote share.

 

Underneath the surface,seismic changes have been occuring over the last twenty years and quite simply can't carry on on the same trajectory.

49 minutes ago, Majorpain said:

It needs to happen, there is not enough cash flowing around the real economy so companies are starting to go insolvent at a very rapid pace.  The number of companies with millions of money owed to them by customers, a big overdraft from the bank and zero to very little cash is actually scary.  Even a mild recession will tip god knows how many small to medium businesses over the edge.

Too much of the UK's money is tied up in overpriced assets which don't actually produce anything of value, the economy cannot exist on everyone selling each other houses.

ZIRP/QE has kept a lot of zombies alive but the thing with debt deflations as you allude,is that they occur because quite simply,the demand chain collapses,sometimes gradually,sometimes not.

High st retail in teh UK is the canary here.Also Carillion.Lot of businesses living off their bank loans,wafer thin margins and loose govt spending.Lot of govt spending predicated on credit spending which works until it doesn't.

While my working thesis at the minute is that the govt will QE/ZIRP some more,I don't think they'll be able to do it to the same degree as post 08,without infaltion running.

6 minutes ago, kibuc said:

The idea behind MMT is that the govt, unlike a regular person or business, can print any amount of money.

 

Which is obviously false. I can print as much money as I like just well. I could print 1 Gazillion Kibucodollars at any moment. The only problem is, people would not accept it as payment, as they would have no reason to trust that Kibucodollar has any value. Why value something that can be created in unlimited supply at a whim? At best, they would accept it at the value of the paper it's printed on.

 

And the same logic applies to govt money, too.

Nicely explained.That's what I was trying to say :Old:

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UK GDP

https://notayesmanseconomics.wordpress.com/2019/12/10/uk-gdp-growth-is-as-flat-as-a-pancake/

'GDP

As to growth well our official statisticians could not find any.

UK GDP was flat in the three months to October 2019.

If we look at the different sectors we see what has become a familiar pattern.

The services sector was the only positive contributor to gross domestic product (GDP) growth in the three months to October 2019, growing by 0.2%. Output in both the production and construction sectors contracted, by 0.7% and 0.3%, respectively. The weakness seen in construction was predominantly driven by a fall of 2.3% in October.'

Comment

We perhaps get the best perspective from the annual rate of GDP growth which is now 0.8% using the quarterly methodology. If we take out the spring blip that has been declining since the 2% of August 2018. There are some ying and yangs in the detail because of we start with the positive which is services growth ( 1.3%) it has been pulled higher by the information and communication category which is up by 5.4% and education which is up by 3%. But on the other side of the coin the depression in production and manufacturing has worsened as both have fallen by 1.5%. I have little faith in the construction numbers for reasons explained in the past but growth there has fallen to 0%.

There are lots of permutations for the General Election but yet another interest-rate cut by the Bank of England just got more likely. It meets next week. Also political spending plans are getting harder to afford in terms of economic growth,

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Talking Monkey
5 minutes ago, sancho panza said:

 

Very few of teh bigger LL's I know,operate without leverage.A surprising number are in the processof getting mullered by section 24.

For the sensisble ones with little leverage,it doesn't take much before you're paying 40% tax.They will though ultimately make it through the other side.

BTL got blown sky high by it's favourable tax treatment,the exclusion of hposue rpices from inflation measures and the easy credit poured into it by banks and buidling societies that priced out the members they supposedly represent.

A lot of the BTLers I know-includsing most likely, my own landlord , are blissfully unaware that their own home is at risk in the default chain.

 

A tax on owning multiple homes would be the key to disgorge them, mind you the LL would simply transfer to their kids, would only work with medium to large portfolios

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I've been keeping my dividends as cash for the past 3 months waiting for a better entry point . Got 6k looking for a home but i can't seem to find any value anywhere.

 

BP or Shell look slightly tempting , i don't like having cash in my share account but i don't want to buy until they have taken out their 52 week low.

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2 hours ago, Tdog said:

That article is saying buy PM's as fiat currency is toilet paper. Its quite remarkable.

My take is that MMT works out - until the realisation hits the general public that there's no store of value in fiat. So - yup - PMs - or something - anything - which can store value over time.  

Triggernometry talked to Jim Rickards a couple of months ago when he was promoting his book. He touches on MMT at 26 minutes in (link to video below).  Says MMT works. Print as much as you want, the market will buy the debt, or the Fed will monetise it.  *But* there comes a time when people hit an 'invisible psychological boundary' and say - get me out of the dollar - and buy gold, silver, real estate, cars, oil, natural resources - because they no longer trust Congress to spend all the printed money without causing inflation.  At that point - inflation lets rip, bond markets in difficulty - and it will happen v quickly.

I've listened to the interview a couple of times because so much in there - to whet appetites - discussion also covers:

- USA monetary/fiscal position (Fed too tight)

- cause of 2008 crisis (Rickards takes it back to 1987 and the rise of derivatives then walks it forward via various 'contained' crises, including LTCM, and leading indicators). This is v interesting whizz through

- black hole of debt in US student loans (guaranteed by US Gov)

- Pulls no punches on (not) doing business with China

- favours IMF Special Drawing Rights to bail out central banks after next crash (rebutted by Celente? I think on a recent Keiser Report)

- suggests why wait for the crash - protect yourself with gold (10% of portfolio) while you can still get it. Is consistent with his negative position on BTC (I'm still taking hopeium for BTC)

 

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12 hours ago, Bear Hug said:

3 x Apps:

Freetrade (£1 instant trade, free when in bulk at 4pm)

Trading 212 (charges on spread?, not sure how much exactly, has CFDs, ISA)

Degiro (lots of markets, UK: £1.75, US$0.50, more for others)

I am overcharged on US dividends in Degiro (with W8Ben but get 25% instead of 15%) but I am not sure if it's an app or US tax issue.

I've been using Freetrade for a few months.  Working fine so far and they seem to be adding more stocks/ETFs weekly.

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Shaun Richards discusses QE ie htye never stopped QEing and have no other option but to try it again.

The academic class from which our CB overlords come from can't accept they got it badly wrong and that money velocity isn't a constant.

Negative rates and the destruction of some big banks cometh.

CB's are boxed in-

option 1 reverse QE or conduct QT and effectively admit they were wrong,allow rates to rise and destroy a lot of creditors

option 2 double down,risne and repeat,destroy a few big banks with negative rates.

 

PS And please remember that when Andrew hauser is quoted as saying BoE balance sheet is 305 of GDP,that GDP measure is circa 12% imputed rents

 

https://notayesmanseconomics.wordpress.com/2019/12/11/the-problems-faced-by-the-qe-era-make-me-wonder-if-qt-is-a-mirage/

The problems faced by the QE era make me wonder if QT is a mirage

Posted on December 11, 2019

If we were to step back in time to when the new QE era began around a decade ago we would not find any central bankers expecting us to be where we are now. In a way that is summarised by the fact that the original QE pamphlet of the Bank of England from the Charlie Bean tour of the summer of 2009 has a not found at this address description on the website these days. Or if we look back this speech from policymaker David Miles finishes like this.

Concluding, David Miles says that quantitative easing will assist spending but also notes it is hard to decide
what the “.appropriate scale of purchases is when the power of the mechanisms at work are difficult to
gauge.” He also notes that the timing and means of reversing this monetary easing will “.depend on the
economic outlook, which in turn depends on conditions in financial markets in general and with banks in
particular.

As to the reversing we are still waiting as all we have had is “More! More! More!” as we note that despite record highs for equity and bond markets financial market conditions are apparently still not good enough.

Switching to the real economy we see that in fact we are back in something of a trough right now. We discovered yesterday that the UK is flat lining and we know the Euro area is similar and the United States has been slowing down as well.

The New York Fed Staff Nowcast stands at 0.6% for 2019:Q4 and 0.7% for 2020:Q1. ( the numbers are annualised )

To that we can add Japan which faces the impact of the rise in the Consumption Tax to 10% this quarter.

Next and in some ways most revealingly is the way that QE has acquired a new name. In Japan it has morphed into QQE or Quantitative and Qualitative Easing at the time purchases of equities and commercial property began. Since then it has become QQE with Yield Curve Control. We await to see if the review being conducted by President Lagarde leads to changes at the ECB but we do know this about the US Federal Reserve. From CNBC on the 8th of October.

Powell stressed the approach shouldn’t be confused with the quantitative easing done during and after the financial crisis.

 

“This is not QE. In no sense is this QE,” he said in a question and answer session after the speech.

The reality is that it fulfils the description of David Miles above in the case of the Treasury Bill purchases with the difference that they have a shorter maturity, although of course back then QE was not meant to be long-term.

The Bank of England looks ahead

Last night Andrew Hauser who is the Executive Director looked at the state of play.

Before the financial crisis, our balance sheet was modest, at 4% of GDP. Since then, and in direct response to the
crisis, that figure has risen to around 30%: a more than seven-fold increase.

He then looks ahead and point one covers a lot of ground to say the least.

The first is that, judged by historical standards, big
balance sheets are here to stay. That’s not a prediction that QE will never unwind: it will. But we have a
bigger responsibility than we did to provide liquidity to the system, in good times and bad, and to a wider set
of organisations, to maintain financial stability. And that’s not going away.

It was nice of him to give us a good laugh about it being permanent! At least I hope he was joking. The liquidity mention doffs it cap to some extent to the mess that the US Federal Reserve has got itself into as well as the fact that changes to the structure of the system such as banks being required to have more capital have put increased pressure on this area.

The next point meanders a bit but we eventually get to an estimate of circa £200 billion for a QT target or objective,

Point two is that big doesn’t mean outsized – so the balance sheet will eventually shrink from where it is today. That’s something the Bank has been stressing for some time. But the Discussion Paper has allowed us to put a tighter range on that forecast, and suggests our liabilities probably only need to be half the size they are today to carry out our
mission once QT is underway/

Ah “eventually!” Also some would think the sort of sum he is thinking of is indeed outsized.

Point three contains some welcome honesty.

Neither we nor the firms who use our liquidity really know what their demand will be when conditions normalise.

Finally we have this

The final message, therefore, is that we must have as our ultimate goal an end-state framework that can cope with
that ambiguity without shaking itself, and us, to bits.

How Much?

The Bank of England balance sheet is more than just QE

Three quarters of the Bank’s assets is in the form of a loan to the Asset Purchase Facility backing £435bn of
gilt holdings and £10bn of corporate bonds, while another £127bn has been lent to banks under the
Term Funding Scheme. A further £13bn of liquidity has been extended under the so-called
‘Index Linked Term Repo’ facility,
part of the Sterling Monetary Framework (SMF).
Nearly all of that activity has been financed by an increase in central bank reserves.

He does not point it out but this structure led to another consequence which is that the Term Funding Scheme (and some smaller factors) adds to the official definition of the national debt raising it by around 8% of GDP.

Hard Astern Captain

I have long considered the Bank of England course reversal plan to be unwise and perhaps stupid.

First, the MPC does not intend to begin QT until Bank Rate has risen to a level from which it could
be cut materially if required. The MPC currently judges that to be around 1.5%.

– Second, QT will be conducted over a number of years at a gradual and predictable pace, chosen by
the MPC in light of economic and financial market conditions at the time.

– Third, the QT path will take account of the need to maintain the orderly functioning of the gilt and
corporate bond markets including through liaison with the Debt Management Office.

– And, fourth, the QT path can be amended or reversed as required to achieve the inflation target.

 

Comment

Frankly the very concept of the Bank of England raising interest-rates as high as 1.5% is laughable under the present stewardship. I have long thought that the plan as described above demonstrates that there is no real intention to reverse QE. There are former policymakers who explicitly endorse this such as David Blanchflower. But there are also implicit issues such as waiting for yields to rise and prices to fall as well as thinking there can be an “orderly market” when the biggest holder sells. When you intervene in a market on such a large scale there is always going to be trouble exiting. One answer to that is to not get too exposed in the first place and to me selling when others might be selling because of losses as well is classic Ivory Tower thinking.

None of that is Andrew Hausers fault as he is in this regard merely a humble functionary. So we shuld thank him for his thoughts that even if QE somehow was teleported away things would still be different.

Bringing all this together, our conversations with firms suggest the current sterling PMRR is of the
order of £150-250bn.

Meanwhile if Livesquawk are correct Switzerland might be adding more not less extraordinary monetary action. Also the original reason was external ( Swiss Franc) whereas now it seems to have spread.

Oxley said, “There is good reason to take the SNB’s forecasts seriously: it has not tended to change its policy stance in the past unless its inflation forecast foresees deflation at some point over its three-year horizon. If the bank crosses the deflationary Rubicon again, this would lend support to our below-consensus view that the bank will end up cutting the policy rate to -1.00pct in the first half of 2020.

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1 hour ago, sancho panza said:

Yeah they have two massive power stations that they've messed up with apparently.We were down in the Western cape.Only lost power hte once for about 4 hours over two weeks.

Where are you?Joburg?

The cable theft is a real issue.Farm we were on got rid of it's landline after thieves kept nicking the cable.

Like I said though,I suspec thte bigger players with land avaliable have decent size diesel generators ready.Not ideal but it is what it is.

Can't imagine what financial businesses in Joburg would do.

 

Edit to add-water shprtage in teh Cape was pretty bad last year.People in multimillion pound homes collecting shower water to flush the toilet with.

Currently on the coast north of Durban, heading back to town in a few days, it will be interesting to see whether the country's third city is suffering equally.

No shortage of water here though...

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33 minutes ago, Talking Monkey said:

A tax on owning multiple homes would be the key to disgorge them, mind you the LL would simply transfer to their kids, would only work with medium to large portfolios

Most LL's are small time.Interesting report.Suggests to my uneducated eye that leverage is quite likely for msot people and that strangely,the cash buyers tend to have bought more recently near the top of the marekt which would be of note to a few of the behavioural trend watchers like @Harley or @DurhamBorn

 

Fascinating report.Opened my eyes.Surpising how the BTL market is dominated by the 4 properties and below LL's.Also only 4% iirc in a limited company suggesting Section 24 could really muller them.

 

Watch out below.

 

 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf

Main findings

There are approximately 3.4 million live deposits registered with one of the three government-backed Tenancy Deposit Protection (TDP) schemes that operate in England. These correspond to an estimated 1.5 million landlords, only some of whom (about 360,000) had registered the deposits themselves. 

It is estimated that the TDP schemes cover between 56% to 71% of households in the private rented sector8 .

Most landlords operate as private individuals rather than as part of a company or organisation.  94% of landlords rent property as an individual, 4% as part of a company and 2% as part of some other organisation.

While almost half of landlords own just one property, half of private rented sector tenancies are let by the 17% of landlords with five or more properties.  45% of landlords have just one rental property. This represents 21% of the private rented sector9 . A further 38% own between two and four properties (representing 31% of the sector). The remaining 17% of landlords own five or more properties, representing 48% of the private rented sector. 

Ignoring the methodological differences, since 2010, the proportion of landlords with just one property has declined from 78% to 45% or from 40% to 21% of the sector. Meanwhile, the proportion of landlords with five or more properties increased from 5% to 17% or from 39% to 48% of the sector. Landlords are, on average, older and less ethnically diverse than the general population10 . Most have been landlords for some time.  Over half (59%) of landlords are aged 55 years or older. Not surprisingly, given the older age profile, a third (33%) of landlords are retired. The majority (89%) of landlords are White.

70% of landlords have let property for 6 years or more.

The average (mean) length of time that landlords had let property was 11.5 years. Landlords most commonly reported that they had become landlords because property was preferable to other investments and/or to contribute to their pension. 

46% of landlords became a landlord because they preferred property to other investments; 44% did so to contribute to their pension. Only 4% became a landlord to let property as a full-time business.  Although 53% of landlords bought their first rental property with the intention of renting it out, 32% did so to live in themselves.

Landlords who had been letting for longer were more likely to have used a mortgage to fund their first rental property and more likely to currently use a Buy to Let mortgage compared to more recent landlords.Almost two thirds (63%) of those who had been a landlord for three years or less had used a mortgage to fund their first rental property compared to three quarters of those who had been a landlord for longer (73% of those who had been a landlord for between four and 10 years, and 75% of those a landlord for 11 or more years). 

About half (49%) of those who had been a landlord for three years or less had a Buy to Let mortgage to fund their current property/ies. This increased to 58% of those who had been letting for between four and 10 years, and 54% for those letting for 11 or more years. Landlords, on average, report a gross rental income of £15,000 per year (before tax and other deductions). For most landlords income from rent makes up two fifths (42%) of their total gross income. 

The average (median) gross rental income (before tax and other deductions) is £15,000. Three in five (61%) landlords had gross rental income of less than £20,000, while a further quarter (26%) reported between £20,000 and £49,999. Thirteen percent reported a gross rental income of £50,000 or more.  Using their annual reported gross income (before tax and other deductions and excluding rental income) and their gross rental income, it was calculated that landlords received 42% of their total gross income from rental property.

 

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