How does Buy to Let END!

[Pip321]

On 04/12/2023 at 22:24, sancho panza said:

https://www.telegraph.co.uk/money/property/buy-to-let/avalanche-landlords-sell-tax-breaks-cut-half/

‘Avalanche of landlords’ to sell before tax breaks cut in half

Higher mortgage rates and punitive property levys wipe out potential profits

Landlords are rushing to sell their properties before tax breaks on investment profits are cut in half. 

The annual capital gains tax allowance is falling to £3,000 at the start of the new tax year, down from £6,000 this year. Last year, the allowance stood at £12,300. 

Lewis Shaw, of brokerage Riverside Mortgages, said there would be “an avalanche of landlords selling” at the start of next year due to a triple whammy of higher mortgage rates, and “punitive property taxes wiping out any potential profits”.

He added: “All this at a time when property prices are falling and set to fall further, any landlords under the cosh would be well advised to offload their properties, and the faster, the better to try and preserve the capital accumulation they’ve enjoyed over the past decade.”

Property investors in the higher-rate tax bracket pay 28pc on any capital gains they make outside of the allowance when they sell a home.

I am seeing several landlords selling for lots of reasons and in very different circumstances. 

My position is fairly untypical but the reasons for selling are fairly typical. 

I have churned rental property ie sold and bought for almost 30 years, so rather than leveraging up on the property held to buy ever more, I sold to buy the next. I did leverage though and interest only was (and is) still the best way for me to offset profits if you get the numbers right. It’s not real debt though because I hold at least the equivalent in cash ISAs all warm and cosy tax free….whilst the nasty interest only mortgages are tax deductible.

However, even though for me the number stack up and most of my rents are a good 20% under market, so there is some contingency…..i am still selling.

The regs, the hassle, the opportunity to invest in easier assets are key reasons and with some reflection I also think it’s the cycle. So now I can sell and walk away with the rent collected, value added through refurb and general inflation over 25 years on an asset that someone else has effectively paid for.

Rightly or wrongly (okay, with hindsight due to the impact on the economy and house prices wrongly) property was an opportunity to create wealth whilst continuing to hold down another full time job to pay the bills and build a decent pension.  

Here is the crunch….I am at the end of the cycle but truly leverage IO BTL landlords are still at the beginning of their cycle. They have spent the rent on crap, they gave up other jobs and relied on the income, they took loans out against capital gains and they are locked in. They have mistaken an opportunity for a long term life plan as an easy life and haven’t respected debt. I know several now who are panicking around denial thinking lower rates ie 1%, will save them next year. 

For me, rental property was a tool to acquire wealth……but it is far from an ideal tool to hold wealth.

Sold one this year, another going through hopefully before Christmas. Some CGT to pay….but thems the rules. I would have hung on to spread gains over tax years but with the allowance so low it not worth waiting. 

 

[spygirl]

Ah Sammy Leeds winning friends and influencing people again.

 

https://www.dailymail.co.uk/news/article-12867973/Millionaire-landlord-posts-video-using-chainsaw-cut-door-evict-tenants-online-sleuths-question-footage-seems.html

 

Im assuming the property is empty.

Cos if it isnt then hes lost his rent and prob off to jail.

 

 

[JoeDavola]

Used to see repo's like this all over the shop during the 08-12 crash; tape over the loo was always the tell-tale sign.

https://www.propertypal.com/apartment-309-margarita-plaza-81-adelaide-street-belfast/923093

Inflation adjusted that's on for slightly less than it would have been at the bottom of the last crash in 2012:

Edited December 15, 2023 by JoeDavola

[Ash4781b]

31 minutes ago, spygirl said:

Ah Sammy Leeds winning friends and influencing people again.

 

https://www.dailymail.co.uk/news/article-12867973/Millionaire-landlord-posts-video-using-chainsaw-cut-door-evict-tenants-online-sleuths-question-footage-seems.html

 

Im assuming the property is empty.

Cos if it isnt then hes lost his rent and prob off to jail.

 

 

Just a PR stunt. There are easier ways to open a door.

[Inigo]

I had a conversation with someone today about a mutual acquaintance that I used to know, through work, about 20 years ago.  Indian chap, nice bloke, probably approaching retirement age now.  It seems that he is in trouble.  Fairly recently he bought a lot of BTL properties on interest only mortgages (several million pounds worth).  The fixed rates ran out on them all at about the time that interest rates started going up.

I imagine he has had his family going on about property for decades and how they have all made themselves rich.  Stunningly poor timing though.

A neighbour is a builder/rentier/property developer and owns half the village.  He was telling me on one of the previous crashes, just before his second bankruptcy, that he worked out that he was worth more to his family dead than alive.

Edited December 15, 2023 by Inigo

[spygirl]

14 hours ago, Inigo said:

I had a conversation with someone today about a mutual acquaintance that I used to know, through work, about 20 years ago.  Indian chap, nice bloke, probably approaching retirement age now.  It seems that he is in trouble.  Fairly recently he bought a lot of BTL properties on interest only mortgages (several million pounds worth).  The fixed rates ran out on them all at about the time that interest rates started going up.

I imagine he has had his family going on about property for decades and how they have all made themselves rich.  Stunningly poor timing though.

A neighbour is a builder/rentier/property developer and owns half the village.  He was telling me on one of the previous crashes, just before his second bankruptcy, that he worked out that he was worth more to his family dead than alive.

I think the era of one man bands leveraging up in the up phase is long ago.

Mainly cos I dont reckon we'll get more up cycles.

And also cos the restrictions on banks lending and their cost of fund are that much higher that the money just wont be there.

Seriously, the arse has long dropped out of the UK mortgage market.

Its going back to being a niche financial product for the top ~40% earners again.

 

 

[reformed nice guy]

18 hours ago, Inigo said:

he worked out that he was worth more to his family dead than alive.

Have you spoke to the family about how you could split the money?

[Inigo]

3 hours ago, reformed nice guy said:

Have you spoke to the family about how you could split the money?

The rest of the family are even more venal and grasping than he is.  I'm sure they already have a plan. 

[onlyme]

6 hours ago, spygirl said:

I think the era of one man bands leveraging up in the up phase is long ago.

Mainly cos I dont reckon we'll get more up cycles.

And also cos the restrictions on banks lending and their cost of fund are that much higher that the money just wont be there.

Seriously, the arse has long dropped out of the UK mortgage market.

Its going back to being a niche financial product for the top ~40% earners again.

 

 

The assumption is that dumping rates / QE after the last two decades won't result in rapid cost inflation. I too think that could be wrong this time and in that case the pattern of those decades will be when and truly broken. A the the start HP /Earnings ratios were low, they are not now and still won't be with significant falls and there are even more debts lumped on those that would need to borrow like student loans.  

[spygirl]

50 minutes ago, onlyme said:

The assumption is that dumping rates / QE after the last two decades won't result in rapid cost inflation. I too think that could be wrong this time and in that case the pattern of those decades will be when and truly broken. A the the start HP /Earnings ratios were low, they are not now and still won't be with significant falls and there are even more debts lumped on those that would need to borrow like student loans.  

Well, even outside of inflation n IR super cycles, you've got regulated mortgages.

80s boom was down tobullshit with profit endowments.

00s,which led to UK banking sector being destroyed, was a combination if liar loans n IO lending.

What little remians of uk mortgage providers need to lend at less than 4.5 verified income, for a repayment mortgage.

 

[onlyme]

1 minute ago, spygirl said:

Well, even outside of inflation n IR super cycles, you've got regulated mortgages.

80s boom was down tobullshit with profit endowments.

00s,which led to UK banking sector being destroyed, was a combination if liar loans n IO lending.

What little remians of uk mortgage providers need to lend at less than 4.5 verified income, for a repayment mortgage.

 

Whatever loan metrics they are supposed to be lending to I still doubt that they are sticking to them (at least on the up cycles), trust in what they do is gone, I think just basic affordability is what will rule the game from now on. Outside of that there are some factors like mass money laundering from the likes of China which have heavily penetrated smaller markets in the likes of Australia and Canada prime areas and whatever may come of the plan to get funds into buying up swathes of property 0 the latter I just don't think they can do it economically at high sticker prices, the carrying and servicing costs are significant and they are just not going to be efficient at coping with the day to day issues without huge admin overhead.   Then there's the swathes of empty commercial real estate, what is going to be done with that, it is not going back to commercial use but most of it is uneconomic to convert realistically.

[Wight Flight]

Quote

Research by Capital Economics for the NRLA found that removing the 3-percentage point stamp duty levy on the purchase of additional homes would see almost 900,000 new private rented homes made available across the UK over the next ten years.

As a result of increases in income and corporation tax receipts, the modelling suggests this would lead to a £10 billion boost to Treasury revenue over the same period.

Or 900,000 homes not being bought by owner occupiers.

Or do they magic these houses up from thin air?

[sleepwello'nights]

47 minutes ago, Wight Flight said:

Or 900,000 homes not being bought by owner occupiers.

Or do they magic these houses up from thin air?

At the moment the large house builders have many unsold houses and are reducing the numbers they're constructing and moth balling sites. Could this be where some of the 900,000 would from over the next ten years? 

[Wight Flight]

9 minutes ago, sleepwello'nights said:

At the moment the large house builders have many unsold houses and are reducing the numbers they're constructing and moth balling sites. Could this be where some of the 900,000 would from over the next ten years? 

Rather than moan about 3% extra stamp duty could they not just ask for 3% off the price?

Or are they planning to do both and hoping nobody notices?

[spygirl]

On 29/03/2019 at 08:33, spygirl said:

I was googling around unfo in this:

https://www.bbc.co.uk/news/business-47740529

These are all MX cBTL customers. They are grasping at straws trying to make a case out of robot signing - its does nto matter who the fuck signs the doucment, the mortgage is owed to the bank not the employee.

The MP - Holinrake - is a cunt ex Yawk EA, probably stacked with BTLs

https://publications.parliament.uk/pa/cm/cmregmem/170306/hollinrake_kevin.htm

Land and property portfolio: (i) value over £100,000 and/or (ii) giving rental income of over £10,000 a year

A third share in 12 residential properties in York: (i) and (ii). (Registered 05 June 2015)

Anyhow stumpled on this from guardian:

https://www.theguardian.com/money/2016/dec/10/buy-to-let-landlords-vilified-lending-crackdown-tax-hike-profit-loss

But critics warn the clampdown may force up rents – and argue that they are not all fat cats. Cooper, 55 and from Windsor, is a landlord with 15 properties across the country, from Crawley in the south to Grimsby in the north. On paper he appears to be a millionaire, with the properties worth a total of £2.4m. But Cooper works as cabin crew on an airline earning £34,000 a year, and says he began doing buy to let to supplement his otherwise meagre pension.

His total rental income is £104,000 a year, but mortgage interest and charges are £88,000, leaving him with an annual profit of £16,000. Added to his pay it brings his annual income to £50,000. Currently he pays £12,320 tax and national insurance on that, but once the tax changes are fully phased in by 2020 his bill will rise to £22,720. Figures prepared by his accountant suggest the tax on his rental income will rise from £4,600 (or 29% of his profits) to £14,900, or 93% of his profits. If interest rates rise he says he will have to pay tax in excess of his profits.

Those numbers are fuckign insane. The idiot and the banks who lent him that money need to be stripped of all assets and put in jail.

Earning 34k in Crawley means the fucker could barely afford to rent a fucking flat never mind 'own' a 2.4m property empire.

Rental income for individual should never have been allowed to be discounted from rent - this wa an oversight as noone ever though banks would be stupid enough to lend how they did.

What sort of leverage does he have? IO Mortgage @ say 4%/y of ~90k means hes carrying around 2m of io debt on a salary of 34k in the frocking South. Apply MMR lending ,hed only been able to get a resi mortgage under 150k.

 

 

Worth rereading the above, followed by -

Landlords using interest-only mortgages have experienced a soaring 283% increase in their monthly interest costs since 2021.

The research by Octane Capital reveals the damage high interest rates have caused for landlords.

According to the report, those landlords who make a full monthly repayment have seen the monthly cost of their mortgage climb by 71%.

https://www.property118.com/buy-to-let-turmoil-as-interest-only-mortgage-payments-skyrocket/

Let's assume the Crawley trolley dolly still has the same exposure.

Hus mortgage IR has gone from 88k to ~200k

Rent income of 104k, tax of 14k.

The moreIO BTL default n the loans go bad, the more capital banks will have to hold, causing IO Btl SVR to go higher, causing more IO Btl to default ...

 

 

[spygirl]

The buy-to-let sector and financial stability

Quarterly Bulletin 2023

https://www.bankofengland.co.uk/quarterly-bulletin/2023/2023/the-buy-to-let-sector-and-financial-stability

7: Conclusion

The BTL sector has grown significantly over the past two decades and has become an important and integrated part of the UK financial system.

The sector is currently facing a number of economic and regulatory pressures. As such, at least while interest rates remain high, BTL properties have become less profitable, particularly when compared to other safe assets. More broadly, pressures on the BTL sector have encouraged greater consolidation as larger landlords have bought properties from smaller ones, at the same time as a moderate decline in the overall number of properties in the PRS.

Distress in the BTL sector could affect financial stability through testing lender and borrower resilience – both among landlords and renters.

In aggregate, lenders remain resilient to pressures on the BTL sector. Since 2015, prudent underwriting standards and strong house price growth have contributed to a strong LTV distribution on the stock of BtL loans. This strong LTV profile would insulate most lenders from losses, even in the face of significant house price falls.

By contrast, many landlords and renters are now feeling the impact of higher BTL financing costs. Landlords could absorb the higher costs themselves, pass them on to renters, many of whom are competing for housing in oversubscribed markets, or exit the BTL market. Were many BTL landlords to exit the market, we expect this would put limited downward pressure on overall house prices, although it would be likely to put further upward pressure on rents, at least in the short term.

Renting households are more likely than other households to face hard financial choices – like cutting consumption, running down savings, or defaulting on financial obligations. While the financial stability implications of such actions would likely be limited, these actions would of course bear on many households’ financial security.

We will continue to closely monitor developments in the BTL market and, in particular, how trends in the sector interact with risks to the financial system.

[spygirl]

It's failing to see tge Wood fir the trees.

Io btlis concentrated in only certain areas/towns.

When push comes to shove private renters are only on 1 months notice( 6 max)

A lot will ditch their rentals and downsize or move away.

Assuming renters will behave like OO is dumb. They won't bear the extra costs, cos they have no skin in the game  n a contract that puts 1 months rent as the cost of moving.

Mentioned years ago, when my cis n his fellow block o flat renters got notice that the LL owner had gone bust, all bar my cuz stopped paying rent.

Most waited for 6 months then moved elsewhwrr, with saved money. New LL was happy to see them.

The dynamics of rentals is v v vdifferent from OO.

The BoE, banks n new LL  don't grasp that.

[spygirl]

 

I should add I'm v suspect about inews content, esp properdee.

They seem to be making stuff up.

[Rare Bear]

On 15/12/2023 at 13:28, Ash4781b said:

Just a PR stunt. There are easier ways to open a door.

I think Michael Caine explained that in The Italian Job.

[Wight Flight]

A bit of interesting insight for a Saturday morning...

https://www.property118.com/newbie-to-prs/#comments

[AWW]

On 31/12/2023 at 13:41, spygirl said:

 

I should add I'm v suspect about inews content, esp properdee.

They seem to be making stuff up.

To answer Charlie's question, in my experience, landlords have been largely clueless. Example - previous landlord who didn't know that only a court could evict me after I ignored S21 notice, current landlord who couldn't believe that tenant could simply refuse to pay increased rent of LL's choosing.

In fairness, most tenants are also clueless about their options when faced with S21 and larcenous rent increase requests.

[spygirl]

Il not post the full address as I know the person who bought this place.

Just for the Lolz.

Porfolio reseller butys, flips to LL at 40k profit for les than 6 months 'work', followed by a long painful 11 years, then a  60k hit

Date Sold	Price Paid	Nominal change	Real change
17 Oct 2018	£35,000	-62.0%	-73.0%
05 Jan 2007	£92,000 *	80.4%	79.3%
11 Oct 2006	£51,000 *	n/a	n/a

 

[sancho panza]

https://uk.finance.yahoo.com/news/one-six-stressed-renters-miss-000100606.html

One in six ‘stressed’ renters miss essential payments every month, survey says

Consumer group Which? is urging UK businesses to support people struggling with the cost-of-living crisis, as one in six “stressed” renters miss “essential” payments every month.

A person interviewed by Which? said: “We are not living, we are existing at this point. No holidays, no luxuries, just stress and worry,” as the consumer brand estimated that 2.4 million households missed at least one payment on their mortgage, rent, loan, credit card, or bill between December 2023 and January 2024.

This marks a significant increase from the 1.8 million households that missed payments in the month ending on December 8, but it is consistent with the levels of missed payments seen through most of 2023.

 

In an online poll of around 2,000 people conducted by Yonder on behalf of Which?, renters were more likely to miss essential bill payments. In the period between December 2023 and January 2024, almost one in six (15.9%) of renters surveyed missed at least one bill.

During the same period, only 6.8% of mortgage holders missed essential payments, while Bank of England interest rates remained high.

[sancho panza]

https://uk.finance.yahoo.com/news/average-asking-rents-hit-record-000100936.html

Average asking rents ‘hit new record high with 11 inquiries typically per home’

The average monthly rent being asked outside London reached a record £1,280 in the final quarter of 2023, according to a property website.

Rightmove, which released the index covering Britain, said agents are receiving 11 inquiries typically per available rental property.

But it added that 2024 is expected to be a year when the pace of rental growth slows down.

 

A 0.2% quarterly increase in asking rents in the last three months of 2023 was the smallest jump since 2019, indicating that the pace of rent rises is slowing.

There have also been signs that more tenants are hitting the limits of what they can pay, with nearly a quarter (23%) of rental properties needing a reduction in advertised rent, compared with 16% a year earlier.

Advertised rents in the final quarter of 2023 were, on average, 9.2% higher than a year earlier.

[spygirl]

6 hours ago, sancho panza said:

https://uk.finance.yahoo.com/news/one-six-stressed-renters-miss-000100606.html

One in six ‘stressed’ renters miss essential payments every month, survey says

Consumer group Which? is urging UK businesses to support people struggling with the cost-of-living crisis, as one in six “stressed” renters miss “essential” payments every month.

A person interviewed by Which? said: “We are not living, we are existing at this point. No holidays, no luxuries, just stress and worry,” as the consumer brand estimated that 2.4 million households missed at least one payment on their mortgage, rent, loan, credit card, or bill between December 2023 and January 2024.

This marks a significant increase from the 1.8 million households that missed payments in the month ending on December 8, but it is consistent with the levels of missed payments seen through most of 2023.

 

In an online poll of around 2,000 people conducted by Yonder on behalf of Which?, renters were more likely to miss essential bill payments. In the period between December 2023 and January 2024, almost one in six (15.9%) of renters surveyed missed at least one bill.

During the same period, only 6.8% of mortgage holders missed essential payments, while Bank of England interest rates remained high.

A business that lets a ~500k house to a people with little to no money is going to have similar outcome to a business  letting Ferraris to people without a driving license.