Summer Budget 2015 – Landlords Reactions

I sent this to Syed Kamall. Sod it, we need support. No paragraphs as it was a tiny slot to fit it all in.

Dear Dr Kamall,
The individual landlords of London will be forced to pay the extortionate tax on their rental income should the chancellor's Proposal become law. We have been campaigning against the proposal as it means that the hardworking landlords, who are not large corporations, will be seeing any profits after losses dwindle to nothing. In many cases, the landlord will be paying a huge tax bill even when there is no profit or they have suffered a loss for that year. This is an absurd tax that will mean that thousands of Landlords will simply not be able to continue. The tax is extremely unfair, as all other businesses are able to offset finance as a cost, and not be taxed on this. By suggesting this is anything by a cost is ludicrous. There is a petition started by the London-based Landlord Ruhal Uddin, which has now gained over 13,000 signatures. https://petition.parliament.uk/petitions/104880
At a time when many boroughs of London are on their knees regarding housing, this tax will literally cripple the much needed Private Rental Sector. Individual Landlords have stepped in where Social Housing has been lacking due to Right To Buy. I experienced this lack first hand in London. This tax levy is also diametrically opposed to the Conservative policies of entrepreneurism and of the ordinary man 'having a go' and providing solutions for social problems that often politicians have been unable to tackle. London is a great city, but not without its very unique problems. Homeless charities such as Shelter, Crisis and Centrepoint are literally inundated with homeless people; the numbers will continue to rise when Landlords are forced to sell their portfolios and evict their tenants. Private landlords have also taken in vulnerable people and those on benefits. Councils have relied on Private Landlords to house these vulnerable groups, so in short, Landlords' businesses need to be protected. There will be bankruptcies, too, which will further weaken the economy. Please please please contact me for more information on our campaign and to discuss the ramifications of this tax, which will impact on London and elsewhere in devastating ways, as experts are warning.
Regards
Connie cheuk

Neil Shah, director of research at Edison Investment Research, said: “An overheated quoted housebuilding sector has seen an immediate correction from the Chancellor’s removal of higher rate tax relief on buy to let mortgages, resulting in over £1.5bn wiped from the value of the big eight UK house-builders, down on average 5%.

"A sign of how dependent the volume housebuilders are on the investor market is in the relative share price falls with Barratt Developments leading down 5.8% while TaylorWimpey fell 4.7%, Persimmon, -5.4%, and Bellway -6%. London-focused Berkeley Group feeds off the domestic and overseas investor market fell so fell 5.7% on the removal of higher rate tax relief. Other volume builders fell Redrow -4.7%, Bovis -3.3% and Galliford Try -3.7%.

"The crash in values today virtually wipes out all the gains made since the Conservative-won election in May which has promised - and will now deliver - more tax efficient savings into the housing market and has seen increasing amounts of freed-up pension savings diverted away from annuities into buy-to-lets. Despite today’s stock market falls the housing market and house-builders generally may still remain over-heated for a while longer with no real freeing-up in the planning system as of yet, and actual new housing output still languishing at around 140,000 homes a year – some 40,000 below the pre-crisis peaks and a full 100,000 below volumes needed to meet pent up national demand from owner-occupiers.

Andy Knee, chief executive of LMS comments on the Summer Budget: “The restriction to Buy-to-let tax relief is a serious blow for landlords, which is likely to reduce their appetite for gearing within their portfolios. However, the move is likely to be welcomed by First Time Buyers who may find securing their chosen property a little easier as a consequence.

"Rising house prices in London and the areas around the commuter belt have created a generation of squeezed renters, unable to save enough for a deposit on a first home, who find that limited housing stock, a falling turnover of homes, and competition from tax subsidised landlords has barred them from the market. Reducing these subsidies won’t solve the housing crisis, but it does shift the playing field a little in favour of first-time buyers.

Stephen Greenhalgh is the Deputy Mayor for Policing and Crime and is seeking the nomination to stand as the Conservative candidate for Mayor of London in May next year.

http://www.conservativehome.com/localgovernment/2015/04/stephen-greenhalgh-only-the-conservatives-will-give-more-londoners-the-opportunity-to-buy-their-home.html

Reply to the comment left by "Connie Cheuk" at "23/08/2015 - 17:49":

Console yourself with the thought that a Labour government would probably have shafted you harder!

Reply to the comment left by "Jerry Jones" at "23/08/2015 - 19:44":

Yeah, I hear you.

My picture in the article would have been Edvard Munch's 'The scream'.

Reply to the comment left by "KATHY MILLER" at "23/08/2015 - 19:08":

Last week has seen a number of housebuilders release their financial results to the market. Interestingly, in the risks section mandated by all financial statements, none of them have mentioned the tax change resulting from the budget, which indicates that they do not see this as being a risk to their business.

It either means that they see enough pent up demand from FTB's or they expect new investors to move over to an incorporated structure.

Reply to the comment left by "KATHY MILLER" at "23/08/2015 - 19:08":

I wonder what subsidies Mr Knee is referring to.

Reply to the comment left by "James Tallis" at "23/08/2015 - 20:14":

Yes, Lenders have ways of adapting; their products and terms change all the time.

Northern Rock made a comeback as a top provider of buy to let mortgages a few years back and was doing rather well.

Lenders are like Tardigrades!

Reply to the comment left by "Monty Bodkin" at "23/08/2015 - 10:31":

Hi Monty

The report in Letting Agent Today https://www.lettingagenttoday.co.uk/1352-tory-mp-eyes-end-to-lettings-sector-tax-perks gives a misleading percentage.

It stated: “Savills' figures, produced for the Financial Times, suggest that landlords have made £177 billion in profit from capital growth over the past five years”, and “The FT reports that the total value of privately rented housing in Britain has grown 57 per cent since the financial crisis”

In fact this 57% was made up of the £177bn in capital growth, plus £242bn of additional rental properties in the period. This exaggeration was due to the biased reporting in the FT.

The journalists who wrote the FT article: http://www.ft.com/cms/s/2/b94cd0d2-95a8-11e4-a390-00144feabdc0.html#ft-article-comments stated “some of that [57%] growth reflects the increasing number of people buying homes to let”.

This was misleading, as it wasn’t just some, it was the majority of the increase. The pie chart alongside the article shows that additional rental properties accounted for £242bn (33%) while the increase in value of existing stock was £177bn (24%).

The journalists contrasted this 24% with the 5% increase in value of properties held by owner-occupiers with mortgages. But they did not mention the 20% increase in value of properties held by owner-occupiers without mortgages, or the 20% (again) increase in value of “social rented” properties. This was also misleading.

This was biased reporting. I assume that the authors were tenants. They inserted a comment from Alex Hilton of Generation Rent, that “it was wrong that landlords were able to “cream (sic) generous tax breaks” at a time when tenants were enduring the effects of government spending cuts”.

The journalists also baldly stated that private sector tenants live in the poorest quality accommodation, without any attribution or evidence.

Furthermore, the £177bn was just an estimate by Lucian Cook of Savills. How he arrived at the figures was not stated.

In another report: http://pdf.savills.com/documents/Property-Focus-Q4-2014.pdf Mr Cook stated that the annual increase in UK properties in the 10 years to 2014Q2 varied from 1% in the North East to 70% in London.

It is safe to assume that most of the £177bn increase in value occurred in London.

Another report from Savills in: http://www.savills.co.uk/_news/article/72418/172125-0/1/2014/uk-housing-stock-value-climbs-to-%C2%A35-205-000-000-000-but-the-gap-between-the-haves-and-the-have-nots-grows states “Valuing Britain, the annual measure of total housing value by Savills research, reveals a £186 billion rise in 2013, with London accounting for over £100 billion of the gain. With the exception of Wales, the North East and North West, all regions saw an increase in the value of their housing stock.”

The London market has been affected by foreign BTL investors putting their money into property there. David Cameron even said in a speech he made in Singapore recently that he would welcome more foreigners buying in London. Brilliant!

It looks to me as though Charlie Elphicke was taken in by the misleading reporting of an estimated figure which only affected part of the country, and on that basis has called for the removal of a tax break that we don’t have, claiming that “the money would be better used to help first time buyers to own their own homes.”

It is ironic that he agrees with Natalie Bennett that we should pay a levy on our finance costs. Where they disagree though is where it should go. She wants it to help build social housing for her natural supporters whereas he wants to give it to his natural supporters.

There was nothing in the Conservative Party’s manifesto about this.

At least the Green Party were honest enough to put it in their Manifesto, which describes our interest as a “tax incentive”:
https://www.greenparty.org.uk/assets/files/manifesto/Green_Party_2015_General_Election_Manifesto_Searchable.pdf

“Make ‘buy to let’ less attractive, so reducing pressure on house prices, by removing tax incentives, including the deduction of mortgage interest as an expense, and reforming the ‘wear and tear’ allowance.”

It would be an appalling irony if a biased article in the FT were the basis of the proposal to disallow our finance costs.

Richard Evans:

Small-scale landlords have suffered an even more serious attack, one that threatens to wipe many of them out entirely.

They will be in the bizarre – and scandalous – position of paying tax on money that they have not made in the first place, thanks to the decision to tax their gross rather than net income after costs (click here for a comprehensive explanation of this inexcusable new tax).

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11817375/Prudent-savers-punished-by-of-all-political-parties-theTories.html