Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Barry Fitzpatrick" at "17/09/2015 - 07:43":

Barry, unfortunately, their counter-argument is that, first time buyers are unable to save for deposit due to extortionate rents.

Not matter what happens, landlords are always to be blamed.

I would like to see how economy or this government together with tenants will survive IF landlords disappeared overnight.

Our biggest enemy is an organisation called "Shelter" They come out with unfounded theories and throw as much mud as possible on landlords with a hope that some will stick.

Ultimately what happens is that, our government starts listening to them, without doing their own research like it has happened in recent tax change.

Essentially, restriction on tax relief was predominantly pushed by Green Party as well as Shelter, Tories simply followed the suit. (albeit silently).

What is most laughable is that, Shelter suppose to be looking after tenants however this tax change will backfire on tenants as rents are likely to rise as result. This is classic example of their poor planning for tenants.

Sell, Who is/would buy NOW? The effect of this tax change on the rental market has been immediate, because anyone considering any future moves in this market will be taking into account these future tax changes right now and changing what they do, right now. Would you to buy rental properties with he same return margin as before? NO. You want a bigger return to pay the tax, so the value of rental propertise has dropped.

It obviously this isn’t going to create a level playing field for FTB’s because it will quickly become the norm for all future purchases to be made inside a limited company. Mortgage companies need to lend money to be in business. When Landlords are only prepared to purchase inside a limited company, it will quickly become the norm and most of their business done lending to small limited companies, 100% guaranteed by the Landlord.

This brings me back to my solution which is the only practical one. To help FTB’s the target for the tax restriction has to be the property, and not the Landlord. Restrict the tax allowance on small cheap properties starting now, be they purchased by a person or a company. By the way, this isn’t just about the government raising more cash from a new tax. If that was the target, it would be far simpler and safer for them to raise the top rate of tax by a few percent. It is about FTB’s having an opportunity to be FTB’s

Reply to the comment left by "Saeef Khan" at "17/09/2015 - 08:10":

I don't think in general rents are extortionate, they are subject to market forces. If there is a shortage of rental properties then rents will go up.

I wanted to buy in my local area but the property prices were too high compared to the market rent (and I'm sure other BTLer's would come the same conclusion). So how is that pushing up prices? I've seen several property peograms on TV were investors have said asking price was way too high for them.

Reply to the comment left by "Graham Chilvers" at "17/09/2015 - 09:02":

Hi Graham.
You might want to put this suggestion into a brief submission to the Public Committee on the Finance Bill. You just have to write a little bit about yourself and why you have a special interest or expertise and then you could just put: 'An alternative to the 'tax relief restriction' and write a brief paragraph on it. I'd be happy to look at it before you send it off - I like editing. We could exchange email addresses via Mark.
I've already sent in a submission so I don't want to send in a second one in case it's disallowed. I think you would need to do it fairly quickly - I was told that they're naming the members of the Committee tomorrow and they will be deciding which submissions are admissible. If you need the link let me know and I'll find it for you.

Reply to the comment left by "Graham Chilvers" at "17/09/2015 - 09:02":

Graham, Tax saving made via Ltd company is easily absorbed by higher interest rates as well as arrangement fees.

In addition, as you have stated that it will become norm for lending institutions to lend to ltd companies then don't you think they will levy same tax on ltd companies?

Reply to the comment left by "Barry Fitzpatrick" at "17/09/2015 - 09:03":

Barry, I agree that the rents are not extortionate however they tend to use it as a counter-argument.

Reply to the comment left by "Barry Fitzpatrick" at "17/09/2015 - 09:03":

Hi Barry.
Here is an extract from a recent letter I have sent to a newspaper, which touches on the subject of landlords and house price inflation:

'As for the idea that landlords are particularly responsible for house price inflation, I refer you to a report which showed that between 1996 and 2007, only 7% of the 150% rise in property price was attributable to increased lending to landlords.’ (Report published in 2007 by the National Housing and Planning Advice Unit: http://webarchive.nationalarchives.gov.uk/20120919132719/http://www.communities.gov.uk/documents/507390/pdf/684943.pdf)

Others have argued that it is rather the tax advantages enjoyed by current owner-occupiers which has contributed to house price inflation (along with insufficient housing being built). Other countries tax owner-occupiers far more than the UK and do not face the same levels of house price inflation that we do.

It is also often claimed that landlords 'outbid' first time buyers. In fact, landlords, not being emotionally involved in decisions about house purchases are far more likely to negotiate prices down,so I don't get this argument. We don't 'fall in love' with properties that we decide we 'must have;' something that might lead someone to pay more for a house than it's worth.

I feel that the argument about us competing for properties is mostly anecdotal and thus will have some truth in some areas of the country. It certainly isn't true in my part of South Wales, however. I have never 'outbid' anyone and in fact my student-type houses in a 'student area' would hold no interest to first time buyers (and in any case, why should first-time buyers' needs be seen as more important than essential housing for students and young professionals who do not want to buy?); and my two-bed terraced houses (which constitute the other half of my portfolio) are mostly located in areas where people traditionally rent.

The reasons they don't buy are more about their lives, their salaries, their lifestyle choices, their decision not to save for a deposit (I am talking about areas where houses can be bought for £50,000 so saving for a deposit is not a pipedream), and the strict mortgage criteria they face. It has nothing to do with me as a landlord; rents for example range from £300 to £400 in most of the areas I have houses (I don't believe social housing rents would be much less than this - and they are due to be sold off anyway. It must also be taken into account that Housing Associations are subsidised and they don't pay the taxes we do, as far as I am aware).

When I bought many of these houses, they were in a poor state of repair and the amount of work involved would have put most first time buyers off. Of those that were in good condition, they had usually been done up to sell and were located in not very popular streets where renting is more the norm. They were usually on the market for some time before I came along (with some, I now know why as they turned out to be quite poor purchases!).

Because of the Chancellor's decision - a decision which makes my business unviable, I am now considering starting to sell up. The first house I have identified (where I have evicted the non-paying, abusive tenant) is in a short valleys street, where there is only one house for sale and it has been on the market for 5 months. There are no first time buyers and landlords rushing to compete and bid each other up for that house.

And although it may be the case that average house prices are on the increase nationally, in my area of South Wales they dipped a bit and recovered slightly, but mostly have been static for many years. Where house prices have soared it is obviously a function of supply and demand and is not because of landlords. The Government should be focused on building more homes and on getting young people to take up courses in the building trades, for example, to tackle the skills shortage.

It should also be incentivising landlords to keep purchasing older properties which need renovating to bring them into use, and also offering incentives for landlords to get more involved in new-builds. If landlords engage in 'build to rent' they cannot be accused of 'stealing' homes from first time buyers as the homes would not even be there if they hadn't built them! (they're creating housing; not stealing it)

It is worth noting that the English Housing Survey credits the private rented sector with creating 83% of the new dwellings built between 1996 and 2013 (3.5 million out of 4 million). Much of this activity is now going to cease. In addition, if landlords had not brought dilapidated houses back into a habitable state or financed the thousands of new blocks of flats (which were accompanied by the construction of affordable housing as the price of planning permission) the shortage today would have been even worse that it is, and both prices and rents would be higher than they are.'

This measure will slow people buying property to rent but it won't stop them. From my understanding about 250,000 NET properties are added to the rental stock each year about half cash half mortgage.

Not all mortgage buying will stop. If 50,000 fewer BTL enter the market each year the rental sector will still be growing by 200,000 units a year.

These changes imo will have a bigger impact in more expensive areas and less of an impact elsewhere.

Overall I think by the end of this government there will be 1 million more rental homes with 2.5 million renters in them. If the aim is truly to stop rentals increasing at the expense of owners there will be more pain to come because the interest as tax changes wont turn the tide around