Summer Budget 2015 – Landlords Reactions

My Predictions for Property Investors/property market for 2016!!!
It’s that time of year when people begin predicting what will happen in the property market next year.
I have read several predictions that property prices will increase:

“Savills is the latest high-end agency to give its forecast for the housing market in 2016 and following years.
It says that overall the scale of interest rate rises will dictate the pace, distribution and sustainability of house price growth, but it anticipates that average UK prices will rise 17 per cent by the end of 2020, but with big regional variations.”

I am going to stick my neck out and risk the wrath of other property investors!
First I will explain what is informing my prediction, then I will make my prediction and run for cover.

1. I am not going to explain why many, many people will sell their buy to let properties after they have spoken to their Accountants – for those who don’t know about the changes made in the Budget I will leave those who understand the details much better than I do to explain. But I have now spoken to enough colleagues to know that the market is going to be flooded with properties (previously rented) for sale because they cannot see any way other than to sell up. Quite apart from the number of prospective tenants who are telling me that they are leaving their present rented properties because their landlords are selling up.

2. New measures to tackle rogue landlords and overcrowded housing - New measures will clamp down on criminal landlords who trap and cram vulnerable tenants in unsafe, overcrowded homes, Brandon Lewis announced. https://www.gov.uk/government/news/new-m...ed-housing

In a nutshell Government are going to stop:

• Those who rent properties with undersized rooms and inadequate amenity facilities
• Those who do not ensure that their tenants are safe
• Those who do not keep their properties in good repair
• Those who do not meet all their legal obligations

3. Local Government Finance (Tenure Information) Bill (HC Bill 17)

http://www.publications.parliament.uk/pa...2.htm#l1g1

This bill when it becomes law, and it will trust me, will give local authorities all the information that they need to map the PRS in their areas. It will also give HMRC, HSE, Fire Departments… the information they need to enforce the regulation and legislation for which they are responsible.

4. The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015

http://www.legislation.gov.uk/uksi/2015/...tents/made
This legislation, which currently only applies to new tenancy which began after 1st October 2016, will eventually apply to all tenancies. Under previous legislation landlords and letting agents often got their applications thrown out of court because of errors on the Section 21 Notices – MANY more will fail under the new legislation. The result of this will be that landlords will be forced to use Section 8 to evict bad tenants, which will take much longer and has the potential to trip them up because they have insufficient evidence to make their case. Those who just want their properties back, because they want to sell them…, may find that their failure to comply with the legislation at the start of the tenancy precludes them from ever using Section 21 to evict that tenant. I wonder whether the lenders have realised the full implications of this?

Prediction number 1.
The Rent-to-Renters will run for the hills when they are unable to make profit from buildings which they have chopped into dog boxes and which fail to meet amenity/safety/HMO Management standards. This will leave the owners to face the consequences of licensing fees and Legal Enforcement Notices/major works while dealing with a house full of tenants who they know nothing about and with whom they have not legal contract.
Once they sort out the mess – Lord help them – they will sell up.

Prediction number 2.
The “accidential landlords” who don’t think that they are landlords and who have not declared their rental income to HMRC because “we don’t make a profit we just cover the mortgage costs” nor have the met the most basic legal requirements of Gas Safety nor Deposit Protection - will evict their tenants and sell up.

Prediction number 3.
This is not rocket science, people go into the property rental business to make money and when they are faced with a tax bill which is bigger than their profit – they will sell up

Prediction number 4.
Landlords who have been in the business as long as I have, almost 44 years, are getting tired of new legislation/regulation and escalating costs and realise that the party is over. They will either find a good Letting and Managing Agent or sell up.

Prediction number 5.
3.9 million people are thought to be living in privately rented properties in the UK – in my opinion there are many, many more and some of the new legislation will provide more accurate figures which will shock most people. It has long been said that buy-to-let investors prevent people from getting onto the property ladder – I’m not going to go into that except to say we will soon see that this is rubbish.
The supply of privately rented properties is about to drop through the floor - this will increase rents – this will bring rent controls – more landlords will sell up -this will further reduce supply – this will be a disaster

I think my prediction for property prices for the coming years is fairly obvious

How many times can you count the words “sell up”? What do you think will happen to property values when the market is flooded by ex-rented properties?

I would really like to be wrong and I will be the first landlord to book my place on a seminar which teaches me how to get through this sh@t storm stresslessly, legally and ethically.

To be clear I am not qualified in any way to make these predictions and I am speaking as a private landlord not on behalf of any organisation with which I work

Mary Latham Landlord

Reply to the comment left by "Trendo " at "12/11/2015 - 16:41":

Totally agree Mary need to be one step ahead as many landlords do not know what's coming my son is getting in first. He is selling his first one to the tenant which is a win win I really cannot understand what this government are doing there are things going on we are not privy to they surely know this is going to screw the market up or they are that incompetent I am stuck between the two.

This clause has knocked my son for six to be honest he is stressed out of his head

Reply to the comment left by "Trendo " at "12/11/2015 - 16:41":

Totally agree Mary need to be one step ahead as many landlords do not know what's coming my son is getting in first. He is selling his first one to the tenant which is a win win I really cannot understand what this government are doing there are things going on we are not privy to they surely know this is going to screw the market up or they are that incompetent I am stuck between the two.

This clause has knocked my son for six to be honest he is stressed out of his head

Reply to the comment left by "Trendo " at "12/11/2015 - 16:41":

Yes all this may happen, factor in also interest rate rises and tranches of interest only mortgages being called in when they run out. An analogy I thought of is a mechanic with a poundland toolkit servicing a bmw that's the Govt "trying to help" so much unneccesary legislation since around 2005 as you say the party is over.

Reply to the comment left by "Trendo " at "12/11/2015 - 16:41":

To be clear i am not Mary ! that was an "interesting post from tribes " that i read ..i di also put a link with the post but my introductory comment and link have dissappeared !

Hi Mark A:

Back in page 511 of this thread I asked the following question (I later discovered you were away at the time so you may not have seen it):

‘In addition to RLA, NLA & SAL, two of the most vocal LL ‘groups’ re Clause 24 appear to be P118 and Property Tribes.

@ Mark A: whilst I realise that you may be busy investigating mitigation options, am wondering if there has there been any offline discussions between the heads of any of the 5 above mentioned groups (or any others eg Landlordzone) re joining forces on this matter to create some sort of action group for the brutal C24 attack on non incorporated & encumbered LLs?’

Just wondering if you had any thoughts or comments Mark?

I think one the key things that has become abundantly clear recently: is that residential landlords lack an official association / body that could (1) help improve standards of the ‘not so good’ landlords, but in this case (2) have a voice that may actually be heard when it comes to defending residential landlords (whether encumbered or not, incorporated or not) and encourage Govt to act fairly and at least consider expert’s views seriously?

Reply to the comment left by "Mark Shine" at "12/11/2015 - 20:02":

Hi Mark

Our campaign group team have been working very closely with NLA, RLA and SAL. You will also have read several open letters that have been published by campaign group members. These have been sent to MP's, Lords, Shelter, Generation Rent, Newspapers etc. etc. etc.

The campaign groups chose not to involve Vanessa at Property Tribes as she has stated that she wishes to stay "impartial" on the matter. Frankly, it is unclear whether actually she understands it enough to offer sensible commentary one way or the other, let alone debate tax mitigation strategies, but that might be wrong.
.

For those of you that receive the Property Tax Insider, you may have noticed on page 8, with Arthur Weller, the so called Tax Guru, stating:

'If you do not need to borrow to buy the property, or if you do need to borrow, but you are a basic rate tax payer, then the new rules will not affect you' !!!!

It amazed me that STILL this misinformation is being spouted.

Needless to say I have written a very sharp email, with a copy of Megan Shaw's example.

Reply to the comment left by "Lisa Stux" at "13/11/2015 - 11:17":

Am I right in thinking if a basic rate taxpayer buys a b2let for cash the additional income may push them into higher rate tax ?

Reply to the comment left by "Simon " at "13/11/2015 - 11:21":

Yes, of course it may...l will copy out the whole Q& A to put the comment in context..(please excuse typos.I will have to type it all out:)

Q2 Will we have to pay the 'new tax'?
I'm a higher rate tax payer and so am concerned about purchasing a buy-to-let property with the new tax laws about to start. If I bought a flat with my retired father and gave all the rental income to him each month(from the tenants direct to his bank account) would we have to pay the new tax?

Arthur Weller replies:
There is no new tax starting in 2017. What is happening is that relief for interest payments is being restricted. If you do not need to borrow to buy the property, or if you do need to borrow, but you are a basic rate tax payer, then the new rules will not affect you. If you do personally need to borrow and you are a higher rate tax payer, it will not help to simply give all you rental income to your father. Some more detailed tax advice would be necessary, beyond the scope of the present column.

So...yes Mr Weller answered part of the question, but the point I was trying to make (all be it with a shortened version of the article) was that he gave no indication that a basic rate tax payer(even with rental income ) may well go into a higher tax bracket solely because of the restriction of interest relief.

Sorry if I didn't make myself clear.