Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "NW Landlord" at "14/12/2015 - 17:36":

I can vouch for that, all my Eastern European tenants always pay on time and look after properties and carry out minor repairs themselves without the need to pick up phone.

Reply to the comment left by "Neil Robb" at "14/12/2015 - 17:58":

Neil I have considered this and there is quite a large overhead for the landlord, unless I am forced into this position I will not bother, there are plenty of working tenants around and I will leave it to the naive landlords to accept the UC claimants.

An open letter to Mark Carney – Governor of the Bank of England

Re: The recent actions of government in the Buy to Let housing market

Dear Mr Carney

I would like to think of myself as a cautious and prudent individual with a career of over seventeen years advising on financial planning, investment and taxation. Whilst not all private landlords will have that background many, if not most, or perhaps even the greatest majority would seek to deploy their capital in an effective way to secure a reasonable running yield, the maintenance and enhancement of the housing stock and quality and assured accommodation for their tenants.

You have apparently identified the BTL sector as a risk to financial stability, I believe this is misplaced on several counts.

1) private landlords, even those incorporated and with ten’s of thousands of units, are not charities and look to profit on their investment of both capital and time, as with any walk of life there will be some who behave recklessly just as with some central bankers.

2) Those with debt may have historically sought to tune their gearing to provide a modest positive cashflow but today the “best” rates offered of around 3.5% already encourage an LTV of 75% and with lender stress testing up to nearly 6% on a 125% of rental coverage. I personally stress test on up to 8% allowing for all actual costs, contingencies, and voids.
a. On this basis the BTL sector is of far less a threat to stability than the owner-occupier currently paying far lower rates and on higher LTVs and thus at greater risk from rate increases given the constraint on domestic budgets.

3) There is in fact no “BTL” sector as it is highly fragmented both as to participants and the housing need they address.
a. The instability introduced by the recent actions by the Chancellor and the BoE are a direct threat to the continued housing of some of the UK’s most vulnerable citizens, Housing Benefit claimants, the long term unemployed, former prisoners or those with other life challenges leaving them unsuitable as mortgage borrowers. This threat emanates from the Chancellor’s injudicious taxation of turnover under Clause 24 which will cause a reduction in supply as some exit entirely or migrate their business away from rent constrained tenants and the deterrence of new entrants as a result of the raised cost of entry.
b. I do not have such tenants but provide solely for the mobile professional and senior and international student. Although not uniquely, such people are often government or corporate funded and thus with a high degree of financial security. If the PRS for such a market diminishes the UK will lose valuable foreign exchange in addition to the substantial expenditures made on educational services, corporate presences, and the local service industries.

4) The notion that my actions are “denying home owners” is misplaced.
a. My objective is to secure well located units at an un-elevated price and disengage whenever faced with an HO on a prospective purchase as it is they who will bid the price up of both the specific property, and importantly agent expectations, which is the very last thing that prudent landlords would want to do.
b. I have walked away from even existing let properties where the financials do not work leaving such units to become available to prospective HOs toward the end of the tenancy.
c. It is incorrect to talk of HOs being “outgunned” as I already have to inject more capital and pay higher interest rates than HOs.

I could make many points but for clarity at this point let them rest.

The actions of the Chancellor and the BoE appear to speak more to the gallery of public misperception in the former and the misunderstandings in Europe of the British lending sector which has long been the case.

Neither the Chancellor nor the Financial Secretary to the Treasury has given coherent reasons for, nor the true implications of, either recent measure affecting the PRS. At best sic. we have a disingenuous reference to the correct taxation of those with the highest incomes (perhaps appropriate in respect of pension contribution tax relief) when many landlords have only a moderate income when taking account of a normal business cost and the many whose lives have had an unexpected instability introduced by suddenly finding themselves significant higher and additional rate tax payers.

As for the BoE I have seen little evidence for the contentions made as to the potential impact of the sector of the stability of the country, I would welcome the publication of such evidence, perhaps along the lines of a Tax Impact Notice.

Yours faithfully

David Strange

Reply to the comment left by "money manager" at "14/12/2015 - 20:48":

Nice one, David. Let's see what you get back. They usually say stuff like it's nothing to do with them and you have to write to the Treasury or they say they've passed on what you say... But it all helps. If we are silent, that definitely does not help.

Reply to the comment left by "Saeef Khan" at "14/12/2015 - 19:59":

This is my experience too. Every single Eastern European I have let to has left the property/room in a condition identical or even better to what it was on the day of move-in (even though we thoroughly clean the property between tenants). They're also yet to miss a single payment or even a viewing. Perhaps some of the anti-landlord brigade should ponder on that before accusing us of hoarding the country's housing stock.

Eastern European immigrants, who are often doing jobs that British people will not, specifically require rental accommodation. They are also frequently turned away by the larger companies and letting agents because they do not possess references from previous landlords. This is something that they have always told me at the viewing stage.

But I suppose supporters of Clause 24 can rationalise the disruption to the plans of these workers on "OIY!! you're either with us or with the landlords!" grounds.

Reply to the comment left by "Ros ." at "14/12/2015 - 17:34":

Done

Reply to the comment left by "money manager" at "14/12/2015 - 20:48":

Hi money manager

The Governor of the Bank of England claimed that in a downswing, landlords would exacerbate a price crash by selling into an illiquid market. I question this assumption.

When the sales market died in August 2007 the BofE Bank Rate was 5.75%. My partner and I were making losses but we had to grin and bear it because not enough people were buying, due to lack of confidence and a lack of available lending.

People even became reluctant landlords because they had to relocate without being able to sell. Others became accidental landlords through inheritance. This increase in supply forced rents down.

Admittedly, this squeeze caused some landlords, who did not have enough resources, to have property repossessed. However, I do not think the price fall was caused by many people choosing to sell cheaply. Prices fell because of a dearth of buyers due to the above reasons. Both experienced landlords and reluctant/accidental landlords held on to their property because they knew that prices always recover, then go on growing.

Since that time rents have increased. Mark Carney has indicated that BR will not exceed 2.5% in future, and that it will take a long time to get there. So I do not envisage landlords making losses, and if they did, they will have built up savings to withstand them. What kind of catastrophic downswing does Mr Carney envisage, I wonder?

Reply to the comment left by "money manager" at "14/12/2015 - 20:48":

Bloody good e-mail David.

Even if we were to bend over backwards and assume the housing market is overheating because of BTL, it would only be an argument for applying Clause 24 to future purchases: i.e. kill the inflation by killing the purchases feeding the boom, not by attacking people who've owned their properties for years. A purchase made 10-20 years ago is not overheating the market. Employing these grounds to apply Clause 24 retroactively is mis-informed, political butchery of the rental sector.

Reply to the comment left by "David Price" at "14/12/2015 - 17:33":

Yes David

If we are getting direct payments now its because they dont pay and most are in 8 weeks arrears. These tenants have already shown they wont pay the rent so we should be able to keep the direct payment.

No training or help appears to have been given to these tenants , some are unable to use a computer. Some have no access to a computer.
The tenant who has not paid his rent to me for 2months had to send by post his tenancy. Two weeks later they write back to say they have rec it and will be in touch in due course. Hes at food banks no money.
IDS is a total disgrace. I was speaking to an ex tenant a few weeks back she has a back problem caused by an industrial injury.
She had togo to hospital and spent 6months on her back being fed via tube as she was not allow to move due to spine. Her benefits are stopped because she did not turn up for a medical.
They said her reason was not good enough, in the end the consultant that treated her said he would take a day off work to attend her appeal. They then decided it was ok.

This country as gone to the dogs

Reply to the comment left by "KATHY MILLER" at "14/12/2015 - 21:46":

Welcome to the brave new world as envisaged by the Tory party.
Heaven help the poor, they certainly won't.