National Rent Rise Day 5 April 2017

Reply to the comment left by "S.E. Landlord" at "13/10/2016 - 15:02":

I see it more as a State sponsored redistribution than State seizure.

Reply to the comment left by "Mark Alexander" at "13/10/2016 - 15:01":

I don't know Mark. I think BREXIT could have some impact - both in terms of currency / overseas buyers & also whether the UK remains a destination of preference / home to people from other EU countries

There could be some localised impacts too. If Nissan closed down its factory in Sunderland for instance, or if tens of thousands of bankers left London

Overall I lean towards stagnation with some nominal falls. Maybe even 20% declines from recent peaks in the next 3 years or so & then growth closely correlated to cpi for a while.

But I would be more surprised to be right than wrong and I wouldn't be shocked if prices moved up a touch or down a lot.

Let's see what the autumn statement brings.

I certainly wouldn't do anything as risky as selling out my entire position, including my own home (the sell to rent strategy) in the hope of buying back in, into good quality properties, a few years down the line.

But nor am I a buyer in this market. I will sit tight with what I have for now.

Reply to the comment left by "Jon Pipllman" at "13/10/2016 - 16:28":

Why would you sit tight if you think values are more likely to fall by 20% over the next few years? The fact that you are doing so seems to suggest that you don't really believe in your own prediction and that it's just a worst case scenario in the back of your mind. If you did really believe that a 20% drop was coming then why wouldn't you sell now and buy back in two years?

Perhaps your strategy is much longer term and you can't reinvest to get a better return?

Perhaps you have little to no equity and a bit of cash flow so you might as well chance it?

What do you think will happen to rents?
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Reply to the comment left by "Mark Alexander" at "13/10/2016 - 17:52":

It wasn't a prediction. I know as much about future prices as anyone else - nothing really.

But if it was a prediction, I wouldn't sell for several reasons.

The transaction costs are so high and, in terms of PPR, I am not sure I could buy back the same (type of) house after any price fall - it was built in 1910 and has only been on the open market once since then: when I bought it!

I have plenty of equity (debt is < 10% & I could bacs that to the mortgage accounts by ten to 8) and, therefore, sufficient cash flow from the investment.

I don't have much skin in the btl game. I don't have a big portfolio and, overall including PPR, UK property is about 20% of my assets. I last bought a UK property in 2007. The let ones I have are decent and, again, I couldn't be certain to replace them with similar quality properties whatever happened to prices after I sold them.

So a 20% fall in prices wouldn't really change things for me

S24 doesn't really matter for me either, my finance cost element is small & I am in the 45% tax band already

If there was a 20% drop, I am not even sure it would make sense to me to buy at those levels unless rents had increased substantially. I would like a couple more, but my approach to property is very conservative and, to buy what I want, where I want would need a 35% fall in prices at current rent levels. If that happens, I will buy. If not, I am unlikely to.

I do think rents will continue to rise, outside London, above inflation for a couple years perhaps. Let's see.

Reply to the comment left by "Jon Pipllman" at "13/10/2016 - 19:48":

Thanks for sharing that background info. I now have a far better understanding of what influences your mindset and your posts on Property118 generally.

May I ask what you find so fascinating about Property118? Is it the discussion about property related matters or is it more about study of human behaviour on forums?
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Reply to the comment left by "S.E. Landlord" at "13/10/2016 - 15:02":

To address SE landlord's feeling that s24 is not as extreme as I say and is not confiscatory:

If S E means south-east England then he/she perhaps believes that this area is typical of the rest of the UK and that the landlords in other areas have loads of options. In fact, in other parts of the country some landlords have made no capital gain and often have properties which are in negative equity and on a sale the landlord would not get their initial investment back, and would have to pay the shortfall out of other resources. Also, some lenders do not allow landlords to sell one property in isolation and the sale of many properties at one time is practically impossible to achieve. Also, why should people be forced to sell their assets by the State at a time not of their choosing when they may lose money on this sale?

As things stand, there would be no need for them to sell for many years, especially if they have mortgages with very low interest rates as many have. Also, why should they have to sell their businesses because of retroactive legislation, when George Osborne in the same Summer Budget said that new car taxes should only apply to new purchases, as it wouldn't be fair to impose them on cars already bought?

As Section 24 will require landlords to pay tax on 'fictitious profit' however, many will not be able to do this for long unless they have significant savings - savings which they will have to hand over to HMRC. When any savings run out it is the lender that will confiscate the property - and HMRC will bankrupt the landlord. The State will have effectively confiscated the assets of the landlord. Without s24 the landlord would have their properties; with s24 these landlords will have everything taken off them (if they are lucky they may end up with some cash or they may not).

In addition, the top rate of income tax is 45%, but I know landlords whose tax on real rental profit under s24 will be 83% and 93%. That is a confiscatory level of tax. The example that Megan Shaw of HMRC issued last year showed how a landlord will pay 170% of the real rental profit to HMRC. That is also confiscatory.

Where do you think rents are heading btw?

I first found 118 when searching for info about ASTs and it is a useful repository of information and source of knowledge.

I was surprised by the fervour with which btl was discussed here and couldn't (and still don't) understand why massive leverage was being talked about as a strategy on some threads without much of a nod to the downside risk.

Then S24 came along & I got drawn into posting.

I do like to dig in to both extremes of things in an attempt to build a view - hence the interest in hpc as well as here for instance. Usually my view ends up being far closer to the middle than to either extreme. That certainly applies to my view on UK residential property: being wholly out of owning doesn't look / feel right and being, pardon the vernacular, balls deep doesn't either.

Also, are you doing a piece about the Irish budget?

Reversing 's24' and introducing help to buy?

Reply to the comment left by "Jon Pipllman" at "13/10/2016 - 20:16":

Our research has been quoted recently in Irish Newspapers and may well have influenced the Budget over there. Our last article was this one https://www.property118.com/the-irish-experience-an-apology/90930/
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Reply to the comment left by "Dr Rosalind Beck" at "13/10/2016 - 20:13":

You compared Section 24 with Mugabe seizing private property, even a cursory review of what took place then and it is clear that there is no comparison and referencing it is for effect. If you honestly believe they are similar I would be interested to see a side by side comparison with what the white farmers faced at that time, but include details of the violence and arrests that they also faced.

I can understand the wish to emphasis the detrimental effect Section 24 will have on highly leveraged landlords but to draw the comparison with Mugabe's actions is inaccurate and unnecessary.