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  • Buy-to-Let

    DPS Private Landlord Survey - anyone else?

    I agree. The real purpose of S24 is to protect the banks. "levelling the playing field" was just spin.

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    @Rachel

    Let's follow your contention that leveraged LL were and are a risk to the economy.

    I bought in 2006/7!!!!..................Doh!!!!!!

    Due to high IR I was subsidising my mortgages

    At NO point did I ever consider  selling the properties  so clearly NO risk to the economy.

    With constrained rents only high IR would have made the properties unsustainable.

    Those homeowners usually had far higher LTV than LL were the ones struggling and it is they who were the threat to the economy.

    Many of those employed suffered from short time working and struggled to pay the mortgage.

    Not so LL who  could easily source new tenants.

    So we now have a situation  that many LL are leveraged at no more than 75% LTV and yet we have homeowners who are leveraged at 100% due to HTB.

    Homeowners should be subject to the same LTV requirements as LL.

    Which invariably means no more than 75% LTV.

    That would be a level playing field.

    However LL operate businesses and very few businesses pay the principal of any business loan as they offset their interest costs against income.

    If Govt was so obsessed with reducing the PRS then all Osborne had to do back in 2015 was to restrict BTL loans at no more than 50% LTV.

    No S24 was needed.

    But of course without S24 Osborne couldn't get his greedy grasping mitts on all that lovely CGT and SDLT from LL having to sell because of S24.

    If HMRC decided to tax turnover on any other business  many of them would be forced out of business; that would collapse the economy.

    S24 had nothing to do with levelling playing fields.

    It was a tax grab pure and simple.

    The Irish Govt tried the same thing but their S24 version was only for new purchases

    Such has been the devastation to the Irish PRS including a massive 50% rent increase that the Irish Govt has been forced to repeal their version of the stupid S24 tax.

    Why would the UK Govt believe that a different outcome would occur if they try an even harsher version of S24 than the Irish Govt! !!?

    All the UK Govt needed to do back in 2015 was to introduce credit controls on BTL and residential  mortgages.

    Residential  mortgages sort of already have this with MMR

    Govt could have easily imposed a 50% LTV BTL loan maximum.

    This would have severely constrained LL ability to buy as they would have needed far larger deposits. But of course this would not allow the Treasury to make a tax grab on the equity that many SE LL had built up over the past 18 years.

    The CGT would have been locked in until LL decided to sell.

    This would not have occurred for about another 25 years.

    The Tories want the money now so they can stay in power

    They need money to bribe the electorate.

    LL have a vast store of wealth that Govt needs to prise from LL.

    They want the CGT NOW; not in 25 years time.

    It is all about tax and nothing to do with FTB or the supposed risks of leveraged LL to the housing market

    As with most things it is all about the money!!

    So Govt is just being disingenuous  about S24 etc.

    It has no altruistic intentions as far as FTB are concerned.

    It knows full well that very few FTB will be able to buy the properties that LL subject to S24 are selling off.

    So I'm afraid that your contentions are just plain wrong.

    It is all about the CGT etc.

    Perversely had Govt imposed a 50% LTV  restriction in 2015 many new LL purchases would be in a very resilient position.

    With no S24 and 50% LTV the PRS would be smaller but very resilient

    Thereally would still be the homelessness but perhaps not as much

    Perhaps due to deposit shortfalls many LL would be restricted  in the number of new properties they could buy.

    If that occurred; so what!?

    Credit controls are a perfectly valid instrument to restrict credit growth and asset price increases.

    I doubt  anyone would have complained if LL were subject to credit controls.

    It is what MMR effectively does for residential  buyers..

    S24 is just a wrong headed tax as has been quoted by the IRS.

    Restrict credit;  don't tax turnover!!

    That is how to manage things.

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    Paul we have covered this before.

    • It was the Bank of England's contention in a paper they published in 2014
    • They believed that MMR had dealt with the risks in the homeowner market. Most of the paper was about that market, only a small section covered BTL.
    • They considered that doing something similar for BTL (i.e. PRA or your suggestions) would not have been sufficient as LLs willing to take risks to grow wealthy (i.e. large leveraged ones) would resort to unregulated loans

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    Unregulated loans not easy to acquire.

    Govt could have tried credit controls and monitored unregulated  mortgage activity.

    If things were getting out of control then more measures  could be used.

    Govt  started with the sledgehammer when a very small one should have been used first of all.

    But we are where we are.

    I can't see how the UK Govt won't find themselves in the same position  as the Irish Govt.

    Is there anything in the UK PRS that would prevent a repeat of the Irish experience?

    As far as I can see there has to be a lot more pain before there is even the remotest chance of the UK Govt cancelling S24 etc.

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    The BoE seemed to believe that unregulated loans would have been difficult for small LLs to get but professional large ones would have found ways. There was that Czech lender that sold out quite quickly. Under EU rules the government could not have stopped other EU lenders from offering loans to the UK outside UK regulations.

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    You’re assuming government can, for the first time ever, control the banking sector! We’re all beholden to the global  banking sector, which is untouchable and unaccountable

    There has been lots of easy money to be made by banks in btl with LLs happy to leverage themselves up to in excess of 300% debt to asset value (what other business model would or could operate or borrow under that business olan with negligible capital to begin with?) without worrying about what could go wrong as it never would, driven by greed and easy unregiulated lending. The debt created is a bubble. The housing market had inflated betond all other indeces and it’s too soon since the global crash for government to ignore it and they can’t trust banks to care about risk / bubbles in the economy. Remember the global economic crash was caused by mortgages and property bubble, same thing as is happening now vAnother house price crash on the scale we saw previously could once again wipe out the bank balance books. But the tax payer couldn’t afford a bail out now as we’re broke. LLs are insignificant in all this. Homelessness will be the only thing to make the government change strategy.

    I’ve taken this from the  CML (Finanxe UK) website. This is btl since the crash. Astonishing.

    The market has grown from 840,000 BTL mortgages outstanding with a total balance of £93.2bn at the end of 2006, to 1.8m BTL mortgages with an aggregate balance of £214bn by the end of 2015.

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    Rachel 

    "Change is a prerequisite to longterm survival".

    The establishment is rigged so that the rich stay very rich, and the poor get poorer.