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  • Buy-to-Let

    Rents rise as Landlords exit the sector

    I'm aware of many former BTL properties now being sold off because the LL can't make the figures add up any more. I know of two in the Cul de Sac I live in and we are in the process of buying a flat in Cornwall that is in exactly the same situation. Plus the damaging effect of UC on LL confidence, its going to have an effect on rents and who LLs are prepared to rent to.  ,

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    Responding to reports out today by the Resolution Foundation which warns that rent levels are making young people less mobile and the Affordable Housing Commission which argues that the number of households facing affordability issues with their housing costs has increased most in the rental market, David Smith, Policy Director for the Residential Landlords Association said:

    “The biggest threat to rent levels are the policies being pursued by the Government which are choking off the supply of homes for private rent as demand is increasing. We warned Ministers that this would happen but they have not listened.

    “Instead of attacking the private rented sector we need pro-growth policies that recognise the need for more homes of a good standard and at an affordable rent. Making renting less attractive for landlords will not make a substantial difference to the availability of property. We must focus on building more homes to address this.”

    The Royal Institution for Chartered Surveyors has warned that average annual rent rises are likely to be around three per cent for the next five years as a result of the demand for rental properties continuing to outstrip supply.

    ​Government statistics show that 10 per cent of private landlords representing 18 per cent of tenancies are already planning to decrease the number of properties they rent out, whilst five per cent of landlords, representing five per cent of tenancies, plan to sell all of their properties. Recent stamp duty statistics point to investment in the sector slowing up.

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    There will be Landlords with student loans who haven't taken into account s.24 also.

    As someone who has taken HB tenants, has never raised rents in a decade whilst every other property climbed substantially all around me due to govt intervention, this meant that I had little trouble finding tenants, but also had trouble asking them to leave when things got tough. Because they would look at the flats upstairs and realise their neighbours were paying 3k more than them. Plus the govt can decide I am not charging market rates despite offering affordable home to those on welfare payments.

    My flat became available in February, I have kept it empty to see the new rules that were predicted to come into play and to analyse how that would impact me. I'm now on fence about selling up also. 

    Overall, we were too passive and now quite a few will be getting their just desserts. We should have engaged with our tenants more, whether through a newsletter or general conversation guiding them about new regulation that were to come in the future and their rents rising. Mobilising them to write to their mp's. Instead some didn't see as on their side. Missed opportunity.




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    there is an article in the Times today entitled

    Our workforce is no longer mobile, and that sends a worrying signal

    https://www.thetimes.co.uk/edition/busin...zk3s 

    Let me take you away from the festival of unaffordable and unachievable promises that is the Tory leadership contest, though it is a wrench. Let me also take you away from Brexit, though that is much less of a wrench.

    Many years ago, when I first came to London from the West Midlands to work, regional policy was still active in Britain. Broadly speaking, it fell into two categories: taking work to the workers and taking the workers to the work. The latter included government payments for a period to workers who moved to the capital from the most deprived areas. I did not benefit because in those days the West Midlands had not suffered from the full force of deindustrialisation, although it became an assisted area later, but plenty of my contemporaries from other parts of the country did.

    The economics underlying this was straightforward. The more that young people were able to move in search of work, the better for them and for the economy. Employers got the workers they needed and those who moved got the jobs they wanted. Geographical mobility of labour, in the jargon, was a key ingredient in labour market flexibility.

    It is also important for social mobility. Moving is often essential to climb the career ladder and for progression within industries and professions. It is often only in the cities where this is possible. Regional policy began to fall out of favour in the 1980s, but London and other cities continued be magnets for young people trying to make their way in the world.

    For the population as a whole, however, there was not enough mobility of labour. Americans were and are many times more likely to move between towns and states in search of work than their British counterparts.

    When, during a time of high unemployment in 1983, Norman Tebbit, now Lord Tebbit, Margaret Thatcher’s employment secretary, reminded people that his father had got on his bike to seek work during the Depression years, not that many responded. Regional unemployment differentials remained large. Those losing their jobs as the old heavy industries declined did not, in general, get on their bikes.

    There were good reasons for this. Family ties and loyalty towards home towns held people back from moving across the country in search of work. The biggest constraint was housing. For people in council and social housing, obtaining the equivalent elsewhere, through swaps and other means, was a huge challenge.

    For homeowners, the challenge was arguably greater. The gulf between house prices in London and the South East and the rest of the country is too big to negotiate easily, as is that between regional cities and smaller towns. The average house price in London, just over £463,000 according to official figures, is more than twice the national average of £227,000 and nearly four times the £123,000 of the northeast. Prices in the South East, averaging £318,491, are more than 40 per cent above the national average. These differentials have varied over time, but not by much.

    Young people, unencumbered by home ownership, were still generally able to move to London and other cities to develop their careers. An increase in the supply of private rented accommodation, thanks in part to the phenomenon of buy-to-let landlords, meant that they could find accommodation.

    Now, according to research by the Resolution Foundation, Moving Matters: Housing Costs and Labour Market Mobility, the housing market is also imposing a formidable barrier for young people wanting to move for work reasons. It finds that rents have risen fastest in areas where earnings are highest, to the point where the salary gain from moving is wiped out. This is not only a London effect. Twenty years ago there were significant income gains net of housing costs for young people moving from Sunderland to York, Thanet to Canterbury, Scarborough to Leeds and Telford to Birmingham. Now young people making those moves are worse off in net terms. The result is that the annual number of young people moving home and starting new jobs has dropped by 40 per cent over the past 20 years. Mobility is down.

    Is this simply the market — and, in particular, the private rental market — working? Maybe, but landlords would say that they have had no choice but to raise rents, given the tax assault on them launched under George Osborne’s chancellorship.

    Does it matter? After all, despite some signs of a softening in labour market figures, unemployment is at a 45-year low and the variations in unemployment rates between regions are much smaller than they were.

    Yes it does. While the variations are smaller, they exist; unemployment rates in some regions are more than twice those in the best performers. There are also striking differences, of as much as eight percentage points, in employment rates between regions. And, within regions, while blackspots in unemployment are not quite as black as they were, they still exist.

    It matters, most of all, because it means that many young people are restricted in their career choices and end up doing jobs for which they are overqualified. It is another example of the negative effects of a malfunctioning housing market.

    The Resolution Foundation, which describes this as “a real cause for concern”, notes: “With the evidence showing that efficiently matching with job opportunities is especially important for young people at the beginning of their working lives, the intergenerational implications of this are clear.”

    High housing costs are turning young people into what you might call involuntary “citizens of somewhere”, unable to move as easily as their predecessors. That is bad for them and, ultimately, bad for the economy.

    David Smith is Economics Editor of The Sunday Times

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    one response was

    Me and my fellow professional buy to let landlords are viewed as parasites by this government. George Osborne single handedly destroyed the BTL market with his stamp duty rise and his Section 24 tax grab. Landlords are now taxed on turnover not profit. Name me another business that operates under that draconian regime. As we are no longer required, we're selling up in droves. The worst affected will be the social housing sector who are being asked to vacate their homes so that they can be sold. They then have to go on the council waiting list thus putting more burden on the state. While central government is persecuting private landlords, local authorities are begging us to provide houses and offering various incentives to do so. Moving jobs to another city will be a lot harder that it is now once the full effect of the mass sell off of rented property gets fully underway. This government does not know its ass from its elbow when it comes to housing or any other policy that requires joined up thinking. The other incentive for us parasites to quit the private rented sector is the vision of the Magic Grandpa walking up Downing Street. The first thing he will do is wreck what's left of the private rented sector with rent controls and indefinite tenancy agreements with no prospect of eviction for non- payment of rent. Only an idiot would want to hang around to experience the carnage to come. I will view it with sadness from a foreign beach.

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    Sounds about right!

    We have seen many changes over recent years.  Investors need a return on their investment that reflects the risk involved. That is why riskier investments than money in the bank have to pay more. Economics 101. BTL is far riskier than money in the bank and involves quite a lot of time too.  Anybody who doesn't think that the extra 3% stamp, s24, the costs of epcs, tds, GDPR etc etc will ultimately have to get fed through to the rent and paid by tenants is just naive.  If sorting out non payers gets harder too that will also end up reflected.

    "Magic Grandpa" is my main reason for selling up. £2.5m sold so far. "Land for the Many" and the fact there are people close to power walking around who think in the way this document portrays showed me that my money is too exposed.

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