Grampa Posted March 6, 2016 Report Share Posted March 6, 2016 Just read in one one the Sunday papers an article on the buy to let market which has left me slightly confused. It states we are likely to see more BTL properties put up for sale due to changes in the stamp duty and mortgage interest tax relief. It goes on to state because of this rents may stay the same or drop.. I must be missing something. Why would reduced numbers of privately rented housing stock keep rents at the same level or reduce them? Surely its supply and demand and if if there is less choice and fewer properties the rents surely must increase not reduce. At the very least stay the same. Am I being thick? Link to comment Share on other sites More sharing options...
Melboy Posted March 6, 2016 Report Share Posted March 6, 2016 I don't think so Grampa. Stands to reason that if their is a shortage of anything prices go up. The whole reason for me entering the rented property market 25 years ago was due to the fact that I was informed that the property I had just renovated could be rented out for x ££'s and would I not consider doing so rather than selling on. There was an acute shortage of rental properties so instead of selling I rented out renovated property. BTL was a phrase unheard of back then and only referred to a BLT sandwich.......OK, well, nearly all the right letter's but not necessarily in the right order. Link to comment Share on other sites More sharing options...
Richlist Posted March 6, 2016 Report Share Posted March 6, 2016 I can only assume the suggestion is ....... that large numbers of landlords may discover they are no longer making a profit due to the new btl tax rules and choose to sell their rented property. The majority of those properties will be purchased by ex tenants (who will not be faced with a 3% sdlt surcharge) so that although there will be less housing stock available to rent, there will also be considerably fewer tenants. Not sure i personally agree with that scenario. It depends on to many variables for it to come true. Link to comment Share on other sites More sharing options...
Melboy Posted March 6, 2016 Report Share Posted March 6, 2016 Interesting way you put that RL. I guess the position will become clearer a few months after April 1st. I have not yet met a landlord who has said that they are actually selling up due to the tax changes. I know of a couple of landlord's who have cashed in properties due to the rise in value over the past 5 years or so but it is their intention to purchase again in the future. Link to comment Share on other sites More sharing options...
Richlist Posted March 6, 2016 Report Share Posted March 6, 2016 It's not being introduced this April. The deduction of finance costs from property income, such as mortgage costs (as currently allowed) is to be phased out between 6th April 2017 - 2020. From 2017/ 2018 the deduction will be restricted to 75% of finance costs, with the remaining 25% available as a basic rate tax reduction. Each tax year the % ramps up until in 2020/ 2021 it become 100%. This will clearly adversely affect profitability for most landlords. Some landlords will find that what is a profitable income today will actually become a loss at some point between 2017 & 2020. The lucky ones will just see their profit reduce. Those without mortgages will not be affected. No landlord is going to continue operating at a loss and it is without doubt that those landlords will look to sell. Link to comment Share on other sites More sharing options...
Melboy Posted March 7, 2016 Report Share Posted March 7, 2016 Aaah! OK... I have to admit that as I don't have any property mortgages I only have a limited knowledge of what was happening regarding the tax allowances. Certainly puts it into a new light of whether to buy or not a BTL property as any rise in capital values will be limited over the coming years. Link to comment Share on other sites More sharing options...
Carryon Regardless Posted March 7, 2016 Report Share Posted March 7, 2016 Rather than affect rents if so many LL's find themselves needing to sell the effect will be on property prices, until things level out. Link to comment Share on other sites More sharing options...
Richlist Posted March 7, 2016 Report Share Posted March 7, 2016 Well, it's all a bit of a guessing game at the moment......bit like voting to leave or stay in the Eu........nobody knows what is going to happen. What we do know is that there is currently a big shortage of property for sale, that is likely to continue, so any increase in available property can only be good news if you are a first time buyer. That in turn is only good news if the economy is buoyant and interest rates remain low and finance remains available. In my view property prices will continue their steady rise......even though they already seem ridiculously high. Link to comment Share on other sites More sharing options...
Richlist Posted March 7, 2016 Report Share Posted March 7, 2016 Melboy.....that's a nice position to be in. I'm also planning to be mortgage free by end of 2017 and everything is on course to achieve my goal. Initially I was a little concerned that having no mortgage interest to offset against income would see my tax bill rise significantly but given the budget changes it now looks like a mortgage free property portfolio really is the best way to maximise income going forward. Link to comment Share on other sites More sharing options...
bil8999 Posted March 8, 2016 Report Share Posted March 8, 2016 16 hours ago, Richlist said: Melboy.....that's a nice position to be in. I'm also planning to be mortgage free by end of 2017 and everything is on course to achieve my goal. Initially I was a little concerned that having no mortgage interest to offset against income would see my tax bill rise significantly but given the budget changes it now looks like a mortgage free property portfolio really is the best way to maximise income going forward. Don't think that less rental properties will reduce rents. I like Melboy am mortgage free, and always have been, feel very fortunate, we have 40 tenants, but have been thinking about adding to my portfolio with buy to lets, but by the sound of things now may not be the right time, any thought. I am 61 still busy working building etc, is it worth the hassle? Link to comment Share on other sites More sharing options...
Richlist Posted March 8, 2016 Report Share Posted March 8, 2016 1. Being mortgage free may be a good thing from 2017 onwards but it's not necessarily a good thing now or over the last few years when we have had very low interest rates. I have a number of mortgages that are 0.5% over base. It therefore makes perfect sense to borrow at 1% to buy property and not spend my own where I can get 3%+. 2.The 3% sdlt surcharge on 2nd properties due to start in April is going to hit investors hard. A first time buyer purchasing a £150k home will pay just £500 sdlt. The same property sold to an investor will see them paying £5000 in sdlt. 3. Tax changes due to start in 2017 - 2020 will mean that any landlord thinking about buying more property will need to check very carefully if the purchase is going to be a profitable investment. There are other places to invest if residential property doesnt look good. Link to comment Share on other sites More sharing options...
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