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Wednesday - Autumn Statement

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NOTE !!!!!!!!!!!

This Wednesday is the Autumn Statement from the Chancellor.

Keep your fingers and toes crossed.

* Potential for a drop in stamp duty.

* Potential for changes to proposed new income tax rules.

We can hope for the best, expect the worst and plan for the exit if all else fails.

Lots of discussion on this subject elsewhere......many have positive expectations.

 

 

 

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To me it would make financial sense to lower stamp duty and abolish the 3% surcharge for second property buying. Receipts from SDLT are way down and the Chancellor is under pressure from organisations allied to property sales to sort it all out. But will he? 50/50 chance from me that he actually will.

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Some are also suggesting that there could be further changes to CGT.

Apparently, word is that there's a shortage of property coming on the market. There are many who would like to sell but are being put off by having to pay a large CGT bill. Easing the CGT burden would increase supply, help to meet demand and slow price increases.

Remember......you heard it here first. ?

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Also being discussed is the banning of fee's to prospective tenants by LA's. Already banned in Scotland to charge tenants any fees.

Grampa   where are you going?   Nooooo don't jump!  :D

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Those of us with agents that charge a relatively small fee, say a couple of hundred quid, will probably just absorb the cost. Those with agents that charge more will just raise the rents a little.

Some will move to cheaper agents but cost is way, way down the list for landlords when choosing a suitable agent.

Tenants won't gain.....that's for sure.

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2 hours ago, Melboy said:

Also being discussed is the banning of fee's to prospective tenants by LA's. Already banned in Scotland to charge tenants any fees.

Grampa   where are you going?   Nooooo don't jump!  :D

I'm mulling it over. Watch this space

 

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Having given it a little more thought, I now think the outcome will depend entirely on the details of the change in the law.

Making it illegal for agents to charge prospective tenants a fee doesn't necessarily stop them from charging the landlord. The landlord could then possibly pass that fee onto the tenants, plus an admin fee, so the tenants may end up having to pay even more than they are paying now.

We already know that in many areas of the country there is a shortage of property. There are more people looking than properties available.

This plan is likely to result in virtually nil effect on agents and landlords and bad news for tenants.

Come on.....let's get real. Let's stop fiddling around the edges and improve market supply of property.

* Cut second home SDLT.

* Reduce CGT.

* Reverse IT changes for landlords.

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The Govt have got to mess with this industry they can't stop them selves.

If the A can't charge the T the fees they either charge the LL or don't give the service.

I would imagine the A will offer services in a tiered fashion, as many do already, Bronze, Silver Gold sort of thing.

Higher admin fees will cause some LL to go DIY. Increased credit check fees will see an increase in higher risk T's, and the knock on of that we see here often.

 

These days I'm essentially DIY anyway, since my find only A couldn't find T's that didn't want to pay a deposit, "they don't understand why you won't take a deposit", strange. Will the Govt aim to prevent me charging my admin fee, approx £150 but negotiable?

It seems to be considered immoral for the smaller business person to make money in this country. There has been a drive to push them out of business for a while now.

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Well we haven't got long to wait now. Philip Hammond will deliver his Autumn Statement straight after PM Questions at about 12.30.

Can't wait.......it's like Christmas all over again. ?

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The way I see it is the agents will charge us more , we will pass the extra on to the tenant in increased rent  so the tenant will still loose out, I already charge an admin charge of £50 to cover my time ,ie lodging deposit with mydeposits , printing out endless pages of tenancy agreement ,right to rent etc ,so I might increase the admin charge to the level the agent charges me after todays" budget" for find a tenant currently £400 inc vat.

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Usually the increase (in this case 2%) represents a very small amount. As a result it just gets taken into account when general rent increases are being considered.

You have to remember that a very large proportion of landlord's will not be paying for insurance anyway. Leasehold service charges include buildings cover, unfurnished property doesn't require contents cover, many don't bother with so called landlord insurance so there is no premium & therefore no increase to pay.

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I charge a basic £35 to cover DPS cost and admin costs. Never had anyone query this once I have detailed where the money is going.

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Interesting article I have come across:

LETTING AGENTS – WHY ARE SHELTER QUOTING OUT OF DATE RESEARCH TO BACK UP THEIR FLAWED ARGUMENT ON FUTURE RENTAL RISES

Scotland banned Letting Fees in 2012. The charity Shelter have been a big voice in persuading and lobbying the Government since it managed to persuade the Scottish Parliament ban fees in 2012.

On all the TV and radio shows at the moment, they keep talking about their Independent Research which backs up their argument that rents didn’t rise.which they say was published in 2014.

A researcher for Shelter in Scotland published these comments yesterday,

“renters, landlords and the industry as a whole had benefited from banning fees to renters in Scotland. It found that any negative side-effects of clarifying the ban on fees to renters in Scotland have been minimal for letting agencies, landlords and renters, and the sector remains healthy.”

Going on,

“Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research show that this hasn’t been the case. The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK. It found that where rents had risen more in Scotland than in other comparable parts of the UK in 2013, it was explained by economic factors and not related to the clarification of the law on letting fees”

The report Shelter mentioned was published in December 2013  (only 12 months after the ban).

How can Shelter quote a report today, in late 2016, when that report they use as proof  that rents havent risen was published in Dec 2013, only 12 months  after the ban (and you think about it, these reports take a few months’ to compile), so the report was only based on figures say six to nine months after the ban came into action (FYI – The ban was Q4 2012)

What really happened to rents in Scotland

I have carried out my research up to the end of Q3 2016, and that tells a different story

In Scotland, rents have risen according the CityLets Index by 15.3% between 2012 and today (CityLets being the equivalent of Rightmove North of the Border – so they know their onions). When I compared the same time frame, using Office of National Statistics figures for the English Regions between 2012 and 2016, this is what has happened to rents

  • North East 2.17% increase
  • North West 2.43% increase
  • Yorkshire and The Humber 3.21% increase
  • East Midlands 5.92% increase
  • West Midlands 5.52% increase
  • East of England 7.07% increase
  • South West 5.82% increase
  • South East 8.26% increase
  • London 10.55% increase

..and let me remind you of Scotland … 15.3% increase.

See the graph below ..

15094287_10154679132654590_4158838222615935824_n

Conclusion

Are you really telling me the Scottish economy has outstripped London’s over the last 4 years? Are really telling me wages and the Scottish Economy have boomed to such an extent in Scotland in the last 4 years they are now the Powerhouse of the UK .. because if they had, Wee-Nicky Sturgeon would have driven down the A1 with a blink of an eye, not even stopping at FerryBridge (M62/A1) Service station for a Bacon Bap and Black Coffee to demand immediate Independence

Rents will increase as the fees will be passed onto Landlords in the coming few years. Not immediately .. but they will

So there you have it rents will rise

 

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But:

Statistics

“There are three types of lies -- lies, damn lies, and statistics.”
Benjamin Disraeli

“Facts are stubborn things, but statistics are pliable.”
Mark Twain

“If your experiment needs a statistician, you need a better experiment.”
Ernest Rutherford

“99 percent of all statistics only tell 49 percent of the story.”
Ron DeLegge II,

“Statistics lie. They are designed to sway opinions. Take the time to keep yourself informed on things that matter.”
Steve Maraboli,

There are two ways of lying. One, not telling the truth and the other, making up statistics.

Josefina Vazquez Mota


Definition of Statistics: The science of producing unreliable facts from reliable figures.

Evan Esar


Statistics are used much like a drunk uses a lamppost: for support, not illumination.

Vin Scully


Statistics are no substitute for judgment.

Henry Clay


I can prove anything by statistics except the truth.

George Canning


Consumers are statistics. Customers are people.

Stanley Marcus


Like dreams, statistics are a form of wish fulfillment.

Jean Baudrillard

I think statistics go in one ear and out the other. All of us respond to stories more than numbers.

Koren Zailckas

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'If' we down'ere increase rents by say 10% over what we might have to compensate us for higher A's charges the T's are definitely the losers.

Any long term rent increase of significance to compensate for a short term (one off per rental cost) must bring in higher returns for the LL.

In my case where I don't employ the services of A's these days, not saying I won't as there  might be future value, I gain even more. I base my rents on the market comparisons, and then knock a bit off to be more comparative. 'If' market rents are going to rise for what ever reason/s I enjoy highre incomes too but with less expense. And I can still charge my admin fee.

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This lettings agent fees issue does need to be discussed but for most landlords who use an agent it's going to initially cost them a few hundred quid. We all know that that cost is likely to be passed on to the tenant as a fee or increased rent so the books are more or less balanced.

What everyone seems not to have noticed is the elephant Iurking in the corner of the room. Introduction of section 24 i.e. the removal of mortgage interest as a legitimate business expense for private landlords over the next 4 years. This will cost landlords far, far more than the few hundred quid charge from their agents.

Get your priorities right......tackle the issues that are going to hurt you the most, first.

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http://www.thisismoney.co.uk/money/buytolet/article-3153541/Profits-slashed-wealthy-buy-let-landlords-Budget-crackdown-mortgage-tax-relief.html

I had a conversation regarding this last week with an accountant. My statement that LL's were going to be taxed on revenue rather than profit was met with "for most nothing will change".

We, in a few years, will no longer be able to offset the mortgage cost against the higher rate tax paid but still able to offset against the lower band. As I don't pay the higher tax, as I don't clear enough, for me no change.

Of course we do lose the 10% of revenue little bonus we could claim on 'furnished' lets. As we are able to claim the actual expenses against tax, and as I don't have furnished lets anyway, for me no difference. apart from the fact the tax man would have had to get off his butt to check if you did have furnished lets if you were claiming that is.

Some may feel a pinch from the changes but as it only affects those who are doing well they will be able to weather any differences. 

As I know this accountant well, the off the record chats have been very useful over the years. Although years ago when I moved home and mortgaged the new domicile to the max he said I was wrong to be claiming a large portion of the new mortgage as a business loan. I said that if I didn't have the properties, i.e. disposed of them, I wouldn't have the large mortgage. The business made most of the new mortgage a requirement. After some checking he returned wiith "you're right it's the principle reason you took the loan out that counts."

There would be a danger that Mr taxman would one day say that any sale profits were business profits, even if proportioned that's not attractive. But I'm heading that one off.

 

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CoR you are indeed fortunate not be affected.

At one point a few years back my mortgage loans were around £700K. I've spent the last few years getting those loans paid off.  I will very soon be mortgage free and so just by chance, as the new tax rules begin to take effect, I also will be unaffected by section 24.

However, this is still very worrying. Many other landlords will find themselves in financial difficulty. Property will be sold, tenants will be evicted, less rental property will be available. IMHO it will be extremely bad news for the industry in general.

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Well RL there is another view. In the past when someone has complained of how much income tax they pay I have responded with "aren't you lucky." It's only those that earn enough will pay a lot of tax. Those below the tax thresh hold and those earning so little they pay little tax are clearly not finding the cost of life easy.

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Interesting reading.

You can now almost understand why some of them appear to be asleep during debates !

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And I still didn't work out what they decided about mandatory electrical checks. We have certificates done at time of purchase and then when we've had any major change like a new electric shower put in and most are less then five years old but one is coming upto five years and I hadn't seen any need to get it reissued quite yet. I have looked at the Electrical Safety First mentioned in the debate and their annual report isn't clear where they get their funding from which always makes me suspicious about their motives. 

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What surprised me were the number of Lords who were landlords themselves with first hand experience of letting.......and one Lord with two daughters who were in the process of renting, so he could see both sides.

There is still no legal requirement for regular/ annual electrical certification unless the property is an HMO.......but I feel sure it will be coming eventually.

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