Wednesday, 26 April 2017

Home-Owner-Ists 1: Economic reality 4.

From City AM:

New stamp duty rules are causing landlords to sell up in droves

An unforced own-goal right from the kick-off there. The extra 3% SDLT for non-owner occupiers might deter new landlords, but existing landlords are more likely to hang on to what they already own.

Last year the government introduced new rules meaning landlords could no longer claim relief on interest payments on their mortgages...

Another own goal in the third minute. They *can* claim relief, it will just be restricted to 20% (to be phased in over the next few years).

... at the time landlords warned it would put people off putting their homes up for rent, pushing up rental prices.

One apiece on the main point, everybody agreed it would force a few highly leveraged landlords to sell up; followed by a foul in the Homey's box and a penalty opportunity for Economic Reality.

Economic Reality's best striker is trotting up to the ball... the decider is, will more or fewer homes be up for rent and will rents go up or down?

Economic Reality says - when landlords sell up, it will be higher earning tenants who buy them, thus leaving a smaller pool of lower earning tenants, putting downward pressure on rents. This is quite the opposite of the Disappearing Homes Conundrum.

However, the figures also showed the supply of rental stock increased eight per cent in the year to March, from 169 properties per branch to 183. The figure was flat on February.

Back of the net! From the point of view of a BTL landlord, the interest acts like (privately collected) LVT so encourages them to make best use of what they own - get a tenant in or sell it; tax relief for interest ameliorates that, so reducing the value of the tax relief makes it a bit more like LVT again. An unexpected but welcome impact.

The number of tenants negotiating rent reductions also rose, with 3.6 per cent of agents saying they had witnessed tenants knocking down prices in March, compared with 2.2 per cent in February.

Some people are on the pitch. They think it's all over...

A quarter of agents said landlords had raised rents in March, down seven percentage points from March 2016.

It is now!

6 comments:

mombers said...

"Letting agents have warned harsh new rules targeted at buy-to-let homes are allowing higher earning tenants to escape the private rental market"

Dinero said...

*and also news just coming from other fixtures*

"The mortgage price war is partly being driven by a tax clampdown on landlords."

http://www.thisismoney.co.uk/money/mortgageshome/article-4429770/Is-YBS-new-0-89-record-low-rate-mortgage-worth-taking.html

Lola said...

Delicious

Mark Wadsworth said...

M, good summary.

D, great, I'll watch that one on catch-up on the other channel.

L, ta.

Ben Jamin' said...

In my view, landlord participation in the market doesn't change demand(in and of itself).

It might however change supply. Firstly, renters consume less housing than owner occupiers. Secondly, many people could not even afford to buy the capital component of a home (say £70K). If neither private landlords or the State offered rental accommodation, this would lead to over crowding/homelessness.

In other words, with landlords we get optimal market allocation.

But, because landlords also enjoy a perpetual freelunch of land rents, this causes excessive inequality (which according to me at least, incurs costs).

The trick then is how to get all the benefits minus the costs?

Lola said...

MW I posted a link to this piece in the comments thread. They've published it.