Killer Arguments Against LVT, Not (386)

We would no longer get fabulous headlines in The Daily Mail like this:

VAT inspector pocketed £1.2million from her buy-to-let property empire while not paying tax in scam with her husband
* Savita and Naveen Seth had buy-to-let empire but failed to declare income
* Couple were found to have owed £171,400 in capital gains and income tax
* The couple also falsely claimed £63,983 in Job Seeker's Allowance
* Naveen was jailed on Friday and Savita handed a suspended sentence

There'd be no VAT or CGT anyway, far fewer buy to let empires, those that remain would be paying most of their tax at source, and with a Citizen's Income-style welfare system, there would be practically no welfare fraud.

What a boring world that would be, eh?

Can you spare 15 minutes to wreck the economy some more?

Do you have some spare time and money to campaign against taxes on landlords? They're not taking these attacks on their way of life laying down.

In the more recent comments, NW Landlord reveals:

One of my business partners has there own manager within the council personally handling all of the claims and issues with payments because they are that worried that if he decides not to benefits they will have literally hundreds of families looking to be housed and with this universal credit it’s going that way let alone clause 21. where are all these families going to live if we can’t meet our tax bills and government pulls the plug?

Gareth Wilson spots an opportunity:

Perhaps your friend or even his manager could be convinced to write to the Mail as well or any number of the other members of public office we have been trying to awaken. Should our arguments be voiced by an individual within a council, they could carry more weight.

Manchester Landlord has a cunning plan:

In a few years Conservative party members will have the opportunity to vote for the next conservative leader in the run up to the election. As a collective of tens of thousands of landlords we could threaten to become members and vote for his opposition. Call it bribery or blackmail or whatever you like, but this will make him listen very carefully.

But Darren Bell would favour a more direct approach

A landlord strike would have a powerful effect. Put a load of tenants on notice and whilst the local authorities are trying to deal with the problem throw the ball back into Gorden Osbourne’s court. Result, new tenants on higher rents, GO with his tail between his legs.

Ros likes Manchester landlord's idea best:

I’m loving it! Depends who is standing against him of course – we don’t want to get rid of the Shah only to end up with the Ayatolla – but I agree it is a potentially brilliant idea, ML. And if we all agree on it, we should start publicising the idea asap so that he gets wind of it.

I really like this jacket, but the sleeves are much too long...

Spotted by Lola in The Telegraph:

[The couple has] no debts apart from a £40,000 mortgage on their home, which is worth £130,000. They bought the house for £50,000 through the Right to Buy scheme in 2013 and so they can’t sell it for another three years...

Georgina Partridge, partner at Plutus Wealth Management:

"Stuart’s goal to upsize to a three-bed house is certainly achievable on the couple’s current level of income. In three years, they expect the equity in their current home to be £70,000 [it's £90,000 already!]. This can be used as a deposit for their new property or split into a deposit for a new house and a buy-to-let.

A three-bed property in their area will cost around £160,000. If they put down the full £70,000 as a deposit, they will have access to good rates with most lenders. For a buy-to-let, they should be looking at a 25pc deposit. If they split the £70,000 equity, £40,000 could go towards the new home, leaving £30,000 for a buy-to-let."

Here we go again...

Here

Principles or income? Hmmm.

Given the re-election of the Tories and the news flow I am going to have to seriously consider re-establishing the mortgage arranging bit of my business. There will be money to be made. At least I know that we will do it right.

But really, dude, WTF?

Mortgage Market Review - Epic Fail by Financial Regulators, Again.

Here.

In other words more subsidy to Buy to Let landlords. Sigh.

Not so subliminal messages

From yesterday's Metro (pages 36-37):

All [almost] going swimmingly to plan then, isn't it Mark; well so long as we

don't get mired in endless arguments about what "good-quality" and "affordable" really means ..

On Thursday night the housing minister Mark Prisk said: "We're determined to build a bigger and better private rented sector that gives tenants more choice of good-quality homes. This is part of our wider efforts to get Britain building, which also includes transforming the planning system to support growth and delivering 170,000 new affordable homes by 2015."

Buy-to-let fuels house price boom

Britain's buy-to-let mortgage market has surged to levels not seen since the 2008 financial crash, prompting fears that a prolonged period of cheap money is setting off an unsustainable housing boom.

Lending to landlords topped £5bn in the past three months, a period that preceded the Bank of England's pledge this week to keep interest rates low for the next three years. More than one in 10 mortgages are now being handed to a would-be landlord while first-time buyers are still struggling to get on the housing ladder.

About 40,000 buy-to-let mortgages were advanced in the three months to June, up from 33,000 in the first quarter of the year, as landlords cashed in on cheap mortgage deals and investors sought higher returns than they could get from putting their cash in the bank.

David Whittaker, managing director of Mortgages for Business, said: "Demand for rental property remains red-hot. Landlords are refinancing in their droves to raise enough capital to make further additions to their portfolios."

Housebuilders are also reporting a rush to take advantage of government mortgage subsidies for new homes and a top London estate agent said the value of prestige homes in the capital had risen by 18% – adding £500,000 to the price of a central London home in the past year.

Now is there someone prepared to summarise exactly what is going on in a reasonably short sentence ?

Stephen Lewis, chief economist at Monument Securities, said: "The danger is that, when a flood tide of mortgage finance meets a chronic shortage of housing, the result will be an escalation of house prices."

Thank you Stephen - although, not to be picky you understand, I might have had "cheap, subsidised" in front of "mortgage finance".

"but the collapse in interest rates has left them making more than ever ...."

The king & queen of buy-to-let



Fergus and Judith Wilson, former schoolteachers turned buy-to-let property tycoons.

Former schoolteachers Fergus and Judith Wilson have 700 houses around Ashford and Maidstone, in Kent, bought using buy-to-let loans. "Life could not be better," they say. The typical rent they charge on a two-bed house has risen from £725 in 2008 to £850.

Many expected their debt-leveraged property empire to crash during the financial crisis, but the collapse in interest rates has left them making more than ever.

On average, they pay 2.25% interest on their loans, with some of costing as little as 1.65%, compared with the 5% rates first-time buyers typically pay.

"Properties that were breaking even or losing us £50 per month are now making as much as £900 a month profit," says Fergus. The average capital gain on his properties has been "£9,000 per unit over the past year", he says, suggesting he has made a paper gain of at least £6m. "For every £1 we are making in rent, we are making another £1 capital gain."

He expects home ownership in Britain to continue to decline to little more than half of all households, bolstering his rental business.

"There is such a shortage of property, it couldn't be better. Some of the tenants are telling me they have given up entirely on the idea of home ownership. Gordon Brown said we are 3m properties short in this country and he was right. Many young people have to get it into their heads that they are going nowhere in the property market. Thatcher sold off the social housing, which we could probably do with now, but that's all in the past."

He adds that most of his new tenants are migrants from eastern Europe. "Around 90% of what we're letting in Maidstone is going to Hungarians … It's a landlord's market for the simple reason that there is such a shortage of housing."

other uplifting tales covered in the same article, Meet the new class of landlords profiting from Generation Rent, include:

Renting the already rented - Dan Burton says he "got bored" studying at the LSE and stumbled into property after subletting spare rooms to student friends in 2009.

The secret millionaire with 672 houses - Kevin Green only started in buy-to-let in 2000 but has now amassed 672 properties.

The 'daddy' of multiple occupation - Jim Haliburton is the self-styled HMO Daddy, with a £10m-plus empire of 100 HMOs – houses of multiple occupation – with 800 tenants around Wednesbury, a depressed town in the West Midlands.

and The Tory minister's son with 40 ex-council homes - Charles and Karen Gow, KCG Property

Home-Owner-Ism: There's always a happy ending.

Spotted by Bob E in The Guardian:

In autumn 2007, in the days just before Northern Rock began to crumble, Nick Scott and his fiancee Hayley Thomas bought a three-bed semi in Warrington, Cheshire. It cost £100,000 but needed another £8,000 for renovation. The words "credit crunch" were yet to enter common usage, and lenders were still being easy with mortgages. The couple managed to obtain a 100% interest-only mortgage on the property, which set them back £450 a month in repayments.

Nearly six years on, the property is worth substantially less than the couple paid for it. At best, Scott thinks they could get around £70,000, which would leave them £30,000 out of pocket, an amount he says there is no way they can afford.

So, really up that famed creek of legend then..?

Fortunately for Scott, a combination of falling interest rates and a buoyant rental market came to his rescue.

"I decided to make the best of it by renting the house out. It cost about £350 administration fee for the lender to agree for me to operate it as a let, but it's now getting £550 per month. Because the base rate has been at 0.5% for almost three years, my monthly mortgage has been only £150 for all of that time. The rental market is really strong. I didn't even have to put a board outside – the property went on the first viewing," he says.

Nice bit of special pleading by Nationwide

From MoneyMarketing:

Nationwide group distribution director Matthew Wyles has called on the Government to introduce tax breaks to encourage more investors to the buy-to-let market. Speaking at the Great Housing Debate last week, Wyles said the buy-to-let sector has become hugely important to the property market...

“We would rather lend at 75 per cent loan to value on a buy-to-let to a hardened, experienced investor than to a 22-year-old plumber who wants a 95 per cent loan. (1)”

Wyles said he does not want to see the sector blighted by regulation and called on the Government to offer potential BTL investors incentives to attract more landlords.

He said: “I do not understand why new lenders are not coming to market more readily. We need to make sure our friends at the regulator (2) cut us some slack around capital weightings so we do not end up with another social need obstructed by regulatory blindness. It is something that should qualify for consideration by the Government for tax beaks. Some fiscal stimulus for the buy-to-let market, as long as it is not too distorting (3), would be welcome.”

Buy To Let Funding Services principal Geoff Laird says: “Were it not for the private landlords entering the buy-to-let sector in the last 11 or 12 years, there would be far less decent property for people to live in (4). Incentives for landlords would be much welcomed.”

1) Yes, of course the bank would rather lend 75% of the value rather than 95%. So that's not a fair comparison.

2) 'Our friends at the regulator' 'nuff said.

3) All subsidies are distorting, and the cost of the distortions always outweigh any benefits.

4) That's right. If the plumber buys the house then he's far less likely to care of it than if he's renting it from the 'hardened, experienced investors'.

Spotter's badge: Jack C at HPC.

Fun with numbers (3)

From The Times;

Last April there were 2,990 buy-to-let mortgage products available, with an average rate of 5.23 per cent. Today there are 597 products, with an average rate of 6.75 per cent. Some specialist lenders, including Mortgage Trust and Paragon, have stopped offering buy-to-let deals altogether.(1)

Last year lenders would loan up to 90 per cent of a buy-to-let property’s value (LTV), but most landlords now need to raise a deposit of 25 per cent to obtain a mortgage.(2)

Landlords have also been hit by lenders’ demands for increased rental cover — the amount of rent that covers the mortgage. Last autumn landlords only needed 100 per cent rental cover but lenders are now insisting on 120 or even 130 per cent.(3)

(1) An interest rate hike from 5.23% to 6.75% would depress property prices by around 22%, for example £100,000 x 5.23% = £5,230. £77,500 x 6.75% = £5,231.

(2) Fundamentalists think that increasing the required deposit from 10% to 25% would reduce prices by 60%, i.e. if you have a £10,000 deposit, that's a 10% deposit on a £100,000 property but a 25% deposit on a £40,000 property. This is almost certainly exaggerated, the question is, by how much?

(3) Increasing rental cover from 100% to 130% would depress prices by around 23% (i.e. 1 minus 100/130).

Or, if you want to really knock yourself out, we can combine (1), (2) and (3).

Assume that up to now, BTL-er has been receiving £4,707 rent p.a. (£90 per week), which is 100% rental cover on a mortgage of £90,000 x 5.23% on a property 'worth' £100,000 in which he has 10% equity. When he comes to remortgage, the bank will say "£4,707 divided by 130% = £3,621, £3,621 divided by 6.75% = £53,641. Therefore we can only give you a loan of £53,641 on that property".

So our BTL-er faces a stark choice: either
(a) stump up £36,359 to make up the shortfall (£90,000 minus £53,641), or
(b) sell the property to another BTL-er who happens to have a £17,880 deposit and is happy to pay £71,521, which is the highest price that will work under the stricter lending criteria. Of course, under option (b) the original BTL-er loses his original £10,000 deposit and still owes the bank £18,479. Ouch.