The great buy-to-let sell up

Property for sale signs © Getty Images
Buy-to-let landlords are selling up

Read the celebrity interviews on the back of the weekend money sections and you’d be pretty certain that the route to riches is still property: they are all still sure that buying a couple of houses is better than having a proper pension.

But look at the numbers and it seems that fewer and fewer ordinary people are agreeing with them. A survey just out from the National Landlords Association suggests that around 20% of landlords plan to sell up this year, something the trade body reckons could “flood the market” with properties.

Properties that there isn’t going to be as much demand for as there might have been a few years ago: figures from UK Finance show that loans to landlords were down 20% year on year in March.

In the last three months of last year, less than 13% of new mortgages went to buy-to-let investors (which suggests that the percentage of the UK property market taken up by landlords will soon fall from its current 20%).

More on this comes from a Rathbones survey of over 1,000 UK investors and 500 “high net worth” individuals (HNWs). Turns out that over half them no longer view property as a good investment and that of the 25% HNWs who are already in buy-to-let, a mere 7% plan to increase the size of their portfolios – something particularly interesting given that, according to Rathbones, 25% of them “had accumulated their wealth through property.”

It isn’t hard to see why – we’ve written about this here many times before. Until April last year landlords could offset all their mortgage interest costs against their income before calculating their tax bill. When they come to do their taxes for the tax year 2017-18 they will only be able to do this with 75% of the interest – the rest will attract a 20% tax credit. This year the 75% falls to 50% and will keep falling until it hits zero in 2020-2021. From then on the whole lot gets nothing but a tax credit.

This changes the sums completely for 40% and 45% taxpayers and might have the effect of pushing 20% tax-paying landlords into a higher band. That’s going to make a lot of people need to sell. However, it doesn’t make more people want to buy – any more than the rise in stamp duty on second properties does.

The same goes for the rising level of work required from landlords – both to meet all the regulatory requirements of letting property and those of managing tenants. The Sunday Telegraph ran a story this week on the tribulations faced by the nation’s landlords: one third have experienced rental arrears (up 4.2% on last year); 25% have faced large bills for damage when a tenant has left; and 16% have had to deal with tenants who refuse to leave at the end of a tenancy. “If I had another income I’d stop this tomorrow,” one fed up landlord told the paper. I think we can be pretty sure that he won’t be buying any more buy-to-lets in the near future.

So who will buy? Loans to first-time buyers are holding steady at about 20% of total loans. With a bit of luck, the great buy-to-let sell up will mean prices keep falling, new owner occupiers to be will keep buying and, in a rare example of government action having something close to the intended effect, Britain’s seemingly endless housing crisis will begin to look less awful.

  • mombers

    Interesting how the ‘we’ll push rents up’ threat has been shown to completely empty. People are paying as much as they can, if they weren’t, landlords would have pushed rents up already. Every BTL sold does not disappear, it is either bought by an owner occupier or another landlord. If sold to a FTB, this removes a higher income tenant from the pool, which puts downward pressure on rents.

    • Alex Moss

      Well if rents are already at the maximum plausible amount (either due to the cost for landlords or speculative landlord greed), and costs rise again, basic economics states that landlords will sell up, which is what the article is saying. And if rental stock goes down, and demand stays the same, then prices will go up, or people will live with their parents or on the street. I’m sure landlords would prefer to hold onto their portfolios if they could increase prices, and many would lower the rent to be more competitive if costs fell.

      • mombers

        The key flaw in the above is if you think that supply goes down when a landlord sells. I sold both of my BTLs years ago and neither of the buyers knocked them down!

        • Alex Moss

          Ype, good point.

        • TheLandlordWhisperer

          But presumably your tenants were evicted?

          • mombers

            Yes I evicted them of course. But maybe they moved into the places that my buyers vacated? In that case the landlords would probably have to take a rent cut as my buyers had higher incomes than my tenants in both cases. It’s not rocket science, just look at any rental indices since section 24 was announced and there’s no evidence of upward pressure on rents. Anecdotes don’t count I’m afraid…

        • TheLandlordWhisperer

          Rental supply does go down. For that not to happen every rented house sold would have to go to another landlord, which is a rarity. Plus, thats not what the govt wants so selling with vacant possession is always better.

    • TheLandlordWhisperer

      But causes the tenant to a) be evicted and b) have to then compete in a high-demand market for fewer rental properties. Existing landlords can, and have, seen rent rises as a result and I don’t see it getting any better.

      • APJ

        Thankfully the unfair tax advantages that BTL buyers have had over owner-occupier buyers are now being belated removed by the government.

        • TheLandlordWhisperer

          You clearly have a sound understanding of tax history, Schedule B taxation and the reason MIRAS was removed from OOs. Yep, you’ve defeated me, I can argue the point no longer.

          • eek

            Nice to see that you agree that landlords have an unfair advantage thanks to the tax advantages their get.

            • BarryinWilts

              You must be a politician, no one else could have your ability to misconstrue what any one says so consistently, and blatantly ignore the facts when they’re staring you in the face.

              • eek

                What facts?

                • BarryinWilts

                  QED

                  • eek

                    So you admit that you’re views aren’t based on facts…

                    Thanks for confirming what I always suspected….

                    • BarryinWilts

                      you’re a ventriloquist as well as a politician.
                      If you cannot be bothered to read the facts I and others have presented then why should I re-iterate them again for you to ignore?

                    • eek

                      What facts? The rental market is a market, the market for buying property is a separate market but one that impacts the supply and demand within the rental market. And of course those markets are made up of a lot of factors.

                      To be blunt I haven’t seen a single comment with facts just people’s believes and statements based upon unspecified and unwritten assumptions which may or may not be accurate but are not backed up by any actual empirical evidence. In fact the only fact I’ve seen that can be backed up with evidence is the fact that if a household currently renting buys a property that was formerly a rented property the number of people renting reduces by 1 household while the supply of rental property would equally be reduced by 1 property. All the other posts (which may be true in reality) don’t provide any evidence to back up their claims.

          • I am A Tenant

            Please do tell us some more about Schedule B taxation, Jamie. I have a strong interest in commercial woodland and you sound like you must know your stuff.

        • Luke 2.0

          As for (useable) housing stock/supply & demand, you are forgetting the properties brought back into use (i.e. contributed to the overall number) by LLs. BTL has increased total supply whomever owns/lives in it.

          The assumption you’re making is that everything is/would have remained equal. Pushing LLs out of the market will prevent a of increased stock.

          • APJ

            The removal of mortgage tax relief from BTL buyers is not about pushing landlords out of the market, it is about levelling the playing field between borrow-to-let buyers and owner-occupier buyers. Non-leveraged landlords will be unaffected because they have not taken on all that massive debt. Borrow-to-let buyers should not be a privileged group who have special tax reliefs to borrow money and perform ‘charitable’ work, not enjoyed by owner-occupier buyers.

            • Luke 2.0

              Would you advocate the removal of CGT, a ‘relief’ enjoyed by OO under the level playing field argument for LLs too, then?

              • APJ

                Yes. It would help stop rampant house price inflation, one of the great evils of our times.

              • eek

                Alongside the removal of ALL tax relief on interest payments on residential properties – quite happily.

                Even after S24 your average landlord has tax advantages compared to your typical first time buyer…

                • Luke 2.0

                  I don’t understand what you are referring to in your first paragraph.

                  What other advantages are you suggesting?

                  • eek

                    Even after S24 basic rate tax relief can be claimed by landlords on interest payments on their BTL mortgages or offset against profits for incorporated landlords.

                    At some point that anomaly needs to be removed with all loans for residential properties treated exactly the same by the tax man. This can only be done by either removing the tax relief landlords continue to receive or by reintroducing MIRAS for Owner occupiers.

                    • Luke 2.0

                      Okay. And what about the removal of requirement on LLs not affecting OOs (or, in most cases, RSLs), such as GSCs, smoke alarms etc?

                      You see, what I’m driving at is LLs provide much more than the OO ‘equivalent’. It’s a service that is time-consuming and effort-laden, requiring decent profit as motivation. Much of the work crosses into social work territory.

                      If I were to gift all of my properties to the current tenants, I can guarantee that within the week there’d a range of problems (boilers/plumbing especially) that the tenants simply couldn’t afford to fix. They’d go to B&M, but an electric heater as a solution. Broken tiles would see the tenants teenage son up on the roof using a tarpaulin and a couple of bricks as the repair.

                      Within a few short years, the properties would be run down and likely end up back out of the collective stock.

                      LLs provide much more than four walls and a roof and the additional services required beyond the immediate housing provision will not be able to cope or perhaps not even there.

                    • eek

                      I don’t think I said anything about not allowing repairs and annual costs to be tax deductible. HMRC is very clear about what is a capital improvement (none tax deductible) and what is maintenance (tax deductible)

                    • Luke 2.0

                      You didn’t, but it all feeds in to part of the overall profits/profitability. If it’s substantially less, LLs will exit…not just carry on, but more melancholic.

                    • BarryinWilts

                      ….and tax on imputed rent, 3% extra SDLT on all purchases, and CGT on principal private residences.
                      Now that would level the playing field.

                    • eek

                      Yep the 3% SDLT can go. Not sure you would want to use imputed rent as a land value tax is far more equitable – it encourages land to be used appropriately and is equally far easier to calculate. Equally CGT on principle private residencies would discourage speculation so happy to go along with that.

            • BarryinWilts

              “The removal of mortgage tax relief from BTL buyers is not about pushing landlords out of the market, it is about levelling the playing field between borrow-to-let buyers and owner-occupier buyers.”
              Wrong on all counts it is about filling the Treasuries coffers. It’s nothing to do with leveling the playing field cf comments from the IFS and LSE.

              • APJ

                Caveat emptor – you should have thought about the all the likely eventualities before you bought. But if you now can’t stand the heat, just get out of the kitchen. It is your choice.

                • BarryinWilts

                  Name 1 business that has planned for being taxed on non-existent profit? Every business plans on the basis of GAAP that has the cornerstone of all businesses for centuries.
                  Who said I couldn’t stand the heat? Yet another disappointment for you.

                  • APJ

                    You seem preoccupied with complaining about the removal of mortgage interest tax relief. Perhaps if you spent less time moaning here, and more time trying to sell your properties, you would not feel the need to complain about the changes, since they would not affect you. However, if you decide not to sell, please stop moaning about your BTL tax bill, since it would be your decision not to sell. The general public is not interested in niche BTL accountancy issues.

                    • BarryinWilts

                      were did I say I wanted to sell my properties?
                      The thread is about the consequences of Government tax policies which will result in massive rent rises and sky-rocketing homelessness. If the Government increases tax on alcohol who pays? the retailer or consumer?

                    • APJ

                      No. You are fully aware the article is called THE GREAT BUY-TO-LET SELL UP and is about BTL landlords selling their properties. You are trying to change the subject to how you don’t like your tax bill and how people should feel sorry for you. Nobody is remotely interested in your tax bill, except you. Everyone has to pay the taxes they owe. You know what? I don’t like my tax bill either, but I have to pay it. Get over it.

                  • Malcolm

                    look on the bright side, if house prices crash the landlords can incorporate with no CGT impact.

    • Ros

      Not true. Many of us liked keeping rents low as we were doing well enough with the low interest rates and also didn’t want to rock the boat. Since Section 24 was announced I have got my rents up by more than 20% in preparation for when it fully kicks in. I doubt I’ll be any better off – all the extra money being paid by tenants will be sent to the Exchequer in the form of huge tax bills. My net income will be very close to what it was before Section 24, which seems fair enough. This is simple economics. If the price of flour goes up to ridiculous levels, the price of bread to the consumer will not stay static whilst the baker stomachs all the losses, even to the extent that they have no money to live on. That would have been my fate, but rent rises have solved that problem, as they were bound to.

  • Dave

    Interesting to know what the governments next move would be if prices do keep falling as suggested in this article because that would cause a lot of buyers to be in negative equity or unable to remortgage. I have friends who have only joined got their houses in the last couple of years and they would be hit hard if prices fall. I think they have pushed too hard against the rental market, for years i was happy renting as it wasn’t certain where i would be long term with my job and i think that is normal these days.

    • TheLandlordWhisperer

      Exactly Dave. The crashists keep banging on about falling prices meaning more can buy but they never think that a) lending dries up, and b) that negatively impacts the 1m FTBs of the last 3-4 years. Dropping prices is good for no one.

      • AAJ

        A small drop can be absorbed. It can be helpful for many people, like myself who would like to move up the ladder. I can happily take a 20% hit on my selling price of the next rung is also dropping 20%. In fact, I am waiting for that to happen as I can’t afford the next step up. It won’t help my parents downsize. So that world cruise would be off.

    • Rico

      Doubtless, some individuals will suffer greatly. However, current sales volumes are extremely low and have been for years. As stated in the article loans for FTBs are running at around 20% of total loans. The other 80% are loans to either OOs buying another property, meaning that they are already likely to have significant equity in the property they’re selling and LLs.
      Bearing in mind that the majority of OOs own outright, having bought their houses years ago and will not suffer actual financial damage by price falls. A small minority of relatively new FTBs with little equity will be damaged, potentially greatly, by falls. Along with highly leveraged LLs relying on house price rises beating inflation for ever.
      I can’t imagine much sympathy for LLs, or political will to help them (they’ve had years to get out). There may be some schemes for FTBs who are in financial difficulty.

  • Alex Moss

    Touche, some good points there to be fair! I guess supply and demand stays static across the whole market, however they may be affected in the local area (i.e. rental property sold to a OO from out of the area, meaning shortage of rental homes in the area). So you’re saying that high rental prices is exacerbated by Landlords getting into bidding wars due to leverage form banks, which means they end up overpaying and thus have to raise rent to get the required yields?

    • APJ

      When a landlord sells up, there is absolutely no loss of UK housing stock. So the argument that when a landlord sells up, it reduces the supply of accommodation is disingenuous propaganda by landlords, who would ideally like to be the monopoly suppliers of all accommodation in the UK.

      • Alex Moss

        Well I’m a landlord and I definitely don’t want to be a monopoly supplier of all housing. I want as many people to own as possible as everyone renting poses a large pensions burden in the future. I’m renting just becauseI’m going on the assumption that I won’t get a decent state pension in the future and so don’t want to rely on the government to support me in my twilight years.

        • APJ

          Landlords as a group (plural) have been voting with their BTL mortgages to hoover up the property that is for sale in the UK, outbidding owner occupiers. If that trend were allowed to continue, landlords would eventually own the entire UK housing stock, and become monopoly suppliers of accommodation.

          • BarryinWilts

            Where is your evidence that Landlords outbid owner-occupiers? recent research from ONS has shown the opposite.
            Or is this just anecdotal?

            • APJ

              Yes. Isn’t it great that BTL buyers are no longer buying up the available property because they can no longer make the sums work without those massive tax advantages, and that first time buyers are starting to get a chance?!

              • BarryinWilts

                Sorry to disappoint you but OOs have always overpaid compared with Landlords. OOs decide based on emotion, Landlords based on the numbers.
                BTL are still buying just through limited company structures which has more tax advantages (and getting better with Corporation Tax set to reduce to 17% over the next couple of years).

                • APJ

                  As per the article, you had better also call an estate agent pronto and offload your properties before you lose too much money!

                  • BarryinWilts

                    Sorry to disappoint you again (just not your day is it), but like most professional Landlords I’m in it for the long term.
                    The Government will have to repeal the tax changes when rents and homelessness sky-rockets, just like what happened in Ireland in the past when the Irish Government tried similar tax raising measures.

      • TheLandlordWhisperer

        You don’t understand this as well as you think you do. There is no loss of stock, but houses operate in two different markets. Any loss to the rental market by selling means one less house available to rent. This is at a time of massive rental demand, predicted by RICS to increase. So more people chasing fewer rentals equals rent rises. Landlords selling en masse equals homelessness. Come back in 2-3 years and tell me it hasn’t happened.

        • APJ

          When a renter buys a house, demand for rental properties falls, unless you continue mass immigration, which enriches landlords.

          • TheLandlordWhisperer

            IF a renter buys a house. But how many are or can? None of mine could. Also, why are you discounting all the new renters who are not immigrants? And why is mass immigration about to stop anyway? Brexit isn’t cutting numbers so far.

            • APJ

              Thankfully, as we speak, the unfair tax advantages that have allowed BTL buyers to outbid owner-occupier buyers are being removed. This is a very fair change that will help more people own their own home.

              • TheLandlordWhisperer

                You think it assists people to get mortgages? Ok then…

                • APJ

                  The tax changes are very fair because they will stop BTL buyers, who have access to much larger BTL mortgages from massively outbidding owner-occupier buyers, who are not allowed to take on such large and irresponsible mortgages.

                  • TheLandlordWhisperer

                    I think you need to understand deposit size, mortgage rates, the PRA, and taxation before you comment any further. Repeating the same lie in several posts doesn’t make it true.

                  • BarryinWilts

                    You obviously know nothing about this. The various Government incentives allows FTb’s to buy with only 5% deposit, generally BTL mortgage require a minimum of 20% and more typically 25%

        • mombers

          Promises, promises! Can’t wait for the below trend rent increase trend to reverse and be proven wrong

    • Rico

      I agreed that imbalances could arise locally, although these would cancel out when a national view is taken. I can only see this as being significant in areas (municipalities) where BTL is dominant and there is a rush for the exits (some evidence exists for this starting to happen) where many LLs try to sell at the same time. This would create a localized and in theory temporary swing in the supply/demand balance in favour of LLs rerenting, assuming LLs try to sell empty properties. However, LLs wouldn’t be able to both capitalise on this effect and sell their properties at the same time. This would happen at the same time as a downwards pressure on selling prices for old rental properties.
      LLs then have a choice between selling into a falling market or trying to capitalise in the (temporary) supply/demand imbalance in the hope that it lasts long enough for them ride out any falls in selling prices, which won’t happen if national falls in selling prices manifest.

  • michael flynn

    Excuse me. House prices are falling!!! No they are not. They are in the South East but they are most definitely on the rise in the North. It’s no surprise they are falling in the South as they’ve gone up a lot since the crash. This has not happened in the North yet.

    House prices will rocket in the North over the next 7 years. They will also go up considerably in the South but not as much in percentage terms as the North because they’ve already had a good run. What’s happening in the South is just a temporary lull in the upward trajectory of house prices. It is most definitely not a long term trend.

    Ignore the doom and gloom. Invest in Northern property.

    You’ll be very glad you did.

  • michael flynn

    Let’s not forget the golden rule of economics. When there is increasing demand for a product its price will go up. There are not enough houses for the population as it is now. The population is going to increase a lot more than the building of houses will be able to keep up with.

    It it basic common sense that prices of houses will therefore continue to rise due to the law of supply and demand.

    • AAJ

      “When there is increasing demand for a product its price will go up”

      …only in an unregulated, free market.

      • michael flynn

        What’s your point? There is a lot of regulation in our supposed ‘free’ market.

  • Flora Neocleous

    What happens in a few years time when there is a shortage of rental properties availiable as a lot of the btl properties will have been sold.Demand will be even greater which , I think ,Will push rents higher.

    • Rico

      Not if former ex-renters have now bought and are now owner occupiers. You need mass immigration to keep demand at former levels.

      • BarryinWilts

        The English Housing Survey found that 2/3rds of FTB were living rent free with parents/relatives, i.e. were not renters occupying a rental property. (as they can save more easily for a deposit).
        So for every 3 properties sold by Landlords there are 2 Tenant + families no looking for another property.
        That’s were a lot of extra demand is coming from, that and immigration, people living longer, people remaining single for longer, higher divorce rates.

    • APJ

      When a renter buys a house, the demand for rental property actually falls, meaning rents will fall.

      • TheLandlordWhisperer

        No it doesn’t. The demand for rental is not a zero-sum game. New students, new divorcees, new people moving for work, new people choosing rent after ownership… the demand for rental will not be met for a very long time, possibly ever. Also, why do you think all the current renters will suddenly be able to buy just because their landlord is selling?! Insane logic.

        • APJ

          A zero sum game – exactly. No loss of accommodation, but more owner occupiers, and less tenants. Renters will be able to buy if BTL landlords stop outbidding them with their crazy and irresponsible BTL mortgages. But thankfully the playing field is being levelled as we speak.

          • TheLandlordWhisperer

            I said its NOT a zero-sum game. The number of tenants does not fall to a point that lowers demand, there are always more willing renters than there are available houses. Also, you are imagining a situation that doesn’t exist – the fact is that OO generally outbid landlords and that a very small percentage (between 7 and 9%) of transactions are subject to bids from both.

          • Luke 2.0

            Eventually, all the BTL LLs will have sold up, but the problem will continue (and will be infinitely worse)…except you’ll have nobody to blame. Then what?

          • BarryinWilts

            Where’s your evidence for this?
            The English Housing Survey found that 2/3rds of FTB were living rent free with parents/relatives, i.e. were not renters occupying a rental property. (as they can save more easily for a deposit).
            So for every 3 properties sold by Landlords there are 2 Tenant + families no looking for another property.
            That’s were a lot of extra demand is coming from, that and immigration, people living longer, people remaining single for longer, higher divorce rates.

        • MAD41T

          It’s certainly not a zero sum game. What about all the 18-35 year olds who are currently living with parents, and waiting for the right time to buy. The same principal applies to lodgers too.

      • BarryinWilts

        Where’s your evidence for this?
        The English Housing Survey found that 2/3rds of FTB were living rent free with parents/relatives, i.e. were not renters occupying a rental property. (as they can save more easily for a deposit).
        So for every 3 properties sold by Landlords there are 2 Tenant + families no looking for another property.
        That’s were a lot of extra demand is coming from, that and immigration, people living longer, people remaining single for longer, higher divorce rates.

  • Peter

    It works! Great news!

  • TheLandlordWhisperer

    It doesn’t have the effect of solving the housing crisis, which is why homelessness has rocketed in the last two years. A selling landlord invariably means an evicted family. With 2m people of social means in private rents, who are going to house those of them that get evicted because the govt wants the landlord to sell? Not the council. Not the owner-occupiers who bought the house. And not the landlord who isn’t there any more.

    • Paul

      I am an HMO and single BTL landlord who provdes great accommodation and customer service and hasn’t increased a single rent in 8 years. I have to ask those who think the BTL sell off is going to be a good thing for our society. Where a single mum on benefits with 2 disabled children who struggles with her rent is going to go and the Indian doctors, the divorcees, the Ghanaian nurse, the teachers, the Eastern European professionals, the university interns, those on temporary assignments, those working away from their families, those saving for a deposit, those with no intention to buy, those who cannot save for a deposit? Also what about the councils that are desperate for more PRS housing when they have massive waiting lists of people that are not in a position to own their own homes.

      • Peter Edwards

        The government will have run out of excuses and we will see a huge shift back to social housing. Margret Thatcher caused this problem by not letting councils replace their housing stock with the money from council house sales.
        Housing, Health, Roads and Education are too important to be provided solely by the private sector.

      • Rico

        You sound like a great guy Paul, selflessly performing a valuable social function without thought for your own advantage, perhaps we should make you “Minister for the Housing Crisis”.

  • Ros

    At one point in the article she says that landlords selling off doesn’t ‘make people want to buy.’ She didn’t mention the fact that even if they did want to buy (millions don’t, depending on their stage of life, means, aspirations etc), penalising landlords doesn’t give first time buyers the means to buy. The deposit and stringent mortgage terms seem to be the main barrier. Then, she makes a simple, illogical point that landlords selling will be good as it will reduce the ‘20% of private landlords’ – thus assuming first time buyers will automatically ‘get’ these houses. The whole premise that first time buyers are of superior value to tenants who cannot or don’t want to buy is of course wrong.

    • mrtickle2015

      Landlords are not being “penalised” because they are still going to be gifted a 20% tax break which owner-occupiers do not get. I’d keep quiet if I were you otherwise you might find that removed and a level playing field created. But anyway, thank-you for taking the trouble to make us aware of your concerns.

  • I am A Tenant

    I am a tenant and I love love love Section 24. It’s a devilishly beautiful piece of legislation, beginning to take effect for the greater good of society before an extra penny has even been paid to the taxman. Don’t even get me started on PRA. Good lord, it’s fantastic.

    • APJ

      I am a reluctant tenant, too. And I also love s24. It is about time we tenants were given some good news, like this!

  • Don F

    It’s been confirmed the sell-off has already begun according to data for England published by the government today. The number of properties in the private rented sector dropped by 46,000 between 31 March 2016 and 31 March 2017, to 4,786,000. First time the sector has contracted in the dataset, which goes back to 2001. However, those 46,000 properties didn’t disappear in a puff of smoke, and somehow the housing stock still grew by 217,000 properties. The number of properties in owner-occupation grew by 261,000 and the number in the social rented sector grew 3,000 (which could and should be much higher).

  • Michael Kinder

    Oh the glee from the have nots… I don’t actually believe the premise of the article. Higher rate taxpayers with one property who have experienced some grief, are now vastly more likely to sell up, this is true. Let us not forget though, that they do so at the top of the market. The more professional landlords will not be joining them. When they sell, it’ll be strategic and limited. They will adapt and prosper.

    • Rico

      The implied premise is that the top of the market has passed, hence the rush to the exits. LLs have had the ten years since the financial crisis to see this coming, they should have used this time to reduce their exposure to risk.

      • Michael Kinder

        You are seeing it all wrong. BTL is a low risk business, due to the deposit levels required and tightened lending criteria, since 2007. The risk was a change in govt policy, and who knew that the Tories would launch a targeted attack on HR taxpayers letting houses out on the side? Put your cash into a company that buys office blocks and splits them into rabbit hutches and they leave you alone, but if you want to borrow cash to help buy your aunty’s house, you’ll pay the extra stamp duty and you’ll be taxed on profits you haven’t made!

        • mrtickle2015

          Sure, that’s why the Bank Of England says that BTL is a risk to the stability of the economy and the government introduced Section 24. The sell-off of houses out of BTL and into private buyers is the INTENDED outcome of the policy. Wake up!

        • eek

          Hang on – you still are taxed on your profits. The only thing that has changed is the type of expenses that can be deducted when calculating your profit.

        • I am A Tenant

          A loan without capital repayment is practically the definition of risk. Crikey, no wonder these people recklessly load up on so much debt if they don’t see it as risky. Interest Only lending should not be allowed – it’s absolutely bonkers.

          • Michael Kinder

            If it’s your own home, of course it would be bonkers. BTL however are commercial loans intended for business / investment. Repaying such loans when interest rates are so low, is actually bonkers. Better to keep spare cash in hand, in case you want to do something with it. Sensible investors manage their risk and play a long term game, whatever the asset class. Which is my only point here. I’ve already stated that I can see those with one property let out, selling up if it makes sense. Those with a portfolio however, will adapt. I know lots of such investors and whilst few are buying, none are selling.

            • mrtickle2015

              They should be charged as commercial bridging loans at commercial rates just like any other commercial business loan, yes, but the problem at the moment is that they are not, They are charged at hundred-year-low rates for consumers. The very idea of a non-amortising loan is pure crazy, which is why they will be phased out.

        • Rico

          The risk is that, in many cases, the BTL business is not profitable without the tax breaks that are now being removed. If a BTL is no longer profitable enough then the LL sells, if many LLs sell then prices fall. A loss making BTL must be sold at a high enough price to cover the cost of the loan made for its purchase, otherwise the lender looses money. This is now seen as a systemic risk by the BoE.

          • Michael Kinder

            It doesn’t make that much difference, so we aren’t going to see a meltdown such as you describe, any time soon. If we do, worry about the FTB, not the LL. The golden rules of investment: don’t put all your eggs in one basket. Spread your risk. Don’t borrow too much relative to your income.

            • mrtickle2015

              And don’t put all your^H^H^H^Hother people’s money (ie an IO loan) into a single asset class such as property. That would create a systemic risk to the economy, hence the requirement for it to be put right.

            • Rico

              Actually, I’m not trying to describe a meltdown, although I’m willing to consider that extreme scenario and give it a probability.
              What I’m doing is giving arguments supporting the trust of of the article.

  • where_from_here

    Seems to me, that much of the comment does not understand the real economics of the landlord / OO / tenant interaction. That and the loss of tax relief largely nails the smaller guy trying to ensure he can retire etc and plan for the future vs hold a hand out to the state. Anyone renting a number of properties will be running it as an Ltd and be largely unaffected. If there is a dip in house prices in the first time buyer end in the south, say from 220,000 for a mid 1.5 bed terrace to 190,000, I don’t see it helping too many folks; it’s still a big number.I can see “independent landlord companies” thinking “this is a useful dip in the market lets buy a few more”! The tax changes, as usual, only hit the squeezed middle trying to its best to drag itself out of the mire.

    • Rico

      If BTL is run as a ltd company then that company will be paying corporation tax already. Possible that some private LLs have moved their properties into a ltd structure but then the company will own the properties and thus be subject to capital gains on selling. Running this kind of business as a ltd makes it difficult and highly illegal to systematically avoid tax. Running it as a privately owned made tax evasion easy in the Brown/Osbourne years and it has been widespread, along with mortgage fraud (LLs taking out OO mortgages and then letting, which is breach of both the mortgage and the letting contract).

  • sh2o

    In my locality in North London, rental prices have been creeping down lately. I’m not entirely sure why. Some of it is due to less demand from Eastern European renters. There has also been a huge increase in in HTB flats coming on the market possibly accommodating young professionals who would otherwise have rented. Not much evidence yet that BTL property is flooding the market. However, rental properties are standing empty since there are insufficient renters able to afford rents and most deals are being done at a discount.

  • Simon Peacock

    House prices are primarily a function of the availability and cost of credit. The current situation has been exacerbated by government policy and imprudent bank lending. Successive governments, in promoting a property owning democracy, have benefited hugely from countless taxes and GDP distortions while inculcating a sense of entitlement that never existed in previous epochs. When the whole thing unwinds prices will certainly fall but where then do people put their money to work while minimizing risk to provide for retirement? Not in banks whose frailty was demonstrated in 2007-8. Nor the stock market where CEOs pay themselves ridiculous salaries based on mediocre performance, share repurchases, compliant remuneration committees, corporate equity holders, and powerless private shareholders. Pension funds are as reliable as banks. We are literally snookered. Personally I would prefer a liquid investment but the choice is diabolical and with Brexit and Trump’s trade war imminent the whole thing is a lottery unless of course you enjoy pension benefits as a former MP or senior civil servant. The system is corrupt and this discussion focuses on a tiny aspect.