OK not to be melodramatic about this but actual DOOOOOM right?
Donny Darko's … 26 May 23 06:41
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So mortgage interest rates are spiking again. The SVR's (or whatever they are called these days) of most banks are now north of 6% and the affordability nonsense for re-mortgaging doesn't seem to have been sorted out. People are going to be utterly fvcked as they roll off their fixed rates. Even for those who can get a deal it is going to be north of 5%. That means people are looking at their mortgage interest payments going up by something like 250% to 400%. 

I just don't see a way we avoid mass repossessions if rates stay this high over the next 12 months. The rental market is still incredibly tight as well so landlords are going to look to push at least some of the cost increase (much of which is not tax deductible) onto tenants. 

The press are surprisingly quiet about this.  All the focus is still on food costs and energy bills which I guess reflects the boomer bias of our media but this is surely going to wipe out vast numbers of Gen X and down.  

Chimp - They might understand an index tracker in principle but whether they will understand what's in that tracker is another story.  A lot of people don't understand how different the exposure to the UK economy/sterling earnings you get with the FTSE100 vs the FTSE250 is for example. 

rents should be limited by law to the costs of upkeep and maintenance of the property
 

as determined by commissioner chill - who does enjoy a visit to the Caribbean in the winter by the way. 
I don’t think you have a clue how these things work chill - how and who would value those costs? an army of bureaucrats with a blanket pro forma? it’s completely impractical. 

looking forward to the examples of successful government-licensed, publicly-owned service providers renting housing on a not for profit basis

historic or contemporary is fine

Worth pointing out to boomer dickheads that "oh this isn't that high" dismissal of current rates ignores the fact that interest rates barely got to levels they are at now for centuries before 60s-80s govts debased their currencies and fuelled the asset price booms that are responsible for boomers' wealth rather than any brilliant investment strategies. The housing crisis is directly attributable to the Tories selling off much of the 50% of housing that was social at the beginning of the 80s, worth considerably more than the gold Brown sold off that gammon w**kstains like to bang on and on about.

I don’t think you have a clue how these things work chill - how and who would value those costs? an army of bureaucrats with a blanket pro forma? it’s completely impractical. 

private landlords evaluate their costs every year when they do their tax returns

freehold management companies do it when assessing service charges

i dunno, throw in an interest ticker based on inflation for the next year, leave them a retention for major works if you want 

it’s not beyond the will of man to put it in place 

Another friend of mine uses her rental income to prop up her teaching assistant salary - the rental income enabled her to make a change in career and take the salary dip. What a witch.

looking forward to the examples of successful government-licensed, publicly-owned service providers renting housing on a not for profit basis

historic or contemporary is fine
 

i’ve absolutely no idea bullace - i don’t know why you keep asking this like some kind of gotcha, it doesn’t mean it wouldn’t work in the uk

the point is the current system is brutally, fundamentally fvcked beyond repair

she’s not a “witch” ob - she’s immensely privileged to have her tenants working to provide her with a second income with which she has the freedom to take a cut in salary

yeah just like if we had proper socialism/communism instead of those failed experiments around the world. making leaps of faith based on ideological social theory is very high risk and usually ends up in disaster. I’ll leave you to draw the obvious parallel. 
I ask the question about your utopian housing provider because they don’t and never have existed for a reason - you put it out there as the obvious solution but you need to put some meat on the bones, though phantasms don’t have bones….

the worst part about landlords is the pathological need to be reassured that what they're doing is great actually 

just get on with taking 50% of people's wages every month, no-one is ever going like you for it

I think, as someone said upthread, that the biggest issue in the last 15 years has been the potential for massive easy gains by leveraging at very low interest rates. If leveraging is taken out of the picture then UK residential property has done worse than a typical global or US biased share tracker. Its the political favouritism towards the over-propertied that bugs me, not the principle of residential property being investible. 

They might understand an index tracker in principle but whether they will understand what's in that tracker is another story. 

OK so do a bit of due diligence. Nobody is entitled to a no-brainer investment

As a matter of fact, it's bad for the British economy if people think that investing in productive enterprises is a "rip off" and "Ponzi scheme" while investing in residential property is just the default way to go. We should rebalance incentives to make sure this is no longer the case.

Its the political favouritism towards the over-propertied that bugs me, not the principle of residential property being investible. 

i agree with this - i certainly don’t blame individual boomer landlords who purchased properties for a song and benefitted from the massive increase in property prices (they were doing basically exactly what the banks and successive governments told them to do, i’d have done the same myself)

but they do have to realise that they just lucked out and those governments and banks have epically, monumentally fvcked the housing market

they’ve had their mortgages paid for them for decades along with a second income stream, they need to be grateful for it and now sell their properties for a reasonable amount (i.e. well under what they’re currently ludicrously valued at) 

and they need to get rid of the idea that they have some sort of “right” to pass this investment asset on to their kids at those ludicrously inflated values, given that the kids didn’t have any capital in the first place

OB your example is terrible, they sound like property managers who run a chippy on the side.

tax second home owners hard, but how to without affecting tenants? Rent controls sound sensible

now sell their properties for a reasonable amount (i.e. well under what they’re currently ludicrously valued at)

and - to be clear - i don’t mean they should all agree to sell their properties under value, i mean they need to stop electing governments whose sole purpose is to keep inflating the housing market and punishing electorally those who threaten their “kid’s inheritance”

(this isn’t a tory/labour thing - theresa may’s plan on social care was a completely sensible policy that would have led to lots of houses being sold when boomers got older, and she got crucified for it)

I think one of the attractions of investing in buy to lets is the feeling of control over your investment.

Whilst you can invest in/buy shares in Oil Co X or Bob's Steel Widgets Limited, the average investor has no real control over how those companies are run and what, if any, return the company will choose to pay on the investment whereas with a buy to let, the owner has control of to whom the property is let and (within reason) for how much which I imagine is quite attractive. 

I don't have any real issue with people owning buy to lets/receiving income from them but agree with Jamie that a properly funded (and quick) court for Landlord and Tenant disputes would improve things. 

In fact when you look back at what happened during Covid, the only people who didn't gey any help or special protections from the government were landlords.

This is untrue.  Sole directors were deliberately excluded from support whilst sole traders were given monthly payments and could continue working.  

Another friend of mine uses her rental income to prop up her teaching assistant salary - the rental income enabled her to make a change in career and take the salary dip.

She could have used the capital that she bought the house with, or invested it another way.  Having the choice to do what she did makes her massively priviliged - and yes, she is living off the labour of others.

“(this isn’t a tory/labour thing - theresa may’s plan on social care was a completely sensible policy that would have led to lots of houses being sold when boomers got older, and she got crucified for it)“

Klaxon alert

I agree with Chill!!

Was gobsmacked when May’s lot produced a socialist-style policy to deal with the funding of care in the elderly then utterly floored when Labour/Lib Dems opposed it. Strangest policy and reaction to it I’ve seen in politics that I can remember. Was a sensible fix, leaving some inheritance and providing funding for the elderly when families didn’t want to or couldn’t afford to without inheritance.

klaxon alert 2

i also agree - though I wouldn’t describe it as socialist - the reaction (public and parliamentary) was massively depressing - the current dysfunctions will only be addressed when the market inevitably produces an earthquake 

Another friend of mine uses her rental income to prop up her teaching assistant salary - the rental income enabled her to make a change in career and take the salary dip. What a witch.

"Another friend of mine exploits the basic human need for accommodation to fund her lifestyle with her tenant's wage rather than her own."

A guy I know runs a farm and sells the potatoes he grows. Sorry I mean he exploits the basic human need for food to fund his lifestyle with his customers wages. 

"Another friend of mine exploits the basic human need for accommodation to fund her lifestyle with her tenant's wage rather than her own."

This is sarcastic and mean spirited. You're forgetting about the fact that she can now finish work at 3.30 and care for little Flanella during the school holidays? Obvs her tenants will have to pay for their own children's childcare somehow on top of the rent that's going towards Flanella's future private school fees but fvck them. She's not some kind of witch you know. 

A guy I know runs a farm and sells the potatoes he grows

land is finite and not fungible

potatoes and professional services are

that’s the philosophical difference

This is sarcastic and mean spirited. You're forgetting about the fact that she can now finish work at 3.30 and care for little Flanella during the school holidays?

Threeps so basically attacking BTL landlords is misogynistic and discriminates against women

A guy I know runs a farm and sells the potatoes he grows. Sorry I mean he exploits the basic human need for food to fund his lifestyle with his customers wages. 

Running a farm and raising crops is not really the same as simply owning a property which you then charge others to use. If you buy a property and improve it in some material way so that it is nicer to live in or can house more people that might be a better analogy, a lot of BTL landlords can't really achieve that though as they lack the capital, desire or both to make meaningful investments.

A guy I know runs a farm and sells the potatoes he grows. Sorry I mean he exploits the basic human need for food to fund his lifestyle with his customers wages. 

This would be useful analogy if your mate is named Charles Trevelyan and he lives in 1840s Ireland

Interest only mortgages are a  disaster and should be banned 
 

Agreed tbh. I was amazed to learn that in the US you have one mortgage rate for the whole term of the mortgage. There is no such thing as a “2-year fix”. The more interest rate variability is baked in to the system, the more unstable it is.

Every resi landlord provides maintenance etc (or their managing agent does) but that is sort of besides the point. They provide capital. Capital needs to attract a return. If it doesn't it will be used elsewhere.  Somebody has to fund the construction of houses (and renovation periodically of houses). 

Anyways, this is daft, sub-sixth form debating society nonsense frankly. 

If I was a guy who'd just compared a renewable, abundant, perishable and interchangeable food item with housing during a housing crisis in which half a million British children don't have their own bed, I'd be a bit careful about throwing around terms like "sub-6th form"

Anyways, this is daft, sub-sixth form debating society nonsense frankly. 
 

It’s just the difference between productive investment and rent-seeking. Of course capital seeks a return, but returns predicated on extracting rents aren’t good for economic productivity.

There is plenty of land to go around as well. In fact there is even plenty of housing to go around (at least taking the UK as a whole). 

As ever it's the allocation that's the issue. The housing crisis is absolutely nothing to do with a shortage of land or even of housing in a physical sense. It's a shortage of land zoned for residential development of sufficient density where people want to live/need to live for work taking account of the existing allocations of land that have been made to wealthy people. 

There is nothing unique about housing as a resource (other than it's lead time is relatively long). We are many centuries away from the UK actually 'running out of land'. 

 

As ever it's the allocation that's the issue

in the sense that it’s been “allocated” over the years to wealthy boomers who have been voting to inflate the property market to multiple times its real value so that they can pass it on to their kids, yes

So let me get this right, the true villains of the piece are the chip shop owners trying to secure their retirement and support their family without state help, the teacher topping up her salary so she can do the low paid job and be there to help raise her family, the mum of 5 living with her mother and using the Airbnb money to make ends meet and the heroes are large scale corporates doing develop to let.

But we like small businesses and side hustles where the money goes direct to the owner, but not when it’s landlords because they are evil for providing safe and secure well kept properties for market rate even if they are nurses and teachers who we like when they only do nursing and teaching and don’t get above their station. 

 

Broadly yes OB because apparently once it is big corporations we will be able to force them to reduce the cost of rent to the cost of maintaining the property and despite this they will continue to provide billions upon billions of capital to fund all of this while enjoying their strongly negative real return because of, you know, reasons. 

Apparently we need to do this rather than simply increase the supply of the developable land though planning reform because of, once again, reasons. 

Thanks Donny, i thought this was the case.

😂😂😂😂😂

gotta hate on those evil mums and oldies and love on those corporates  

☀️ 🍭 all round 

There would be plenty more land to go round if that feudalistic aunt you call a friend wasn't hoarding it all to grow fooking chips to keep people fat and poor while he gets rich of their misery.

Chill, a BTL will get hit for 40% IHT so it is not the case that they are all passing down these BTLs tax free to their children. There's stuff you can do with trusts, but many won't, and trusts aren't a 100% solution.

I just don't agree with compulsory sales at less than market price. The properties are worth what they will sell for. Presumably you aren't saying that if I've bought a BTL for £1m, I should be forced to sell it for less than that - it's just capital growth you are interested in going after? In that case, what you are really arguing for (I think) is an increase in the 28% CGT rate that currently applies on sale of a BTL.

 

 

if they are nurses and teachers who we like when they only do nursing and teaching and don’t get above their station
 

Just lol at trying to frame defending small-time residential landlords as standing up for the little people.

oh definitely it’s never going to happen

but starmer will have to do something to correct the housing market and the easiest way would be to increase tenants rights (also it will play well with younger voters)

ideally he’d do it all at once to force a load of btl landlords to sell at once but it doesn’t particularly matter

the idea would be to make running a private btl incredibly difficult and unprofitable

no forced evictions is a start

all boilers / heating systems need to be replaced every five years if gas, or all need to be converted to solar or other clean energy (can play this as an environmental measure)

rent controls of course

make it easier for tenants to sue their landlords

i dunno you could come up with more

the idea is ultimately all the private landlords will have to sell or lose money year on year (and if you get them losing enough they’ll sell for a lower market value to stop the bleed, particularly if their mortgage has been paid)

they can then be snapped up by larger companies, which you can then regulate the kittens out of and fine if they don’t comply

Look, I get it - my girlfriend is a small-time residential landlord and does reasonably well out of it. But the capital she uses to do that would in an ideal world be invested elsewhere, and the lifestyle she enjoys via rental income would in an ideal world be funded by her going to work (which she doesn’t do that much of) and using her skills and abilities in a productive way. The same is true of landlords generally.

I don’t think people doing this are “evil”, that’s a big straw man. But neither are they innocent mums, teachers, nurses and oldies just trying to make their way in this mean old world. They’re people of all types trying to maximise their capital return, and the best way they have to do that is via rent extraction - not their fault but not a state of affairs that should be encouraged

Chill, a BTL will get hit for 40% IHT so it is not the case that they are all passing down these BTLs tax free to their children.

no agreed not tax free but when your flat in camberwell that you bought for 70k is now worth 350k it doesn’t much matter

the market has gone utterly bananas since eg the early 90s

"the idea would be to make running a private btl incredibly difficult and unprofitable"

For debt financed BTL we aren't far off this position already.

Osborne, who I doubt you were a fan of, stopped them getting full deductibility for interest costs.

Now that interest rates are being hiked this is going to be very painful when people refinance. There will be plenty of mortgaged BTLs out there which won't even wash their face.

He also slapped an extra SDLT cost on them which first time buyers don't have to pay.

if you're talking about debt free BTLs acquired 30 years ago I think the most you could reasonably argue for is a higher CGT rate on the huge gains. Osborne already took a small step in this direction by creating a special CGT rate for it (28% vs 20% for almost everything else), although you might want it to go even higher.

why would a higher cgt rate help?

the idea is to get btl landlords to sell so that supply goes up and property prices come down

we’re not going to build enough new homes so we need to force the boomers to sell and stop sitting on them to pass on to their kids

get rid of the cgt on them if you want, the tax take is nothing compared to the necessity of fixing the housing market

like bullace i don’t think you understand the urgency of this georgey 

we are about to have an entire generation who are unable to afford to buy a house unless their parents were lucky enough to have bought at a time when prices were reasonable

society cannot withstand that

tbh at this stage i don’t even care if they get to keep the massive massive gains they’ve lucked into and pass the cash to their kids (most likely it’ll be split three or four ways anyway), as long as they sell up to correct the market

Correct the market to what? 

it should be possible on the average uk salary to buy a home that can house the average uk family

fvck the “ladder”, it’s been pulled up - no couple buying a property today (even their one bed flat) can rely on property prices increasing in the way they did over the past 30 years

i don’t think the tories on the board understand the scale of the problem, but leave them alone - if they want to push to keep their investment properties the current generation of 19 year olds will, eventually, elect someone to the left of jeremy corbyn to slap a land tax on everyone

it will be corrected one way or another, it’s unsustainable 

The current gen of 19 yr olds will either inherit bigly or have nothing (ai having fcked their ability even to earn as much as young people currently do).

Private landlords and inequality are each as old as human civilisation tbf

The current gen of 19 yr olds will either inherit bigly or have nothing (ai having fcked their ability even to earn as much as young people currently do).

agree clergs

not a good recipe for social stability

And the generations after so as Clergs points out aren’t parents going to do everything they can to try and provide for their kids inc btl or any other vehicle available as they can see it coming 

And what will you do when you become a parent?

my friend’s parents (70s) have just entered the btl market because they are worried about her sister and her future. She’s a simple soul, lives at home with her parents and has worked at the local convenience store for over 25 years now. They couldn’t think of any other way to ensure an income for her over the long term after they are gone and after much deliberation decided this was the safest (in their minds) route. They want her to take on the mgt of the property but she is currently too nervous and so my friend is helping with the admin. 

my friend’s parents (70s) have just entered the btl market because they are worried about her sister and her future

they’ve just entered the btl market when house prices are at a massive generational high??

why ffs - there’s only one direction the value can go

might as well throw their inheritance money in a metal bin and set fire to it

They couldn’t think of any other way to ensure an income for her over the long term after they are gone and after much deliberation decided this was the safest (in their minds) route

if they’re in their 70s surely they lived through the negative equity crisis of the 90s?

this is the maddest thing i’ve read in weeks 

they should be getting out of the btl market not pumping their money into it

this is what happens when you train boomers to think the government will do anything to protect housing prices 

They couldn’t think of any other way to ensure an income for her over the long term
 

being a landlord should never be seen as a way to “ensure income over the long term”

jesus christ

sorry i’m just really shocked by this - hope the family is ok and everything but they might as well have lent their money to a nigerian prince

what on earth made them think that was a smart investment??

Blah, blah, blah. They system is screwed.  I’m now back to higher for longer - until something big will break. And it will. Then massive QE and rate cuts. I’m more worried about the constant debasement and huge deflationary impact of AI. It’s coming.

It’s their decision to make. Retired teachers and live up north. But yeah, evil landlords aren’t they, not worried parents. 
 

my guess is that a large volume of cash would make her vulnerable to predators and sales people where as a small annuity and a property makes her safe in their minds. 

It’s not shocking, it’s just a decision they made based on their need to provide v other risk factors that they can see, they aren’t Wall Street types. 

 

my guess is that a large volume of cash would make her vulnerable to predators and sales people where as a small annuity and a property makes her safe in their minds. 

wait who - the daughter?

oh - it’s not her parents job to “ensure an income for her in the long term” that may be where they’ve gone wrong

sorry i thought you were talking about an income for the retired couple 

well they’ll feel the crash and she’ll have to ensure an income for herself, no harm no foul

He's just a troll. Although there are some people with a mad objection to the model. Which i guess is fine but they're never standing ready to deploy an effective alternate to avoid mass homelessness.

And what will you do when you become a parent?
 

You’re repeatedly missing the point. I’m not saying it’s “bad” or “evil” or “wrong” that people are doing this. I completely understand why it happens. I’m saying that on a social and economic level, it has bad outcomes.

She must have sweet inheritance moolah if she's under 40 and making btl work tbf. She could run a Zine or sthg instead.

Ah Zines. I'll miss those even more when the ai outlaws all non-binary communications.

He's just a troll. Although there are some people with a mad objection to the model

oh come on clergs - “the model” shouldn’t possibly be that it’s a parents job to “ensure a long term income” for their daughter

i mean well done to her if she’ll never have to work, lucky her

that’s not a model society can function on though