Buy to Let Tax

The reveune have announced 80,000 buy to let landlords have paid too little tax. They believe that people have deducted the capital payments on their mortgages off their tax (you are only allowed the interest part.)

Home loans

The home loans for last month were down 15% on the previous month. (This though is still 1% higher than last year.)

Those figures included remortgages. Loans for purchases fell from 75K to 65K giving a trend downwards.

This suggests the market is cooling, with the large number of properties on the market it should give buyers more power

Inflation and the property market

When talking about inflation for property we normally are talking about the rate housing prices are going up. There is though the wider inflation rate. This has been high, RPI is currently 4.5%, and the situation worldwide is looking poor.

The world has had a one off benefit with China and India starting to industrialise. This has pushed manufactured costs very low. The problem is now that commodities have increased. We all know about the effect on the oil price but it is also hitting metals and foodstuffs. The price of manufactured goods could also increase as the new economies start to consume.

Inflation hits property owners and the market in the short term as interest rates rise. In the long term it erodes the value of debt.

Fixed rate mortgage anyone.

London property market

Is the London property market different? One of the questions to ask is is the UK property market one market. The answer is no though there are linkages. Northern Ireland is unique and so is London. London has been buoyed by large city bonuses and russian "businessmen" at the top end.

How long will this continue?

Any thoughts anyone.

HIP fiasco

The HIP fiasco continues. This half baked piece of legislation was "delayed" just days before due to come into effect.

This has already led to a flood of property onto the market at short notice. This will change the nature of the supply and demand. While it will take months to come through in official figures this risks undermining prices. The data for prices will not be comparable and this inturn risks the MPC ignoring figures it doesn't like.

The government is facing legal action from the poor sods who spent thousands training up.

There is also the suggestion that the inspectors will not complete their courses. This would mean the HIPs can never be introduced as there aren't the inspectors.

Property market news - flats

The suggestion is that the market is vastly over supplied with flats is shown in the figures. While detatched houses have doubled in price over the last 7 years flats have increased by only 11%.

The following is a quote from the House builders Association

He said that in Manchester alone there were 20,000 flats awaiting planning permission against "just a handful" of new houses. "It's across the country - a tidal wave of new flats waiting to come on to the system. They can never possibly hope to sell them all," he said.

Thinking of buying a flat?

The answer seems to be think again

Buy to let risk to property market?

The current uk property market has been buoyed by buy to let investors. Many have become signifcantly rich as the prices of property have risen ever upward. The property slump of the late 80s and early 90s have become a distant bad dream

But are buy to let investors more risky to the house market than first time buyers?

A number of investors are not buy to let. They are leaving the properties empty and just looking for capital gains. In some towns 25% of new build properties are vacant.

[Why are they doing this? rental yields are so low. In my town the gross rental yield for flats (rent /property price) is less than 5%. When you knock off costs such as voids, repairs and management fees the yield will be sub 4%. The view is why risk hitting your capital values with tenants who cause damage etc. and if its empty its easy to sell.]

This is not investing for a return it is betting in capital growth. (I argue if there is not an income it is a bet not an investment, I give you not an original concept.)

So if the market slows down the owners of these empty properties have costs (rates, service charges, etc.) and are seeing low, no or negative capital growth are going to be tempted to sell.

Unlike other investments such as shares, gilts or bonds properties are unique. You do not ring your broker up for 5 buy to let flats. Similarly if you sell you have to find a specific buyer for the flats (which is where I believe the problem is most acute.) If the market turns down who is going to buy these flats.

Not other investors yields are too low and without a rise in rents are not going to increase.

First time buyers are priced out of these properties and why would they want them. You can buy a house for roughly the same price as the flats. Maybe not as trendy. But unless you are earning huge amounts you need to be a couple to afford them. By the time people can look round to buying in couples you can add the thought of children (if not now in a couple of years.) Who wants kids in a flat especially taking prams etc up lifts.

The amount of buy to lets in flats is huge. The main area around me for flats is over 80% buy to lets (or buy to bets.)

If the market changes these people could look to get out quick. They are not living in them. They do not need them, unlike first time buyers. This means a down turn could turn ugly much quicker in the buy to bet arenathan the rest.

Remember flats suffered disproportionately in the last down turn. They will again

UK Property Prices

This is a blog about UK property prices.

The areas it will cover is where are property prices heading?

Is there an imminent crash awaiting in the Uk market as appears likely in the Spanish Market where oversupply and the end of a speculative bubble.

There certainly are some warning signs. I'll look at these over the next few posts.