Housebuilders share prices plummet post Budget

by Neil Patterson

21:07 PM, 8th July 2015
About 3 years ago

Housebuilders share prices plummet post Budget

Make Text Bigger
Housebuilders share prices plummet post Budget

Housebuilders share prices fell immediately to post Budget reaction that BTL mortgage interest tax relief will be capped to the basic rate of 20%.shares

Barratt shares fell 5.7%

Taylor Wimpey  shares fell 5%

Persimmon down 4.7%

This is direct instant economic indicator to what the financial markets think about the reduction in tax relief, as no other policies seemed to have such a direct connection to house building.

Far from freeing up the market to make it easier for home buyers, the markets seem to be saying they think less homes will be bought because of a reduction in demand from investors.

Basic economic rules say that if this is the consequence, and less homes are built (supply decreases), but the same number of people still need housing (e.g. demand does not decrease) then the Price (i.e. rents and property values) must increase, all other non-open market factors being equal.

That would definitely not help the housing crisis !



Comments

Mark Alexander

21:20 PM, 8th July 2015
About 3 years ago

I completely agree Neil.

We can but hope that George Osbourne and his cronies pick up on this and more importantly .... realise their errors and make a swift u-turn.

Hopefully the supporters of this stupid tax hike from the left will also have spotted the instant stock market reactions and begin to think through the consequences too.

It's feels a bit like the chancellor has inadvertently fired a Nuke to me!
.
.

Jerry Maguire

23:08 PM, 8th July 2015
About 3 years ago

i own some of these stocks and sone of these are up around 50% in the last year so losing ~5% in a day won't cause George to lose much sleep, presumably you saw what he did to those unfortunate enough to be selling annuities in his previous budget? I think you're both being over dramatic.

What's more interesting for me is...

A/ how many landlords will this put underwater cashflow wise?
B/ what implications does this have for the housing market now that the fastest growing sector of the market may get smaller?
C/ Do we still expect an MMR style formal limits from the BoE for buy to let or has this changed anything?
D/ I wonder how lenders will interpret this news, presumably lending appetite will diminish given landlords lower cashflows?

Mark Alexander

23:23 PM, 8th July 2015
About 3 years ago

Reply to the comment left by "Jerry Maguire" at "08/07/2015 - 23:08":

I too share all of those concerns Jerry.

I will be affected more than most.

I certainly didn't see this coming, especially from a Tory Government!
.

Jerry Maguire

23:39 PM, 8th July 2015
About 3 years ago

Two significant themes for me:

Wealthy landlords will now elect to pay down debt rather than expand - possibly by selling 2 properties to pay off eg 3 others

It provides big business (the pension/insurance sector) that are strategically looking to enter the PRS an even bigger advantage over the small scale man in the street.

There were some positive things in the budget for you too mark so don't be too down.

Nice evending

Alan Loughlin

11:24 AM, 9th July 2015
About 3 years ago

at the end of the day if landlord costs rise so will rents, it cannot be any other way, so if this way campaigned for by the likes of the pratts from shelter then it will seriously backfire on them.

Jerry Maguire

12:35 PM, 9th July 2015
About 3 years ago

Or small high marginal tax landlords make less money? I'm not convinced all landlords will be passing the new costs on in full as simplistically as you suggest.

Moreover, higher rate leveraged landlords are not at a structural disadvantage compared to large scale pension funds /insurance companies now... This is a game changer for the landlord on the street.

Luke P

12:39 PM, 9th July 2015
About 3 years ago

I will raise rents.

Alan Loughlin

14:52 PM, 9th July 2015
About 3 years ago

it will not affect us as we are basic rate, but the little mentioned change is to the simple 10% furnished property renewals allowance, we use this as it is simple to administer, not sure what the alternative is going to be. anyone know?

Jerry Maguire

15:54 PM, 9th July 2015
About 3 years ago

Reply to the comment left by "Alan Loughlin" at "09/07/2015 - 14:52":

Yes doing what all other businesses do, claim for costs as and when they are incurred...

Jay James

15:57 PM, 9th July 2015
About 3 years ago

Reply to the comment left by "Jerry Maguire" at "09/07/2015 - 15:54":

That sounds more reasonable to me, despite that some will lose out as a result. It certainly brings accounts closer to reality.

1 2 3

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Want to avoid empty properties over Christmas?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More