BTL impact on prices for FTB's was minimal, it's official.

HAMISH_MCTAVISH

Well, it seems there is a detailed study of the exact amount of the rise in house prices over tha last couple of decades that was attributable to BTL, available here.....

http://www.communities.gov.uk/docume...pdf/684943.pdf

Despite all the frothers protestations to the contrary, it's official that the impact on house prices was hardly anything at all....

In this paper the impact of Buy-to-Let on house prices is investigated. An econometric model was used to determine the impact of gross BTL lending on house prices by comparing actual house prices to an estimate of what house prices would have been had there been no BTL lending.

Between 1996 Q3 and 2007 Q2 the overall impact of BTL on house prices was relatively modest and illustrates the point made by others that movement’s in house prices are largely determined by fundamental economic and demographic factors (Meen etc).

The model discussed in this paper attributes much of the variation in house prices to mortgage interest rates, changes in disposable income, and the stock of housing to the number of households, and the availability of credit. For instance, since 1996 Q3 house prices increased in real terms by 150 per cent and, even without the estimated effect of BTL, they would still have been expected to increase by more than 130 per cent. It would therefore be wrong to say that BTL has been responsible for all of the growth in house prices over the last decade but it has played a part, as other have argued (e.g. NHF, 2007; Sprigings et al, 2006).

In term of affordability it is an open question as to whether a 7 per cent increase in house prices in 2007 Q2 represents a significant additional cost. For example, the monthly mortgage repayment on a property priced at around £183,000 in 2007 Q2 would be around £1,190, assuming a 100 per cent mortgage at an interest rate of 6 per cent over 25 years.

The equivalent monthly repayment for a property priced at £169,000 (the models estimated house price for this period had there been no BTL lending), would be £1,100. A difference of £90 per month in mortgage repayments could be significant for some but not for others. However, if one assumes that BTL investment has provided no wider benefits then the additional amount it adds to house prices and households mortgage repayments is undesirable because it has reduced the opportunity for home ownership, particularly for those on lower incomes.

There is some evidence to suggest that BTL has increased the size of the private rental (PRS). For example, BTL mortgages were estimated to make-up over a quarter (28 per cent) of the whole private rented stock in 2006, rising from less than 1 per cent in 1996 (see Figure 5). However, one cannot necessarily conclude from this data that the PRS would have declined from its pre-BTL level had BTL not existed. This is because the statistics mask the fact that some investors will have taken out BTL mortgages on rental stock that they already owned, once the BTL product became available.

Only a paltry 7% of the price of a house was attributable to increases caused by over a decade of BTL.

The majority of the price rise in that timeframe was caused by underlying economic and demographic factors. Not BTL.

Graham_Devon

Comparing house prices to a mere estimation (guess) of what house prices may have been without BTL.

LOL. Now that's class.

Sorry, official class.

nickmason

It's a pretty nonsense piece of research though. It's amazing how "econometric" models will scare people aware. this is the right link http://www.communities.gov.uk/documents/507390/pdf/684943.pdf by the way.

92203

You know what Hamish, you're right. BTL hasn't played much of a part in the housing boom, and despite increasing in cost significantly, the current property market represents very good value for money.

It is right that owning a property should be out of the financial grasp of a vast swathe of society. When these people retire they should be willing to accept the prospect of living in poverty in order to pay rent to BTL landlords, who we all know have brought so much equality and enrichment to society.

abaxas

In other news.....

Chocolate lovers officially state that eating 2kg a day only put on 7% of body fat.

Malcolm.

There's simply too many assumptions used in the analysis Porkish.

I'll assume it's another of your dangle a fish in front of the bears style threads.

HAMISH_MCTAVISH

Malcolm. wrote: »

There's simply too many assumptions used in the analysis .

No more than the assumptions used in the Grauniad article on BTL impacting prices posted in another thread just now.....;)

Both produced by government departments.

One says BTL raised prices. The other quantifies by how much.

And 7% is just paltry......

Blaming BTL for the price rises caused by population growth and a housing shortage is nuts.

It's a total red herring.

Malcolm.

HAMISH_MCTAVISH wrote: »

One says BTL raised prices. The other quantifies by how much.

And 7% is just paltry...... It's a total red herring.

Agreed, the 7% figure is a finger in the air job.

brit1234

Despite all the frothers protestations to the contrary, it's official that the impact on house prices was hardly anything at all....

Treasury saw buy-to-let threat to first-time buyers

• Danger of market overheating missed, say campaigners
• Gordon Brown knew market was distorted but failed to act


The Treasury acknowledged privately as early as 2004 that a burgeoning buy-to-let market could be crowding out first-time buyers, according to a government report released by campaigners who lambast the authorities for allowing the landlord boom to continue regardless. The admission from the Treasury under Gordon Brown's reign as chancellor runs counter to previous government rhetoric on the relationship – or lack thereof – between a rise in buy-to-let activity and a shortage of affordable homes for first-time buyers, according to the PricedOut group.

The campaigners received the Treasury briefing paper following a freedom of information request. The report was drafted in response to a request by former prime minister Tony Blair in 2004 after he had read a newspaper article on the prospects of a housing market collapse.

In it, the Treasury concedes that the decline in first-time buyers (FTBs) taking out mortgages was a "notable feature of the housing market" with the proportion of loans to such buyers falling to an all-time low of 28% by the end of 2003, well below its post-1993 average of 46%.

"However, the falling numbers of new entrants has not had the expected cooling effect on the housing market as the growing trend of buy-to-let may have taken up much of the slack," the report continues.

Noting "significant growth" in the buy-to-let mortgage sector, it goes on to conclude: "The increase in activity may have the effect of crowding out FTBs as, typically, rental properties and those being sought by FTBs often have the same characteristics."

The report also cites other pressures on first-time buyers such as the size of deposits, high demand for housing and rising interest rates.

PricedOut, which recently clashed with the Treasury over proposed tax breaks for buy-to-let investors, said the report was evidence of the department's complacency and failure to spot "clear dangers from an overheating housing market"."This document shows that the government knew that first-time buyers were being priced out of the housing market by the buy-to-let sector – but were happy to do nothing to stop this happening," says PricedOut spokesman William Griffith.

"This shows a government more than happy to benefit from the feel good effect of rising house prices yet unconcerned about reigning in the negative social consequences. Government public statements to be helping first-time buyers were in private being undermined by the government's failure to act on its own analysis."
The Treasury, which is not able to comment on PricedOut's accusations under election period purdah rules, has flagged up a number of measures over the past year to help first-time buyers. In his budget last month, Alistair Darling announced a two-year stamp duty exemption for first-time buyers purchasing a home costing less than £250,000.

But at the same time there has been support for buy-to-let investors, with a Treasury consultation paper in February including plans to boost the supply of private rented housing. One key proposal was for professional investors to pay stamp duty separately on each home, even when they buy a large portfolio of properties, reducing their total bill.While the plan was intended to increase housing supply, PricedOut argued that instead, buy-to-let investment had created a net loss in the supply of houses available to first-time buyers and other owner-occupiers.

http://www.guardian.co.uk/money/2010/apr/12/buy-to-let-first-time-buyers

brit1234

http://www.communities.gov.uk/docume...pdf/684943.pdf

Your link doesn't work Hamish

However my Guardian one with the freedom of information request on the effect of buy to let does.

Now buy to let was not the cause of all the bubble but it did majorly contribute. As a ftb looking at property 5 years ago all the properties I went to go to visit were already bought by investors. Prices were shooting up and ftb had to compete with 100% mortgages, interest only mortgages, or lying on self certs (BBC money program).

The Wilsons buying 1000 properties in the MAIDstone area had an effect on prices otherwise they couldn't do the gearing to buy more.

HAMISH_MCTAVISH

brit1234 wrote: »

The report also cites other pressures on first-time buyers such as the size of deposits, high demand for housing and rising interest rates.
.

:rotfl:

Both government reports conclude the same thing.

But the one I sourced was done several years later, and also quantifies the price increase attributable to BTL.

A measly 7%.