Debate House Prices


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BTL is in desperate need of reform

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Comments

  • StevieJ wrote: »
    Not at all, each national insurance number would be entitled to one property rental, free of tax on rental income.

    And how would this benefit anyone other than the individual landlord?
  • StevieJ wrote: »
    Well! regulate them then :)

    A very fine idea, and one that the last government was due to implement. I'm afraid that idea has now fallen by the wayside.
  • HAMISH_MCTAVISH
    HAMISH_MCTAVISH Posts: 28,592 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    DervProf wrote: »
    If the shortfall is to continue, how is best to handle BTL for the benefit of the country ? Is it right/fair to encourage/discourage or leave BTL to pure market forces ?.

    Well the best thing to do is to get rid of the shortfall. Build more houses and increase mortgage lending, which is of course a prerequisite to getting more houses built.....

    But in the short term, and without the increase in lending/building, discouraging BTL is likely to make things worse because any attempt to dis-incentivise ownership, such as tax increases, is likely to be passed straight through to rents for a captive population who can't get mortgages.
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”

    -- President John F. Kennedy”
  • julieq
    julieq Posts: 2,603 Forumite
    DervProf wrote: »
    And given what I just very agreed with, the debate might move on to - If the shortfall is to continue, how is best to handle BTL for the benefit of the country ? Is it right/fair to encourage/discourage or leave BTL to pure market forces ?

    This could get interesting.

    There are essentially three things you have to do:

    1) encourage more building, which is about relaxing planning regulations and possibly giving tax breaks to builders favouring smaller cheaper dwellings (this is not the same as a bit of social housing in a development of 4 bedroom family homes).

    2) allow first time buyers back into the market by relaxing capitalisation requirements on mortgage. This feeds (1) and reduces the size of the rented sector.

    3) allow prices to rise past the point at which yields are attractive. In the short term this is a function of (2), but as (1) kicks in and supply increases relative to demand, prices and rents will drop in real terms.

    (1) is by far the most important. Unless you do that you're just rearranging the musical chairs, and ultimately prices will rise far higher as more and more people compete for the homes that are available. So if you're campaigning for anything, campaign for that. The government policy for local say on planning, which is a Nimby charter by stealth, is one of the most damaging things they're doing, but it hasn't raised anything like the anger the very anodine proposals to remove sections of forest from Forestry Commission control did. Go figure.

    Regulation of the rented sector is possible but difficult, and you have to bear in mind the law of unintended consequences which often gets in the way of good intentions. Regulation costs will get passed on to tenants one way or another, and the bad landlords will dodge them. A strong yes to basic standards rigorously enforced though, there's no question that everyone should agree with that.

    As I've said, leasehold is a good and perfectly traditional way of improving security of tenure. This gives far more control to the occupier and leases can be sold on.

    It's a very serious issue, and deserving of better than a ding dong bull versus bear argument. There's no easy solution because the problem has run on so long, but there are things that can be done, and not a bad starting point is to campaign for (1). Most "bulls" don't want rampant HPI incidentally, they want a stable housing an banking market, and any bull with children has a strong interest in seeing this issue resolved.
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    But in the short term, and without the increase in lending/building, discouraging BTL is likely to make things worse because any attempt to dis-incentivise ownership, such as tax increases, is likely to be passed straight through to rents for a captive population who can't get mortgages.

    No it won't.

    If BTL pulls back, house prices would fall to a level whereby FTB's could afford to buy them.

    Worst nightmare for some.
  • HAMISH_MCTAVISH
    HAMISH_MCTAVISH Posts: 28,592 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    No it won't.

    If BTL pulls back, house prices would fall to a level whereby FTB's could afford to buy them.

    Worst nightmare for some.



    Try responding to the whole post rather than extracting an out of context sentence.
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”

    -- President John F. Kennedy”
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    edited 25 April 2011 at 12:07PM
    Try responding to the whole post rather than extracting an out of context sentence.

    It was pretty much the whole post.

    The shortfalls had nothing to do with my point, which was in reply to what you stated.

    Making BTL harder will have a knock on effect. Would be very difficult to increase rents, while prices fell. As you say "supply and demand is all there is"....until you come across a possible price fall, and then that sentence is completely ignored.
  • julieq
    julieq Posts: 2,603 Forumite
    OK Graham, so how do you allow FTBs in unless you also relax capitalisation requirements on mortgages? They still have to save up 80% of the deposit they're having difficulty saving up now. So while they're doing that, they are living somewhere which is now more heavily regulated - Hamish's captive market - and are now having to pay for that regulation. And under those circumstances with a secure rental base, why would a BTL landlord decide to take a loss and walk away? They'd be more likely to look at the house in the same terms they started looking at it, as a rebt subsidised purchase, and stick it out. So prices would be unlikely to fall in the first place.

    It's a closed system. More people coming in wanting homes than there are homes. The result is competition for homes however they're supplied. The only solution, really, is to build more of them.

    Your problem here is that the arguments you had in place to sustain the idea there can be a sustained price fall are being gradually dismantled. SMI has a marginal effect only and in any case isn't a new measure by and large so can't have supported the market any more now than previously. Lender forbearance was hardly used, neither was the other government mortgage support scheme. Lending is no longer lax. A significant rise in interest rates, several percentage points, will put tens of thousands only (against millions) into some degree of difficulty. Yet prices are being sustained, and they're being sustained because the rental sector is having to bear the brunt of demand. I was arguing this some time ago to general derision, and now we have post after post pointing out that it's actually happening. At what point I wonder will you start to acknowledge that we do know what we're talking about and listen rather than nitpick on points of detail (like the dictionary definition of rationing)?
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Yes. With all that, prices are only being sustained....just.

    Makes you think, doesn't it?
  • julieq
    julieq Posts: 2,603 Forumite
    Graham, I think for a living. It's your turn now really.
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