Banks shut of BTL lifesupport.

Thrugelmir

IveSeenTheLight wrote: »

I quoted a 25 year timeframe as that is the standard time a mortgage is taken over.

25 years ago the equivalent of a BTL mortgage would have cost around 1.5% above standard SVR , or 3.5% above base. So the concept of leveraging didn't stack up. You are comparing a relatively short period of time where lending rates were exceptionally low to the real norm.

Kennyboy66

IveSeenTheLight wrote: »

I tend to think there was a few more significant factors.

1) Social housing was sold of by the government.

2) As a result of this and to assist the private market to fill the gap caused by the government, the AST lease was introduced. This ensured that private rental could evict tenants within certain terms whilst providing security to the tenants for the duration of the AST.

3) Because a gap was created and legislation was changed it allowed the private markey to partially take up the gap created by the loss of social housing

4) Lenders could see a profit from lending to BTL, by marketing them at higher interest rates than normal residential properties and also having a higher "arrangement fee"

Assured Tenancies were introduced in 1980 at the same time as the right to buy legislation.

The express intent at the time was to encourage the construction of new rented properties that wouldn't be subject to the old style controlled rents.

The unintended consequence was that it allowed Landlords to out compete first time buyers for terraced houses.

It was spectaculalrly unsucessful in encouraging the construction of new homes, other than by Housing Associations.

More than half the returns in the long run for BTL have been as a result of capital appreciation.

To compare the returns against a savings account would be peverse. The more appropriate measure would be against stocks.

IveSeenTheLight

Thrugelmir wrote: »

25 years ago the equivalent of a BTL mortgage would have cost around 1.5% above standard SVR , or 3.5% above base. So the concept of leveraging didn't stack up. You are comparing a relatively short period of time where lending rates were exceptionally low to the real norm.

I try not to look too far into the past and prefer to focus on the future.

Things change, Time moves on, you can only make decisions at the time based on the circumstances known and try to predict potential issues.

The facts remain that BTL flourished at a time when a gap in the market occured (social housing sell off) and an improvement in legislation reduced the risks to residential leasing.

The facts also remain that without considering HPI, or rent increases, BTL provides a better return than a standard savings account.
Mix in HPI and rent increases over the term and it's even more profitable.

Really2

Thrugelmir wrote: »

BTL was born in 1998. So a few years to go to reach the 25 year period.

I was interested in that quote, so checked as I thought lending to private landlords had been around a lot longer.

Buy-to-let as a term was coined in 1995 as a marketing badge for a finance initiative launched by the Association of Residential Letting Agents (ARLA), although this type of lending had existed for many years.

Thrugelmir

IveSeenTheLight wrote: »

I try not to look too far into the past and prefer to focus on the future.

Things change, Time moves on, you can only make decisions at the time based on the circumstances known and try to predict potential issues.

The issues of the recent past will be with us for many years to come. Therefore will a material bearing on future investment returns.

IveSeenTheLight

Kennyboy66 wrote: »

Assured Tenancies were introduced in 1980 at the same time as the right to buy legislation.

Your a little early in your estimation

http://www.landlordzone.co.uk/history.htm

Over the years several legislative attempts at relaxing controls were made to stimulate supply, but none was effective until the 1988 Housing Act brought in the Assured Shorthold Tenancy. This was a turning point enabling landlords to let at or near market rents with a guarantee of getting their properties back

The Shorthold Tenancy
The Shorthold Tenancy started to stimulate supply again but it was, and still is, a slow process particularly as the legislation did not apply retrospectively, i.e., not to "Rent Act" tenancies created before 15 January 1989.
Currently less than 70% of UK housing stock is in owner occupation and falling. About 19% is in social (local council and housing association) ownership, the the remaining 10/11% in the hands of private landlords.
Owner occupation has risen steadily with increasing affluence and the influence of the Thatcher years policies of selling off council properties. This process has continued to the point where housing associations are becoming the main owners of social housing.
The increasing wealth of UK professional and many working families, with inherited family property and increasing investment funds, has encouraged the move into rental property as an investment alternative.
This, coupled with the Assured Shorthold Tenancy and the Buy-to-Let mortgage has resulted in a steady rise in the supply of privately owned rented accommodation. We have a long way to go to reach the levels of the European market, but there is now a definite move in this direction.

Kennyboy66 wrote: »

More than half the returns in the long run for BTL have been as a result of capital appreciation.

I'm not arguing that capital appreciation has been a bonus in returns (for those that have sold up). But capital appreciation should be seen as a bonus in the calculations.
That said, doyou really think that properties will be lower nominally than they are now in 25 years time

Kennyboy66 wrote: »

To compare the returns against a savings account would be peverse. The more appropriate measure would be against stocks

Why is it perverse?
It's just another form of investment.
Compare against stocks if you wish.

I previously attempted buying into stocks and got my fingers burnt.
Property investment may or may not out perform stocks, but it cerianly seems to be a far lower risk and more secure investment.

Indeed, considering stocks, how many reports are there of pensions linked to stocks that have paid out far less than expected because of stocks in the last few years?

IveSeenTheLight

Thrugelmir wrote: »

The issues of the recent past will be with us for many years to come. Therefore will a material bearing on future investment returns.

Indeed and one of the likely outcomes of this is an increased rental market.

Certainly it would appear that property investment and rental returns are a strong / safe position to be in at the moment.

Thrugelmir

Really2 wrote: »

I was interested in that quote, so checked as I thought lending to private landlords had been around a lot longer.

Always has been commercial lending. Borrowing to invest in residential property (single as opposed to HMO's) was not an attractive proposition. So property tended to be the domain of capital rich investors.

Bradford and Bingley started lending in 1996 and are recognised as the leading drivers in the market.

In 1999 just 3.5% of new mortgages were for the purpose of BTL by 2006 the proportion had risen to 28.6%. This excludes people who remortgaged existing residential property to purchase in cash.

Kennyboy66

IveSeenTheLight wrote: »

Your a little early in your estimation

No, I think you will find I was correct

Assured Tenancy was introduced in the 1980 Housing Act.

Here is the act of parliament

http://www.legislation.gov.uk/ukpga/1980/51/pdfs/ukpga_19800051_en.pdf

The legislation was expanded and modified in the subsequent Housing Acts of 1988 and 1996.

An assured shorthold tenancy is just a type of assured tanancy.

Since 28th Feb 1997, all Assured Tenancies are shorthold by default with a few exceptions.

Thrugelmir

IveSeenTheLight wrote: »

Certainly it would appear that property investment and rental returns are a strong / safe position to be in at the moment.

Differing opinions make markets. :beer: