New EU mortgage rules to hit btl

geneer

http://blogs.telegraph.co.uk/finance/ianmcowie/100013206/new-eu-mortgage-rules-could-hit-house-prices/

The VI lobbyists are bleating.
Which suggests this could be a good thing for joe public UK.

European Union (EU) plans to regulate Britain’s booming buy-to-let sector could restrict mortgage availability, force landlords to sell and cause house prices to fall.
Other unintended consequences of proposed EU legislation could include reduced numbers of properties to rent, according to new analysis by the Building Societies Association (BSA). Leading mortgage brokers and estate agents agree that the buy-to-let (BTL) sector needs EU intervention like a fish needs a bicycle – but fear that is what it is going to get, whether landlords and tenants want it or not.
Now, despite the Treasury deciding two years ago that no further intervention in the housing market is justified, new legislation looks set to take effect next year. The EU draft directive on Credit Agreements Relating to Residential Property (CARRP) says BTL should be regulated in the same way as residential mortgages for owner occupation.
That could prevent lenders and borrowers – including existing BTL landlords seeking to remortgage at the end of fixed deals – from taking anticipated rental income into account when assessing how much mortgage is affordable.
Instead, EU proposals would bring Britain into line with Continental practice and force lenders to assess BTL in the same way as mortgage applications by owner occupiers on their prime residence; that is, the main criterion would be the borrower’s earnings.
Paul Broadhead, head of mortgage policy at the BSA, said: “If rental income is excluded from consideration when underwriting BTL then the availability of new borrowing could cease fairly rapidly. In addition, those with existing BTL loans may well be unable to refinance.
“Over time this could lead to a reduction in private rented sector properties. At the extreme, current BTL borrowers may be forced to sell their property portfolios which would have obvious implications for existing tenants and the housing market as a whole.”
That’s no exaggeration, given the growing importance of private rented accommodation in Britain’s housing market. While the proportion of home ownership is falling, the number of properties offered for rent has increased by more than 1m since 2005.
BTL has delivered income and capital gains despite dismal returns from bank and building society deposits and shocking stock market setbacks. About three quarters of privately rented homes are owned by husbands and wives or individual landlords – as opposed to institutional investors – and BTL mortgages back more than a third of these properties.
Mr Broadhead said: “It would be totally inappropriate to bring this lending under the auspices of a proposed residential mortgage regulatory regime. Any attempt to do so could have a detrimental impact on the ability of lenders to provide BTL products, and the consequent ability of investors to provide properties for rent.”
David Hollingworth of London & Country Mortgages agreed: “The EU proposals could extend to BTL a similar regime as owner occupier mortgages and lead to tighter criteria which mean landlords face a very different process when they come to the end of their deal.”
Ed Mead of the Association of Residential Letting Agents (ARLA) and Douglas & Gordon estate agents, pointed out: “Potential EU legislation might drive many BTL landlords away from what is a vital and expanding part of UK housing provision.
“This must be viewed with caution. Our Government ought to be wary of taking a lead from the EU here and actually encourage informed investment into this sector with tax breaks, not lumping BTL in with those residential purchasers who need all the protection they can get.”
Housing minister Grant Shapps should send a memo to his opposite number at the EU: “If it ain’t broke, don’t fix it.”

MrRee_2

Been posted before, and been dismissed .... end of.

geneer

MrRee wrote: »

Been posted before, and been dismissed .... end of.

MrRee he no likeee.

Going4TheDream

Maybe the EU has its good points then... not many but maybe for those wanting to buy this could be one of them?

julieq

Well not really, because the market for rental still exists. If you squeeze small amateur landlords out, you just create an environment where property is owned by larger companies who can average out void periods. What keeps a lid on rent currently is the fact that if a landlord has a small number of properties, void periods can be damaging, so rents are set competitively. Concentrate ownership into the hands of professional investment companies and you'll see a far more ruthless approach to charging rents. Fiduciary responsibility to shareholders and investors means raising rents whenever you can, not indulging nice tenants because you like them.

It should be obvious by now even to the most dimwitted of financial numpties that if prices have remained stable even through the worst sovereign debt crisis in history, they're not going anywhere other than up as we move past the crisis. Honestly, new rules on who can borrow to buy won't make the remotest difference to the market. The only thing that can put downwards pressure on prices is increasing supply, the only way you increase supply is by ensuring someone investing in building can sell the house, the only way that can happen is to allow finance to buyers. This penny will eventually drop, but everything else that happens - restricted lending, more regulation of the rental sector, interest rate rises when they eventually happen - work against the interest of those currently renting who want to buy, because ultimately costs will get passed on, and there are more people looking to rent than there are houses for them to rent.

So the end point is higher occupation rates for longer (house and flat shares), and the creation of a property owning elite, either fairly broadly based or as a smaller number of larger property investment companies.

Beware of what you wish for, in other words.

macaque_2

julieq wrote: »

Well not really, because the market for rental still exists. If you squeeze small amateur landlords out, you just create an environment where property is owned by larger companies who can average out void periods. What keeps a lid on rent currently is the fact that if a landlord has a small number of properties, void periods can be damaging, so rents are set competitively. Concentrate ownership into the hands of professional investment companies and you'll see a far more ruthless approach to charging rents. Fiduciary responsibility to shareholders and investors means raising rents whenever you can, not indulging nice tenants because you like them.

It should be obvious by now even to the most dimwitted of financial numpties that if prices have remained stable even through the worst sovereign debt crisis in history, they're not going anywhere other than up as we move past the crisis. Honestly, new rules on who can borrow to buy won't make the remotest difference to the market. The only thing that can put downwards pressure on prices is increasing supply, the only way you increase supply is by ensuring someone investing in building can sell the house, the only way that can happen is to allow finance to buyers. This penny will eventually drop, but everything else that happens - restricted lending, more regulation of the rental sector, interest rate rises when they eventually happen - work against the interest of those currently renting who want to buy, because ultimately costs will get passed on, and there are more people looking to rent than there are houses for them to rent.

So the end point is higher occupation rates for longer (house and flat shares), and the creation of a property owning elite, either fairly broadly based or as a smaller number of larger property investment companies.

Beware of what you wish for, in other words.

Speaking as a long time renter myself I certainly 'wish for' larger more professional landlords. Amateur landlords are not all bad by any means but what we need is the Sainsburys or Morrisons of rental properties. Sustainable rents, better certainty of tenure and no surprise visits when the family are having dinner.

Good OP Geneer.

the_flying_pig

julieq wrote: »

Well not really, because the market for rental still exists. If you squeeze small amateur landlords out, you just create an environment where property is owned by larger companies who can average out void periods. What keeps a lid on rent currently is the fact that if a landlord has a small number of properties, void periods can be damaging, so rents are set competitively. Concentrate ownership into the hands of professional investment companies and you'll see a far more ruthless approach to charging rents. Fiduciary responsibility to shareholders and investors means raising rents whenever you can, not indulging nice tenants because you like them.
...

I had to read that twice. The first time I didn't understand it. The second I just thought 'what hogwash' _party_.

Road_Hog

Oh dear. It seems renters don't understand the value of amateur landlords.

Amateur landlords often allow, smokers and people with pets. When you get your big corporate landlords, "Sainsburys and Morrisons", you're in for a nasty shock.

Still, I'm sure these renters will be happy when not dealing with amateur landlords that understand if the rent is a week late, and will be happy with the big boys, who'll put a neg on your credit file and issue you with an eviction notice.

Good luck with that.

Sibley

As long as Geneer never owns then I am happy.

Generali

macaque wrote: »

Speaking as a long time renter myself I certainly 'wish for' larger more professional landlords. Amateur landlords are not all bad by any means but what we need is the Sainsburys or Morrisons of rental properties. Sustainable rents, better certainty of tenure and no surprise visits when the family are having dinner.

Good OP Geneer.

I thought that setting up as a corporate landlord would be a great idea. You could standardise places to get economies of scale on repair and maintenance costs and as JulieQ suggests you could average out void periods. Ah well, there's still time.

Graham_Devon

julieq wrote: »

Well not really, because the market for rental still exists. If you squeeze small amateur landlords out, you just create an environment where property is owned by larger companies who can average out void periods. What keeps a lid on rent currently is the fact that if a landlord has a small number of properties, void periods can be damaging, so rents are set competitively. Concentrate ownership into the hands of professional investment companies and you'll see a far more ruthless approach to charging rents. Fiduciary responsibility to shareholders and investors means raising rents whenever you can, not indulging nice tenants because you like them.

It should be obvious by now even to the most dimwitted of financial numpties that if prices have remained stable even through the worst sovereign debt crisis in history, they're not going anywhere other than up as we move past the crisis. Honestly, new rules on who can borrow to buy won't make the remotest difference to the market. The only thing that can put downwards pressure on prices is increasing supply, the only way you increase supply is by ensuring someone investing in building can sell the house, the only way that can happen is to allow finance to buyers. This penny will eventually drop, but everything else that happens - restricted lending, more regulation of the rental sector, interest rate rises when they eventually happen - work against the interest of those currently renting who want to buy, because ultimately costs will get passed on, and there are more people looking to rent than there are houses for them to rent.

So the end point is higher occupation rates for longer (house and flat shares), and the creation of a property owning elite, either fairly broadly based or as a smaller number of larger property investment companies.

Beware of what you wish for, in other words.

I believe you appear to be suggesting the only way to keep things going is to continually keep lending ever larger and larger sums.

I.e. money is lent and prices rise, so a larger amoutn of money is lent, so prices rise, so an even larger amount of money is lent and prices rise..... and even larger amount of money is lent again....and well, prices rise.

Nice theory. Won't ever work. Not for any decent length of time. Afterall, what you describe is merely a glorified pyramid scheme.