BTL versus home buyers

macaque_2

How can any civilised government allow predatory rents at a time like this?

Doubtless the bulls will intepret recent events as the outcome of 'mortgage rationing'. The real truth is that the lenders/government are now prepared to do anything to avert another bank meltdown even if this means locking the fox in the hen house. We are still a democracy though (I think) and the hens ultimately have more votes.

Traditionally as buy-to-let mortgage lending increased, homeowner mortgage lending increased in line with this. However, this is no longer currently the case, as for every £1 lent to traditional homeowners, prospective landlords have been lent £1.11.

Another anomaly is that the amount they would pay to rent a property could easily be double per month what they would have to pay if they had a homeowner mortgage.

http://debthelpbureau.com/buy-to-let-mortgages-dominate-the-market/465/

wotsthat

Bears wish list..

- restricted/ sensible lending
- higher deposit requirements
- lower prices

Happy days - they got everything on the list.

A case of being careful what you wish for?

HAMISH_MCTAVISH

wotsthat wrote: »

Happy days - they got everything on the list.

Yep.

And it's resulted in fewer FTB-s than ever before being able to buy houses.

A case of being careful what you wish for?

Absolutely.

HAMISH_MCTAVISH

macaque wrote: »

How can any civilised government allow predatory rents at a time like this?

Eh?

Rents are doing exactly what they're supposed to.

Pricing out sufficient numbers of people who are then forced to share, so as to allocate the limited housing stock efficiently.

Doubtless the bulls will intepret recent events as the outcome of 'mortgage rationing'.

This is the inevitable result of preventing a million people from buying since 2007.

An extra million people need to rent instead.... With only one possible result for average rents.

Pobby

Hamish. Do you think it is a good thing for people to be renters? Being of an age when a single person could buy a home close to London, I now find the situation is becoming really difficult for my family youngsters.

Regardless of good incomes, they still cannot get a place of their own. Going back about 14 years ago, a decent 3 bed terrace in Reading was about 45ki or just a bit more. Now hitting the market at a staggering £175k. Kids are priced out and they are the ones to get the housing market moving.

HAMISH_MCTAVISH

Pobby wrote: »

Hamish. .

Pobby.

I find conversations with you to be a bit pointless.... because I understand that house prices are a function of supply and demand, just like any other asset price, and do not assign a moral value to them.

You on the other hand seem to think that HPI is a moral issue rather than an economic one, and somehow avoidable if only we could all agree it's bad and sit round the campfire singing songs together or such like.

There is no such thing as "good" or "bad" when it comes to house prices or rents. Only the market allocating limited supply through price. As efficient markets always do.

If you want sustainably lower house prices and rents over the long term, then build a few million more houses.

If that doesn't happen, then either prices or rents or both will rise significantly and all the wailing in the world about ye olde times when a young man could buy a house in Reading won't make the slightest bit of difference.

Population is rising by close to a million people every two years.

We build less houses than at any time since 1923.

You'd have to be well on the other side of unrealistic to think that the long term outcome of that can be anything other than an increase in the price of housing and rents.

macaque_2

HAMISH_MCTAVISH wrote: »

Eh?
Rents are doing exactly what they're supposed to.
Pricing out sufficient numbers of people who are then forced to share, so as to allocate the limited housing stock efficiently.
This is the inevitable result of preventing a million people from buying since 2007.
An extra million people need to rent instead.... With only one possible result for average rents.

The reason that people are not buying has more to do with a return to responsible lending. BTL's have temporarily cornered the market with their access to artificially cheap credit. It will all end in tears.

wotsthat

macaque wrote: »

The reason that people are not buying has more to do with a return to responsible lending. BTL's have temporarily cornered the market with their access to artificially cheap credit. It will all end in tears.

It's already ending in tears for people wanting to buy houses to live in. Over a lifetime they are going to pay a huge premium for their accomodation.

BTL's are laughing their t*ts off. Cheaper houses, cheap credit, an expanding rental market and reduced competition from owner occupiers.

If that's the result of responsible lending you can keep it.

macaque_2

wotsthat wrote: »

It's already ending in tears for people wanting to buy houses to live in. Over a lifetime they are going to pay a huge premium for their accomodation.

BTL's are laughing their t*ts off. Cheaper houses, cheap credit, an expanding rental market and reduced competition from owner occupiers.

If that's the result of responsible lending you can keep it.

I agree its a mess but the problem will only be rectified by lower prices. Lending at inflated earnings multiples or pricing tenants into the gutter won't solve anything.

the_flying_pig

The possible solutions to increasing BTL are:

1 - Decide that it doesn't matter;
2 - Decide that it may matter but that there's not much that can done at low cost and/or without unwelcome knock-on effects;
3 - Offer some form of taxpayer-funded subsidy to persuade banks to persuade them to lend more to would-be owner-occupiers, or alternatively give taxpayer-funded subsidy direct to OOs;
4 - Reduce planning resrtictions so that more housing is built at no cost to the taxpayer, reason that some will end up with OOs and/or that rents will be pushed down;
5 - Impose some sort of tax or other restrictions on BTL to stop it expanding and/or reduce the rents it can charge.

Of these possible responses 3 would be by far the most expensive to the taxpayer & the worst. The fall in owner-occupation, and rise in BTL, started a long time before the 'credit crunch'.

The current interest rate situation [where savers get nothing] is a massive culprit in encouraging BTL since older people, with decent amounts of cash in the bank, are earning nothing at all on their deposits. They're being forced elsewhere.

julieq

If you don't lend, you can't generate returns for savers. Far from helping, the so-called "responsible lending" is hurting savers and prospective first time buyers. There is simply no evidence that lending in the UK wasn't responsible in the first place.

Ultimately building more houses and allowing the finance to allow owner occupiers in is the only way of relieving the pressure. Stopping mortgage lending to BTL investors won't stop the growth in residential letting as an investment, it'll just move into professionally managed unit trusts.

The bears will eventually figure this out.