When will the correction come to house prices?

HAMISH_MCTAVISH

Jason74 wrote: »

btl is certainly much more prevailant than was the case 20 years ago,.

Yes it is.

But BTL doesn't change the shortage of housing or really have much of an impact on prices or rents.

If you manage to force 100 houses from rented stock into owner occupied stock, you've also forced 100 tenants from rented stock into owner occupied stock.

The balance of supply and demand has changed for neither one.

So it has virtually no impact on prices or rents.

And generally speaking in the UK it remains the case that most renters would like to buy but can't get mortgages, even though they are paying rent that is greater than a mortgage payment would be.

The banks, and even some people on here, seem to prefer that those people buy houses for their landlords instead of buying them for themselves.

In other words, banks are happy to take the money from young renters and will lend to a landlord on the basis of rental income....

They just won't lend directly to the renter.

Which is absurd.

AndyGuil

The empty property rate in London is no higher than the UK average, 2.4%. There are far more areas in the rest of the UK with much higher levels of empty properties.

AndyGuil

Jason74 wrote: »

My understanding is they're quite a bit higher. Something like 30% of all prime central London property is bought by non UK residents and 20% of all inner London new builds are sold to non UK residents according to Knight Frank. That's a sizeable chunk of the market, and the numbers of transactions being made by non resident buyers is imho far more significant than the overall ownership rates.

Even without this, btl is certainly much more prevailant than was the case 20 years ago, so I don't think that there's much doubt that a) the portion of properties bought for reasons other than principle occupation by their owner is much higher than 20 years ago, and b) that this is more of an issue in London than elsewhere (that said, I don't have the figures for that second point, so am happy to be corrected if appropriate).

Savills, Spotlight: World of London report states that levels of foreign investment today in prime central London are no higher than they were in the 90s. The investment into new builds is good for rental income. The market is dominantlu domestic and when you consider how few properties are built you realise why most of the market is not foreign owned.

HAMISH_MCTAVISH

AndyGuil wrote: »

Savills, Spotlight: World of London report .

From that report...

The neighbourhoods that were deserted in the post-war era are now being repopulated – by Londoners of all types.

The prime area has grown but the extent of other residential neighbourhoods has grown too as gentrification, intensification, change of use and regeneration has meant that new neighbourhoods have been created.

Some of this new development and regeneration has only been possible in recent years because international buyers, many of them from Asia, have effectively funded new schemes by buying units off-plan, in advance of completion.

It is probable that fewer new schemes, including affordable housing would have been built without this activity from overseas buyers.

Far from being ‘buy to leave’ investors, most international buyers in London live and work in the UK and contribute to the London economy.

A large proportion of the remainder are landlords who let property to London’s tenants.

Even the small proportion buying second homes will often be contributing to London’s economy, and the growing private finance sector, by using London as a business base in the EMEA time zone.

Jason74

HAMISH_MCTAVISH wrote: »

Yes it is.

But BTL doesn't change the shortage of housing or really have much of an impact on prices or rents.

If you manage to force 100 houses from rented stock into owner occupied stock, you've also forced 100 tenants from rented stock into owner occupied stock.

The balance of supply and demand has changed for neither one.

So it has virtually no impact on prices or rents.

And generally speaking in the UK it remains the case that most renters would like to buy but can't get mortgages, even though they are paying rent that is greater than a mortgage payment would be.

The banks, and even some people on here, seem to prefer that those people buy houses for their landlords instead of buying them for themselves.

In other words, banks are happy to take the money from young renters and will lend to a landlord on the basis of rental income....

They just won't lend directly to the renter.

Which is absurd.

But this isn't really true. If you change the tax treatment of BTL so that it is no longer a viable investment, then the prices of those houses will eventually fall to the level that the young renters can get finance for. So your theoretical 100 houses move from rented to owner occupied stock, at prices affordable based on the financing capacity of the current renters as other demand has been removed from the market.

It's why those who say BTL isn't a problem miss the point, and why dealing with BTL is almost as important as the building issue. No "solution" to the current problems can work unless it addresses both of these issues.

CLAPTON

Jason74 wrote: »

But this isn't really true. If you change the tax treatment of BTL so that it is no longer a viable investment, then the prices of those houses will eventually fall to the level that the young renters can get finance for. So your theoretical 100 houses move from rented to owner occupied stock, at prices affordable based on the financing capacity of the current renters as other demand has been removed from the market.

It's why those who say BTL isn't a problem miss the point, and why dealing with BTL is almost as important as the building issue. No "solution" to the current problems can work unless it addresses both of these issues.

If tax changes made rental businesses less profitable at today's prices then landlords would tend to hold fewer rental properties.

However, what actually happens depends upon the likely occupancy rate of owners occupier homes compared to rental properties.

In general the majority of owner occupiers do not share their homes will others, so transferring property from landlords to OO will create proportionally greater demand for the remaining rental properties.

Where this greater demand will rise prices sufficiently to counteract the additional tax burden is hard to say.

Whether there is a significant improvement in OO numbers is hard to gauge but almost certainly renters will be the significant losers.

HAMISH_MCTAVISH

Jason74 wrote: »

But this isn't really true.

And that's where we disagree.

If you change the tax treatment of BTL so that it is no longer a viable investment, then the prices of those houses will eventually fall to the level that the young renters can get finance for.

Well gosh that seems a complicated way of forced redistribution, if you really want to bypass any semblance of market economics and property rights, why not just pass a law dictating private landlords must offer to sell the property to their tenants at a 50% discount?

That is broadly what you're suggesting here.

That it is acceptable to impose punitive taxes on owners of private property in order to force prices to fall and redistribution to happen.

But why stop there?

Surely if forced redistribution is your goal, you could achieve more of it by imposing punitive taxes on old people with large houses?

That would free up more stock than landlords hold by some margin...

It all sounds like an incredibly complicated way of avoiding a very simple solution....

-Build more houses.

-Lend more to young people.

-Problem solved.

the financing capacity of the current renters

Should be equal to the amount they pay in rent.

But it isn't....

Banks are willing to accept that renters can provide a suitable income stream for the covering of a mortgage on a landlords property at todays prices.

But they won't lend directly to the renters.

Which is patently absurd.

It's why those who say BTL isn't a problem miss the point, and why dealing with BTL is almost as important as the building issue. No "solution" to the current problems can work unless it addresses both of these issues.

No that argument just doesn't hold water.

The problem is a shortage of housing, and a shortage of lending (which has worsened the shortage of housing), that are available to young people.

You can't fix a shortage of houses by restricting BTL. You can't fix a shortage of mortgage finance by restricting BTL. You can only fix it by building more houses and getting the banks lending again.

Trying to solve this by penalising existing property owners would be like trying to cure a broken leg by breaking the other leg...

Bantex_2

HAMISH_MCTAVISH wrote: »

And that's where we disagree.



Well gosh that seems a complicated way of forced redistribution, if you really want to bypass any semblance of market economics and property rights, why not just pass a law dictating private landlords must offer to sell the property to their tenants at a 50% discount?

That is broadly what you're suggesting here.

That it is acceptable to impose punitive taxes on owners of private property in order to force prices to fall and redistribution to happen.

But why stop there?

Surely if forced redistribution is your goal, you could achieve more of it by imposing punitive taxes on old people with large houses?

That would free up more stock than landlords hold by some margin...

It all sounds like an incredibly complicated way of avoiding a very simple solution....

-Build more houses.

-Lend more to young people.

-Problem solved.



Should be equal to the amount they pay in rent.

But it isn't....

Banks are willing to accept that renters can provide a suitable income stream for the covering of a mortgage on a landlords property at todays prices.

But they won't lend directly to the renters.

Which is patently absurd.



No that argument just doesn't hold water.

The problem is a shortage of housing, and a shortage of lending (which has worsened the shortage of housing), that are available to young people.

You can't fix a shortage of houses by restricting BTL. You can't fix a shortage of mortgage finance by restricting BTL. You can only fix it by building more houses and getting the banks lending again.

Trying to solve this by penalising existing property owners would be like trying to cure a broken leg by breaking the other leg...

Governments have done it to councils.

HAMISH_MCTAVISH

Bantex wrote: »

Governments have done it to councils.

There's a pretty big difference.

Deliberately undermining private property rights, whether through outright confiscation or tax policies that achieve the same thing, would have grave consequences for inwards investment into the UK across large parts of the economy.

It's the sort of thing you expect to see under Mugabe in Zimbabwe, not in Britain.

mobfant

HAMISH_MCTAVISH wrote: »

And that's where we disagree.



Well gosh that seems a complicated way of forced redistribution, if you really want to bypass any semblance of market economics and property rights, why not just pass a law dictating private landlords must offer to sell the property to their tenants at a 50% discount?

That is broadly what you're suggesting here.

That it is acceptable to impose punitive taxes on owners of private property in order to force prices to fall and redistribution to happen.

But why stop there?

Surely if forced redistribution is your goal, you could achieve more of it by imposing punitive taxes on old people with large houses?

That would free up more stock than landlords hold by some margin...

It all sounds like an incredibly complicated way of avoiding a very simple solution....

-Build more houses.

-Lend more to young people.

-Problem solved.



Should be equal to the amount they pay in rent.

But it isn't....

Banks are willing to accept that renters can provide a suitable income stream for the covering of a mortgage on a landlords property at todays prices.

But they won't lend directly to the renters.

Which is patently absurd.



No that argument just doesn't hold water.

The problem is a shortage of housing, and a shortage of lending (which has worsened the shortage of housing), that are available to young people.

You can't fix a shortage of houses by restricting BTL. You can't fix a shortage of mortgage finance by restricting BTL. You can only fix it by building more houses and getting the banks lending again.

Trying to solve this by penalising existing property owners would be like trying to cure a broken leg by breaking the other leg...

If it was much easier to just build more houses, then it would have happened. But despite everyone across the political divide recognising the need to build more houses, we're not building enough. It would much easier to change the rules so that mortgage interest payments can't be offset against tax than to build the required number of houses next year.