Buy-to-let is danger to UK economy, warns Bank

padington

If you read between the lines the Bank of England is also suggesting we don't allow house prices to tank. The reality is this is equally a call of arms to keep house price inflation as an economic goal and if anything, go easier on the BTL landlords that already exist.

TonyMMM

I would expect a slow squeeze on BTL over the next few budgets - started already with the tax changes coming in.

The BOE are just preparing the ground so it doesn't come as too much of a shock - they (and the chancellor) are hoping to make it gradually less attractive as an investment to reduce house price inflation & rents but without precipitating a full crash ......very tricky.

Carl31

TonyMMM wrote: »

I would expect a slow squeeze on BTL over the next few budgets - started already with the tax changes coming in.

The BOE are just preparing the ground so it doesn't come as too much of a shock - they (and the chancellor) are hoping to make it gradually less attractive as an investment to reduce house price inflation & rents but without precipitating a full crash ......very tricky.

I've seen a few articles lately advising on how to efficiently dispose of a BTL property under current arrangements. One in the telegraph on Sunday had a survey asking if people were going to keep their BTL or sell, it was a 50/50 split

I imagine some of the less savvy investors will panic and ditch their properties, the everyday joe trying to make a few extra quid type, where as those in it as an investment and business will just carry on, be interesting to see what happens

CLAPTON

TonyMMM wrote: »

I would expect a slow squeeze on BTL over the next few budgets - started already with the tax changes coming in.

The BOE are just preparing the ground so it doesn't come as too much of a shock - they (and the chancellor) are hoping to make it gradually less attractive as an investment to reduce house price inflation & rents but without precipitating a full crash ......very tricky.

there seems a reasonable argument that the extra taxes may reduce house price inflation but one can't see how fewer properties to rent will reduce rents

wotsthat

Graham_Devon wrote: »

I'll take my earlier words back if the BOE carries this out.

Looks like they are looking into putting a cap on BTL lending.

There's an element of the BoE talking their book here. They have no powers to cap BTL lending like they can with OO loans.

They've highlighted an (unquantified) risk that BTL is a danger to the economy. Obviously it's within their remit to highlight this risk but it's also probably a nudge to Mr. Osborne that maybe he should consider expanding the BoE's powers.

wotsthat

Carl31 wrote: »

I've seen a few articles lately advising on how to efficiently dispose of a BTL property under current arrangements. One in the telegraph on Sunday had a survey asking if people were going to keep their BTL or sell, it was a 50/50 split

If there's one thing we should have learnt from surveys of this nature is that what people do tends to be very different from what they say they'll do.

Just wait until interest rates go up. There will be surveys and articles galore with people bleating about impending bankruptcy. Arrears and repo data will be eagerly anticipated and the real effect will be not much at all.

kabayiri

wotsthat wrote: »

If there's one thing we should have learnt from surveys of this nature is that what people do tends to be very different from what they say they'll do.

Just wait until interest rates go up. There will be surveys and articles galore with people bleating about impending bankruptcy. Arrears and repo data will be eagerly anticipated and the real effect will be not much at all.

My worry is when people invest in property in areas they know nothing about. I remember in the last recession the lady from London who placed her life savings into 2 flats in Warrington. She basically hardly knew the place and got burnt in the process.

That sort of investment is more akin to blind faith. Anyone with local knowledge will be able to tell you which parts of their town/suburb prove sticky to sell when the going gets tough.

N1AK

padington wrote: »

If you read between the lines the Bank of England is also suggesting we don't allow house prices to tank. The reality is this is equally a call of arms to keep house price inflation as an economic goal and if anything, go easier on the BTL landlords that already exist.

Sounds about right.

The fundamental issue is that people aren't entirely stupid. They've seen house prices rise, reach peaks never before imagined, and then rise some more. So when given the option of naff all interest on savings, risky and confusing stocks, and property there's a real attraction to property.

It's going to take an extended period of nominal property value change or very considerably financial penalties for investments in property to put people off.

Thrugelmir

N1AK wrote: »

The fundamental issue is that people aren't entirely stupid.

People move with the herd. That's ok until the lions spook the herd and cause a stampede.

CLAPTON

Thrugelmir wrote: »

People move with the herd. That's ok until the lions spook the herd and cause a stampede.

sometimes the lions gets trampled