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BOE to get new regulatory powers over BTL
Comments
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HAMISH_MCTAVISH wrote: »What about them?
They mostly can't buy because of mortgage rationing, not prices, so selling their rented home out from under them isn't going to help...
The real problem is a housing shortage. You can't fix that by shuffling the existing stock around.
A simple illustration:
10 houses for sale, 12 people want to buy one, prices rise until the bottom earning 2 people are priced out. The market has allocated goods in scarce supply through price.
10 houses for rent, 12 people want to rent one, rents rise until the bottom earning 2 people are priced out. The market has allocated goods in scarce supply through price.
Now lets have some good old fashioned government intervention.
Force the movement of 2 houses from rented to for-sale via tax, BTL lending changes, etc.
You now have 12 houses for sale and 8 for rent. But you also now have 2 homeless renters.
So there are 12 houses for sale, and the original 12 people that want one, plus the two people that used to be able to rent that now have to buy. Still a shortfall of 2 people.... Prices still have to rise until 2 people are priced out.
And you still have two more people wanting to rent (10) than there are houses to rent (8). So rents continue to rise as well.
OR...
You keep the current mortgage rationing so no more people can buy.... You then have 12 houses for sale and the original 12 people that want to buy one. Prices now stagnate.
But then you only have 8 houses for rent and 12 people that want to rent one. Now rents really have to soar until 4 people are priced out. And even fewer renters can save up a deposit to buy.
Pick your poison....
The only way to cure a housing shortage is to build more houses.
Any attempt to target BTL in the meantime will only backfire spectacularly, just as mortgage rationing backfired spectacularly, and can only worsen an already critical shortage of housing.
Good post. What this example - and others like it that I have seen - illustrates is that if you squeeze a balloon, you don't make it smaller; it just bulges somewhere else.
One interesting (in the Chinese sense) difference between your example and the actual situation is that there are more people in the rented houses than the owner occupied. So converting a rented house to an owner occupied one is actually even worse than you have outlined because more people are displaced out of the rental than are re-houses as owner-occupiers.
A further upward push on rents, potentially, comes if house prices weaken in consequence of the sales from BTL to owned. If people think there’s a risk of capital loss to owners, then not being an owner becomes worth more. So just as the rental supply declines, it starts to look smart to rent - with the result that rents go through the roof, as they did in 1989 - 1995.0 -
HAMISH_MCTAVISH wrote: »Any attempt to target BTL in the meantime will only backfire spectacularly, just as mortgage rationing backfired spectacularly, and can only worsen an already critical shortage of housing.
Rents are rising in some locations, falling in others, but not stratospherically everywhere. The big rises are mostly in some gentrifying locations. Rents will continue to rise. We don't live in an enclosed eco-system, we have differing economies within this country and this country is part of one giant economy. People have more choices than in your example.
So I remain skeptical over what I see as vested interest argument pro-BTL, but we'll see the outcome in due course.0 -
What has this 18 year old got to do with anything? What about the couples renting well into their 30s?
They generally don't exist outside of London and some parts of the SE
Of course if by couple you mean two people who are provably not serious and will go their separate ways in a year or two and they both know it then yes they don't buy
And as I keep saying more than half the country is cheap. 5 regions are cheaper in real teems than they were more than a decade ago yet renting has increased there too suggesting its not price driven0 -
Rents are rising in some locations, falling in others, but not stratospherically everywhere. The big rises are mostly in some gentrifying locations. Rents will continue to rise. We don't live in an enclosed eco-system, we have differing economies within this country and this country is part of one giant economy. People have more choices than in your example.
So I remain skeptical over what I see as vested interest argument pro-BTL, but we'll see the outcome in due course.0 -
HAMISH_MCTAVISH wrote: »What about them?
They mostly can't buy because of mortgage rationing, not prices, so selling their rented home out from under them isn't going to help...
The real problem is a housing shortage. You can't fix that by shuffling the existing stock around.
A simple illustration:
10 houses for sale, 12 people want to buy one, prices rise until the bottom earning 2 people are priced out. The market has allocated goods in scarce supply through price.
10 houses for rent, 12 people want to rent one, rents rise until the bottom earning 2 people are priced out. The market has allocated goods in scarce supply through price.
Now lets have some good old fashioned government intervention.
Force the movement of 2 houses from rented to for-sale via tax, BTL lending changes, etc.
You now have 12 houses for sale and 8 for rent. But you also now have 2 homeless renters.
So there are 12 houses for sale, and the original 12 people that want one, plus the two people that used to be able to rent that now have to buy. Still a shortfall of 2 people.... Prices still have to rise until 2 people are priced out.
And you still have two more people wanting to rent (10) than there are houses to rent (8). So rents continue to rise as well.
OR...
You keep the current mortgage rationing so no more people can buy.... You then have 12 houses for sale and the original 12 people that want to buy one. Prices now stagnate.
But then you only have 8 houses for rent and 12 people that want to rent one. Now rents really have to soar until 4 people are priced out. And even fewer renters can save up a deposit to buy.
Pick your poison....
The only way to cure a housing shortage is to build more houses.
Any attempt to target BTL in the meantime will only backfire spectacularly, just as mortgage rationing backfired spectacularly, and can only worsen an already critical shortage of housing.
As you know from this site and the other now virtually dead site, I used to say the whole of England has a shortage of homes.
I've recently changes my mind on that and now think at least half the country has little to no shortage of homes. Prices are cheap in over half the country places so cheap that the average terrace costs less than 2x the full time median male wage (eg stoke on Trent)
Yet even in the cheap regions renting has gone up so its probably not a shirtgage of homes but more so mortgage rationing and perhaps some demographics changes resulting in more people who have to rent (students recent migrants etc)0
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