Treatment of BTL in the budget?

littlegreenfrog_2

westernpromise - we are clearly never going to see eye to eye so there is little point in continuing this debate.

I have clearly not at any point said that poor people will never be able to afford to buy so we should just write them off and concentrate on the middle class. Different people have different problems requiring different solutions.

Everyone should have the right to a secure and stable home. For people on low incomes who will never be able to afford to buy, this should come in the form of more state support, which is why we need more social housing. But people who are on decent incomes will never be eligible for social housing, and neither should they need that kind of state support. They should be able to buy their own homes and achieve genuine financial independence, which will, crucially, enable them to support themselves in their retirement when their income is much lower. This is increasingly becoming an impossible dream for anyone below a certain age who doesn't have family money to help them out. This was not the case a few years ago. The reason this situation has arisen is because of a combination of economic factors and government policies which have enabled investors to amass far more than their fair share of the nation's wealth. If nothing is done to reverse this trend, then wealth inequality will continue to grow.

I have to say I find your posts quite hypocritical. You're accusing me of wanting benefits for middle class people like me and not caring about those who are less well off, when what is apparent from your posts is that you would like to preserve your own financial situation at the expense of everyone less well off than you - evidently a much bigger group of people.

Talk about pulling up the ladder after you.

cells

littlegreenfrog wrote: »

westernpromise - we are clearly never going to see eye to eye so there is little point in continuing this debate.

I have clearly not at any point said that poor people will never be able to afford to buy so we should just write them off and concentrate on the middle class. Different people have different problems requiring different solutions.

Everyone should have the right to a secure and stable home. For people on low incomes who will never be able to afford to buy, this should come in the form of more state support, which is why we need more social housing. But people who are on decent incomes will never be eligible for social housing, and neither should they need that kind of state support. They should be able to buy their own homes and achieve genuine financial independence, which will, crucially, enable them to support themselves in their retirement when their income is much lower. This is increasingly becoming an impossible dream for anyone below a certain age who doesn't have family money to help them out. This was not the case a few years ago. The reason this situation has arisen is because of a combination of economic factors and government policies which have enabled investors to amass far more than their fair share of the nation's wealth. If nothing is done to reverse this trend, then wealth inequality will continue to grow.

I have to say I find your posts quite hypocritical. You're accusing me of wanting benefits for middle class people like me and not caring about those who are less well off, when what is apparent from your posts is that you would like to preserve your own financial situation at the expense of everyone less well off than you - evidently a much bigger group of people.

Talk about pulling up the ladder after you.

We need less social housing especially in inner London, not more

Prices are very affordable in much of the midlands and the north yet ownership is falling there too. This suggests it not price that determines the level of ownership. What seems to be a primary factor is the availability of mortgages especially the for the sub prime groups.

If you want ownership to increase and renting to fall you need a return of 100% mortgages, Interest only mortgages and Self cert mortgages

mwpt

cells wrote: »

We need less social housing especially in inner London, not more

Prices are very affordable in much of the midlands and the north yet ownership is falling there too. This suggests it not price that determines the level of ownership. What seems to be a primary factor is the availability of mortgages especially the for the sub prime groups.

You've said that prices are only 2 x median salary. Are banks really restricting mortgages at this level?

cells

mwpt wrote: »

You've said that prices are only 2 x median salary. Are banks really restricting mortgages at this level?

I dont think they are restricting prime borrowers at 2 x median full time wage borrowing (actually they probably are for older borrowers). They are however not offering 100% mortgages, not offering self cert, not offering interest only. Those things combined maybe mean 10% of households who could service a mortgage on those terms are turned away. If that is the case then the current regulation system will see a 10% swing from owners to renters and guess what that is what has been happening.

How else do you explain the fall of ownership in the north and midlands where prices relative to wages are very affordable?

westernpromise

littlegreenfrog wrote: »

westernpromise - we are clearly never going to see eye to eye so there is little point in continuing this debate.

We see exactly eye to eye. You're talking your book and thus I can talk mine.

My SDLT-on-renters idea is pure genius if I say it myself.

mwpt

cells wrote: »

I dont think they are restricting prime borrowers at 2 x median full time wage borrowing (actually they probably are for older borrowers). They are however not offering 100% mortgages, not offering self cert, not offering interest only. Those things combined maybe mean 10% of households who could service a mortgage on those terms are turned away. If that is the case then the current regulation system will see a 10% swing from owners to renters and guess what that is what has been happening.

How else do you explain the fall of ownership in the north and midlands where prices relative to wages are very affordable?

But those mortgage conditions you describe (100% LTV, IO and self cert) were only available for a short period of our history. They have been deemed too risky before, why would you offer these products on top of emergency low interest rates?

We do have 95% LTV mortgages available at the historically lowest rates in history. If a potential buyer can't scrape together just 10% of his/her yearly salary (save 3% a year for 3 years) then I don't think they should be lent any money.

If that scenario is causing ownership to fall (hypothetically), then perhaps the previous ownership levels were incorrect and on risky mortgages.

cells

mwpt wrote: »

But those mortgage conditions you describe (100% LTV, IO and self cert) were only available for a short period of our history. They have been deemed too risky before, why would you offer these products on top of emergency low interest rates?

We do have 95% LTV mortgages available at the historically lowest rates in history. If a potential buyer can't scrape together just 10% of his/her yearly salary (save 3% a year for 3 years) then I don't think they should be lent any money.

If that scenario is causing ownership to fall (hypothetically), then perhaps the previous ownership levels were incorrect and on risky mortgages.

well it is up to you, accept 'risky'* mortgages and get higher ownership or get rid of them and accept higher renting. What you can not have is blaming landlords for an increase in renting and falling ownership when the evidence clearly points to mortgage rationing resulting in a shift from owners to renters


*by most accounts the 'risky' mortgages were not risky at all with most borrowers paying back and the banks making a profit on that type of lending. Which then brings up an important question do you set policy which will impact on peoples families lives in a big way on evidence or do you set it on the basis of some sort of moral judgement 'then I don't think they should be lent any money'???

littlegreenfrog_2

The more money banks are prepared to lend people, the more prices will shoot up, and it becomes a vicious circle.

If you want to encourage more home ownership without fuelling a bubble, disincentivising people from owning properties as investments makes sense. Introducing overly harsh penalties could have unintended negative consequences and some people will still need to rent properties. But introducing new measures designed to shave away at the profit margin people get from investment properties (e.g. by charging extra SDLT and reducing the available tax relief) may help to redress the balance somewhat, if it makes some of the people currently thinking, "oh I've got some extra cash, I'll get a buy to let" think twice about it and maybe choose an alternative investment instead.

Requiring BTL investors to have massive deposits might help as well, as they would have less ability to outbid would-be owner occupiers.

westernpromise

Jason74 wrote: »

Thanks for the considered reply. We come at this from very different starting points, so I doubt we'll find much common ground. But the reasonable response (something all to often lacking on here) deserves the courtesy of an honest reply so here goes.

I'm not confusing the right to shelter with the right to buy a home. However, I do believe in the idea of a (for want of a better term) social contract, whereby those who go out and attempt to do the right thing gain certain reward for doing so.

No disgreement so far.

And part of that reward is a secure home.

Indeed, but how secure is, for example, an owned home if I bought it 30 years ago, now have only the state pension to live on but am deemed to be rich enough to pay a wealth tax because I own a "mansion"? There does not seem to be agreement on the left that I'm entitled to keep something that I've paid for.

Broadly speaking, I believe that everyone who works full time should be able to access either home ownership, or a rented home that meets their needs (and here the emphasis is on needs rather than wants) on a model broadly based on traditional council tenancies (ie, with truly affordable rent full security of tenure). For me, this is as much an obligation of government as providing a police force and making sure that every child has a place at a decent school.

The trouble with this is that while fine in principle, it has historically produced absolutely horrible ghettoes.

Where we part company of course, is that I see that as a problem and you don't. But for me, Government action is absolutely required to reverse that trend. Top of my list of actions to rectify the issue would be large scale public sector housebuilding both for ownership and secure rent.

Funded how though? And isn't this just going to leave other houses empty?

But it's also very clear to me that BTL is part of the problem, so actions to limit this through the tax system are imho a clearly and unambiguously good thing.

Why is it clear, though? A large amount of BTL simply serves as social housing. Rented property is more densely occupied so inferentially renters occupy fewer houses than the same number of owners would, which is bearish rather than inflationary. The there is the question of whether it si BTL that casues rises or the foreign investor's habit of leaving properties empty.

Of the various factors that have driven property price rises it is IMHO impossible to discern how much was attributable to BTL, nor can I recall a credible effort by anyone at doing so.

One way might be to look at areas with lots of BTL properties and at comparators with none and consider whether either has seen greater house price inflation in consequence. In Ashford in Kent, one BTL landlord has 1,000 properties. Are prices there any higher than elsewhere? I don't think so.

cells

littlegreenfrog wrote: »

The more money banks are prepared to lend people, the more prices will shoot up, and it becomes a vicious circle.

If you want to encourage more home ownership without fuelling a bubble, disincentivising people from owning properties as investments makes sense. Introducing overly harsh penalties could have unintended negative consequences and some people will still need to rent properties. But introducing new measures designed to shave away at the profit margin people get from investment properties (e.g. by charging extra SDLT and reducing the available tax relief) may help to redress the balance somewhat, if it makes some of the people currently thinking, "oh I've got some extra cash, I'll get a buy to let" think twice about it and maybe choose an alternative investment instead.

Requiring BTL investors to have massive deposits might help as well, as they would have less ability to outbid would-be owner occupiers.

The problem with shrinking the rental sector is that renters use up less floor space and live more dense than owners. Therefore its impossible to shrink the rental sector without building more homes.

If you did what you suggest, which is already happening soon with the tax changes, without building a lot more new homes then the result will be that the renters that remain will have to live in yet more dense housing pushing up rents further

Take the simple example of four tenets in a 3 bed + living room house. Two of the tenants form a couple and the landlord sells the property to them. The new owners kick out their old buddies because as owners they dont want to share. Where do the two displaced tenants go? Imagine that but with say a million homes. Where do the 2 million displaced tenants go? Well they have no choice but to squish into the private rental sector which has in this example gone from 5 million to 4 million units. The renters in those 4 million units now need to budge up and accept the 2 million displaced to also live with them. They dont want that as they live dense enough already so they will bid more rent to avoid it