Treatment of BTL in the budget?

cells

littlegreenfrog wrote: »

What is a really good way of achieving financial independence? Buying your own home.

agreed but you think X households are held back from buying and are forced into renting due to nasty landlords buying up all the stock.

I think some 3 million households maybe more are held back from buying due to over regulation of mortgage finance. They have no choice but to go to a landlord and ask them to bid on their behalf. Of course the landlord charges for this service and their time.

So we both agree more owners would probably be a net positive for the country. However I think regulations are causing a huge shift from owners to renters. You think evil landlords are buying up housing and force feeding it to renters.


My evidence for my view is I think quite strong. Even in cheap parts of the country like the North and Midlands (where the median terrace can be bought for ~2 x median full time adult couple wages) ownership is falling. This suggests its not price which are very affordable in those areas instead something else is holding back buyers....

cells

CLAPTON wrote: »

what is true is we need more properties and to restrict immigration but we don't need more social housing.

We probably dont even need all that much more house building in the North and Midlands and Wales the current rates seem sufficient. We just need a massive house building program in London and a large program in the SE. Something like 100,000 units a year in the capital and 50,000 units a year in the SE with maybe another 150,000 units spread across the rest of the UK

Regarding immigrants. We probably would do well to keep population growth in the +0.5% a year mark. But plenty of other threads to discuss that

mwpt

cells wrote: »

a BTL landlord just bids on behalf of tenants. If you increase the cost for BTL landlords then tenants will pay once equilibrium is reached.

Didn't seem to be the case in Ireland. Remember, tenants have a hard upper limit on what they can pay, so your theory only works so long as there is slack in this. There probably is, but how much?

So the question you need to resolve should simply be....why are tenants not bidding directly? and instead having to go ask landlords to bid indirectly for them?

The problems are almost always (at least for single family units) an over regulation of finance.

If a tenant could go to a bank and get a 100% interest only mortgage self cert or normal, then they would have no need for a landlord and would bid directly. but the do gooders in government and the public have made such mortgages disappear they regulated them out of existence.

Your type of mortgage only existed for a short period. We coped fine without them before the 2000s. The big rise in property prices coincides with the introduction of leveraged finance to BTL landlords.

What you are saying above is this:
Tenants cannot compete on leveraged finance with BTL landlords.

You want to increase the amount of lending to tenants who would be OOs in order to allow them to compete.

I would prefer to decrease the amount of leveraged finance available to BTL landlords so that they can't outbid would be OOs.

(Btw: cash BTL outbidding is fine, there is nothing you can do about that, so we'll have to find the level cash purchases are prepared to bid to organically)

wotsthat

mwpt wrote: »

Your type of mortgage only existed for a short period. We coped fine without them before the 2000s. The big rise in property prices coincides with the introduction of leveraged finance to BTL landlords.

If the houses weren't being purchased by leveraged BTL's they'd be purchased by leveraged owner occupiers. I can see why an increase in debt could be linked to house prices but I'm not sure BTL buyers are that much more indebted than OO buyers if at all.

There are now 5,000,000 more people in the UK than 2000 by the way.

mwpt wrote: »

(Btw: cash BTL outbidding is fine, there is nothing you can do about that, so we'll have to find the level cash purchases are prepared to bid to organically)

I understood you were anti-BTL so why are you fine about rich BTL's buying in cash. Don't you want to deter them too?

cells

mwpt wrote: »

Didn't seem to be the case in Ireland. Remember, tenants have a hard upper limit on what they can pay, so your theory only works so long as there is slack in this. There probably is, but how much?



Your type of mortgage only existed for a short period. We coped fine without them before the 2000s. The big rise in property prices coincides with the introduction of leveraged finance to BTL landlords.

What you are saying above is this:
Tenants cannot compete on leveraged finance with BTL landlords.

You want to increase the amount of lending to tenants who would be OOs in order to allow them to compete.

I would prefer to decrease the amount of leveraged finance available to BTL landlords so that they can't outbid would be OOs.

(Btw: cash BTL outbidding is fine, there is nothing you can do about that, so we'll have to find the level cash purchases are prepared to bid to organically)

First, tenants set the price of rentals. Its an auction with no reserve price. Of course agents don't set the price at £1 and let tenants bid eBay style because they know roughly how much the winning bid is going to be and it saves time but the point is tenants set rent prices not landlords. So for rents to rise tenants need to bid more. They will bid more if there are more of them (population increased) or if there is less Property to rent (a shift from rentals to owners will see less property to rent as renters live more dense) or if their ability to bid more improves eg pay increased. If there is a shift from renters to owners then its clear the clearing rent bid will be higher


Second, leveraged landlords or cash purchase landlord's do not bid against renters. They bid for renters on their behalf because some renters need to rent and because some renters have been denied mortgages. My best guess is 4 million households need to rent and 2 million have been forced to rent due to mortgage rationing. I know you find this hard to processes its not obvious as tenants don't go find landlords and say please buy a house in location x so I can rent it but it is just that only the link or contract is not clear as a price signal sets the contract up. Having said that I did have one tenant request a rental for one of their relatives (EU family) in a certain area in Haringey and I had none in that borough. I bought a home their for them to rent and they've been there for over 4 years now. If self cert 100% interest only was available they could have just brought directly but you have a hate for those products. Also I was not advocating 100% self cert landlord mortgages I was saying for would be owners so why you resist is strange.

Third. Most the rental growth is equity not debt. Its hard to tell exactly but last year only 100,000 BTL mortgages were given out. Some of those will have just been one landlord buying from another. The rental sector grew by 440,000 units. Therefore it suggests over 80% of the growth in renting is financed by equity not debt.



Also the mortgage rationing is hitting older folk quite hard. If you are 50-55 and want to buy a house the bank wants you to pay it off in 10-15 years so you fail affordability. If self cert was available they would get the mortgage. Instead they have no choice but to ask a landlord to house them because mwpt doesnt like self cert even though all the evidence showed that that type of lending was low risk and profitable.

mwpt

cells wrote: »

Third. Most the rental growth is equity not debt. Its hard to tell exactly but last year only 100,000 BTL mortgages were given out. Some of those will have just been one landlord buying from another. The rental sector grew by 440,000 units. Therefore it suggests over 80% of the growth in renting is financed by equity not debt.

I don't have time right now to address the rest of the post but just wanted to comment here. I find those figures stupendously unbelievable. I would be you anything that digging deeper would reveal you cannot take them at face value (wherever you're sourcing from, since I don't know that either).

One good bet is people moving and keeping existing house as rental. Adds to private rental sector without requiring BTL mortgage. Another is finance raised by other means, remortgaging existing property to fund BTL purchase for eg. And so forth.

There may well be a lot of cash BTL purchases by I find the 80% figure completely unbelievable. I'll leave it there for the moment.

cells

mwpt wrote: »

I don't have time right now to address the rest of the post but just wanted to comment here. I find those figures stupendously unbelievable. I would be you anything that digging deeper would reveal you cannot take them at face value (wherever you're sourcing from, since I don't know that either).

One good bet is people moving and keeping existing house as rental. Adds to private rental sector without requiring BTL mortgage. Another is finance raised by other means, remortgaging existing property to fund BTL purchase for eg. And so forth.

There may well be a lot of cash BTL purchases by I find the 80% figure completely unbelievable. I'll leave it there for the moment.

yes it surprised me too but if you think it through there is a huge amount of wealth in this country.

For a start some 300,000 properties (my estimate) each year are left behind as inheritances. Vast majority perhaps 99% will be mortgage free or have a trivial mortgage on them (a few thousand pounds)

Some of them will go directly into rentals. Some of them will be sold and the proceeds go to rentals. Some of them will be sold and the proceeds go on shares. Some of them will be sold and the proceeds go on fast cars and lose women. The simple fact is those 300,000 properties are some £75 billion per year and that is equity a lot of which will stay/go to rentals. And that is just housing wealth there must be a lot of other wealth left from life insurance policies and pensions and savings accounts and other assets too. It would not surprise me if inheritance wealth alone is £150B a year.

Then there are those who become rich. Think lotto wins or business sales. I know a brother and sister who built up a company and sold it and with some of the proceeds bought nearly a hundred homes mortgage free.


I would however agree with you that about 20% are through BTL mortgages the remaining 80% are through inheritance through savings through capital and some of that 80% must be through indirect finance.