It was the BTLers' fault?

Gorgeous_George

For years we have had people bleating on about how BTLers have pushed the market up and forced them out of the property market.

Now things have turned and it's not because of a mass BTL exodus.

Do you concede that BTL LLs were NOT the cause of the housing boom? It was slack lending after all.

GG

tomstickland

I don't have the numbers to really know, but my opinion is that the majority of housing inflation was because a lot of people borrowed as much as they could get their hands on. The lenders joined a "who can lend the most" race, chasing the profits.
BTL did have a part to play, especially when competing with first time buyers. They pushed the bottom end of the market up a bit.

Total guess, I say BTL had a 20% influence.

m00m00

slack lending and BTL are intrinsically linked.

Zammo

BTLers were competing directly with FTBers. They have definitely had a hand in this.

epz_2

if by that you mean slack lending allowed the BTL bubble to prop up a market that should have popped in 2005 then yeah, its mostly the banks fault.

personally i dont have an issue with BTL and its my prefered method of housing the dole scum rather than useless councils who dont care if the place gets trashed.

that said i think they should reform council tax so its incremental after a certain point like 3 houses, thats until they relax the planning laws, i dont mind someone making money but if they restrict supply of an essential then market forces should be unleashed upon them.

Stevenic

I think that the banks are of course partly responsible but there are many other factors to consider. The Government have to share some of the blame, many people lost confidence in pensions and consider houses as a good way to save for retirement which meant that prices rose as BTL became fashionable. And the media are not blameless either with their 'Property !!!!!!' TV shows like Location, Location, Location and Property Ladder sold the dream that there was easy money to be made.

Cinderbrook

A lot of it is due to people buying for pensions. I have been to view properties in Liverpool particularly where 10 people would be viewing the flat at the same time. All of them retired people apart from me and maybe the odd young first time buyer. Estate agents drove up the prices buy several thousand a few years ago with each property transaction. Presumably most of them will be retraining as debt collectors.

WTF?_2

It's important to recognise that not all BTL activity was bad for others, or stupid on the part of the 'investor'. Just stuff in the last few years when the market got silly.

The recent BTL craze happened in tandem with the property boom and exacerbated its effects. However the entire property boom was itself created by the credit bubble.

Anyone who got into BTL when rent received covered mortgage payments is fine. Given that council housing is on the decline someone has to provide decent affordable housing for rent.

However speculators who piled in once this situation no longer held using cheap borrowed money, remortgaging their existing properties to get the deposit for new ones often to build a massive property portfolio (property pyramid more like) and hence bid prices on residential housing up into the stratosphere deserve no pity. I believe that for the last year or two they were supporting the market in lieu of the FTBers they had priced out with their 'pyramid buying'. They are about to be hoist by their own petard and I won't be shedding any tears. They made a very poor business decision which has had disastrous social consequences and it's only right that they pay the price.



Once prices bottom out I'll be considering getting a BTL myself. If the price is right it should be a nice little earner. It's all about sensible investing and unfortunately property mania has drawn too many clueless muppets in, in search of easy money.

Pez2

What makes you so certain that BTLers aren't selling up?

A house opposite me was bought, done up and then rented out to students at the end of last summer. Lo and behold a "For Sale" sign appeared outside a couple of weeks ago.

What evdience do you have that BTLers aren't selling up?

Laughing_Man_2

Very strange post George.

BTL speculators did indeed bid up prices on the bottom rung by competing with FTB'ers. This is known, easily provable, fact. Do you seriously dispute it and if so on what grounds- i.e can you tell a story where tens of thousands of middle aged investors armed with mortgage applications and house equity who used it to buy flats and terraces in cities across the country in direct competition with the existing market had no significant impact on the price of those assets? In other words you must convince me of the fallacy of the demand curve. If so I may concede the point.

According to Andrew Farlow of Oxford University a housing boom needs both cheap credit to inflate it AND speculators to make it happen. Cheap credit with no speculation implies much a lower rate of inflation, as only existing market participants make use of it (much less demand you see). Speculation without cheap credit is not as profitable due to the leveraging effect and the risk is more obvious, so fewer people wish to speculate- hence a lack of speculative demand and a lower rate of inflation. Now, put the two together and BOOM prices only ever go up.

We have several brands of speculator in this market, not only BTL, but holders of 100%+IO mortgages, who are essentially betting on a rising market to build equity for them. Self cert mortgages are bets on interest rates remaining low enough and mortgages available enough to so that repayments do not exceed take home pay. Now the credit tap is off demand from these specualtors is being curtailed, and as their bets become unprofitable (i.e the capital value of the asset they're betting on begins to fall) they will exit the market.

As you need both speculators and credit to make a boom, so both are needed to disappear for a crash. First the credit rug is pulled- this is happening now, and speculative demand vanishes (no more 100%, no more self cert, no more BT lending) then prices start to fall, then the speculators try to cash out profit by leaving the market, massively increasing supply, then the value of the assets they speculated on crashes and burns often driving the price a long way under long term trends.

Bubbles and crashes are actually surprisingly well understood phenomena and all this is going to play out to a well rehearsed script.

RecoveringAlcoholic

Has anybody mentioned widespread


FRAUD.