Cameron's housing plans

[Kemik]

Indeed.

Ah poop, I missed out a word! I was arguing that BTL has pushed house prices up. I think it depends on the area though. In the South East I know those four houses would have all gone to individuals rather than landlords if BTL was banned or made to be less incentivised as I know the landlord and I know the sole owner of the 4th house.

If the number of BTL landlords falls, the demand falls so house prices should fall. As the prices fall people move from renting to buying, rental prices should stay the same as there are less houses to rent (increase in monthly rent) but more people move to buy (fall in monthly rent to attract more renters). In all, house prices fall and rental prices stay the same.

 

[ScoTTyBEEE]

It's really quite simple.

BTL landlords can get interest only mortgages, then claim a lot of interest back in tax relief. This means they can pay more for a house than pretty much most people. There are a shed load of amateur BTL landlords doing this (due to no interest on savings and 'crashy' stock markets), so this means prices are pushed up to THEIR level, not the level of people paying repayment mortgages with no tax relief.

When the governments tax changes kick in lots of these landlords will have to sell as they won't make any money and there will be no more capital gains in the properties. Why no more capital gains? Because prices have been artificially pushed to this level due to tax incentives, the same incentives being reduced.

Where will prices fall to? They will fall to the amount people paying repayment mortgages with no tax relief can afford, which is far lower than where they are now.

Prices will come down, it's not supply and demand of houses causing this bubble but supply of credit.

All the recent BTL landlords will lose all their deposits. Most likely deliberately set up by the banks and government, a sort of disguised bail in.

 

[balky12]

I still don't get all this talk of bubbles and crashes once BTL is 'sorted out'. It makes up such a small percentage of homes.

Maybe it will have a small effect on new builds? But a crash? Just can't see it.

Demand for houses certainly won't be going anywhere.

 

[Scam]

Indeed. Why are people not able to see that the increase in BTL landlords is because nobody was buying houses because the banks became more risk averse and it is harder to get a mortgage for owner occupiers? In my hometown there was a whole block of freshly built flats and they were all empty for over a year. That was not unusual across the county and, dare I say it, the country.

Nonsense. Your examples prove that BTL is creating a false demand. There was no demand for those homes (because people couldn't buy them), therefore the house prices should have come down dramatically to compensate. That is the 'free market' that everyone bangs on about. Instead, what you have given is a perfect example of a corrupt and biased BTL market stepping in and propping up house prices to the detriment of everyone else.

I really like that moneyweek article by the way. The idea of all these BTL landlords realising they have no way of escaping negative 'equity' due to massively leveraged loans and huge CGT bills just makes me feel warm and fuzzy inside.

 

[FoxEye]

I really like that moneyweek article by the way. The idea of all these BTL landlords realising they have no way of escaping negative 'equity' due to massively leveraged loans and huge CGT bills just makes me feel warm and fuzzy inside.

Sadly, if you read the comments you find BTL openly discussing how they will use loopholes to avoid the CGT even after the changes.

It might sound extreme, but many are discussing leaving the UK for 5 years before selling up. If they do this, they avoid *all* CGT.

Others were talking about deliberately leaving their portfolios mortgaged up to the hilt, and getting rid of the cash. This would allegedly allow their children to pay less tax when inheriting the estate. Tho I must admit in this case I'm not sure exactly how that would work.

Yet more were talking about moving all their properties to a PLC, allowing them to pay much lower rates on CGT than normal.

So we should all remember that part of the "service" BTL landlords provide is also to shift the tax burden to the rest of us, by actively finding and employing loopholes to avoid paying tax themselves. Just like most people obsessed with wealth and their own self-worth.

 

[balky12]

There was no demand for those homes (because people couldn't buy them

Think this is where everyone can argue till their blue in the face. Is it because they couldn't buy them? Or because they didn't want to buy them...?

There is quite the demand for rental accommodation (otherwise BTL wouldn't exist).

Surely increase in BTL is only meeting the demand for rented accommodation?

Some will argue back that people are only choosing to rent because BTL is driving up house prices to an unaffordable level. That's ludicrous. BTL makes up such a small percentage of sales that it has a negligible effect on house prices.

A more sensible argument would be that there is a housing issue, demand is far greater than supply, and this should be addressed. But that would mean accepting that BTL isn't the big demon a lot of people claim it to be.

 

[Scam]

Think this is where everyone can argue till their blue in the face. Is it because they couldn't buy them? Or because they didn't want to buy them...?

You're right we can argue this forever, but as far as the case for 'demand' goes it simply doesn't matter if potential buyers can't or won't buy. Either way they're not and that's the important bit where the market will adjust itself.

Some will argue back that people are only choosing to rent because BTL is driving up house prices to an unaffordable level. That's ludicrous. BTL makes up such a small percentage of sales that it has a negligible effect on house prices.

Firstly, nobody chooses to rent. Literally no-one. Well maybe a select few, those starting a career in a new place etc. but seriously. The view that anyone chooses to rent long-term in this current market just makes me laugh.

I'd be interested to see stats on the number of BTL mortgages approved. I thought it was about a third of all mortgages for last year. That said, that won't include the vast numbers of cash buyers will it?

In the meantime check this out, namely:

However the Generation Rent analysis found that two-thirds of private renters (67%) felt stuck in the rented sector because of the cost of buying, and more than half (52%) said the level of their rent was their biggest problem.

So, two-thirds of all tenants felt 'stuck' in the rented sector. That means they would want to buy, but can't. That's a lot of people.

A more sensible argument would be that there is a housing issue, demand is far greater than supply, and this should be addressed. But that would mean accepting that BTL isn't the big demon a lot of people claim it to be.

I'd never argue that BTL is the sole cause of our housing crisis, but it is a big, big factor. It's a bigger factor in the social impact -- of the rich getting richer and the poor getting poorer.

 

[scorza]

Think this is where everyone can argue till their blue in the face. Is it because they couldn't buy them? Or because they didn't want to buy them...?

There is quite the demand for rental accommodation (otherwise BTL wouldn't exist).

Surely increase in BTL is only meeting the demand for rented accommodation?

Some will argue back that people are only choosing to rent because BTL is driving up house prices to an unaffordable level. That's ludicrous. BTL makes up such a small percentage of sales that it has a negligible effect on house prices.

A more sensible argument would be that there is a housing issue, demand is far greater than supply, and this should be addressed. But that would mean accepting that BTL isn't the big demon a lot of people claim it to be.

One way to reduce demand is to reduce the number of BTL properties somehow. I'm not sure BTL takes up such a small percentage of sales either - according to Wiki as of Q3 2014 nearly 15% of mortgages were BTL mortgages. 15% sounds like quite a significant percentage to me, and that's before you factor in people who are buying properties with cash to rent out. Housing is one of those things where just a small change in supply or demand has a big impact on prices because your home is a very emotive purchase. Economists call this the "elasticity of supply and demand".

 

[Tunney]

Some will argue back that people are only choosing to rent because BTL is driving up house prices to an unaffordable level. That's ludicrous. BTL makes up such a small percentage of sales that it has a negligible effect on house prices.

What percentage? What's the percentage for cheaper starter homes? What's the percentage for 1-2 bedroom flats built in the last ten years in zones 1-3 London?

I'd imagine that the kind of properties that are attractive to first-time buyers are exactly those being targeted by BTLers.

 

[Scam]

1 in 5 homes now owned by private landlords

The Supply-and-Demand myth

 

[FoxEye]

1 in 5 homes now owned by private landlords

The Supply-and-Demand myth

The biggest damning statistic there is that 'more than half of new homes are bought to rent out.'

More than half. That means that the % of BTL property must be (and is confirmed to be) increasing quite significantly.

 

[balky12]

You're right we can argue this forever, but as far as the case for 'demand' goes it simply doesn't matter if potential buyers can't or won't buy. Either way they're not and that's the important bit where the market will adjust itself.

In the meantime check this out, namely: So, two-thirds of all tenants felt 'stuck' in the rented sector. That means they would want to buy, but can't. That's a lot of people.

I do see where you are coming from, and understand the economics behind them. It's extremely difficult to drill down on.

First point regarding demand and the market adjusting itself; there is demand, it doesn't matter if it is a person buying a home for themselves or a BTL, there is still a demand for the houses. Person A doesn't want to buy the house to live in but person B wants to buy it to rent it out (now this can be changed through taxing BTL). Maybe it's the way I look at it but in my mind BTL wouldn't increase without the demand for rented accommodation. Why would landlord buy properties they could not rent out?

However the 2nd point; people who feel 'stuck' because of housing prices. Now I don't think BTL has much of an impact on housing prices. But forget BTL for this part. Say for some reason the housing market goes through some 'adjustment' and prices come down; even with the lower house prices, how many people who are renting will now be able to afford to buy?

My point is that it's fine for these surveys, and I agree it's tough. But people saying I am stuck in renting because of house prices; how many of these would genuinely be able to afford a home if house prices fell say 20%? Basically are they really 'stuck' renting because of house prices, or because of personal circumstances?

It's a tough figure to drill down on. There are definitely people out there who would be able to buy a house if the market dropped a little. Even more so if the market dropped a lot. But how far do house prices have to fall before they can afford to buy? 10/20/30/40/50%?

Then there are people out there that will, quite simply, never be able to afford to buy a home.

 

[FoxEye]

Maybe it's the way I look at it but in my mind BTL wouldn't increase without the demand for rented accommodation. Why would landlord buy properties they could not rent out?

There is a demand for accommodation. Everybody *must* have a place to live. This isn't just demand, this is a basic human requirement for life.

What you are interpreting as "strong demand for rental property" is, in many cases "strong demand for somewhere to live, and no choice but to rent".

The fact that you seem to reject this idea completely, in favour of a view that renters *want* to rent, is why we won't ever agree on this.

Not enough housing for everyone + "investors" buying more than they need = people forced to live in someone else's house, paying rent.

 

[balky12]

There is a demand for accommodation. Everybody *must* have a place to live. This isn't just demand, this is a basic human requirement for life.

What you are interpreting as "strong demand for rental property" is, in many cases "strong demand for somewhere to live, and no choice but to rent".

The fact that you seem to reject this idea completely, in favour of a view that renters *want* to rent, is why we won't ever agree on this.

Not enough housing for everyone + "investors" buying more than they need = people forced to live in someone else's house, paying rent.

You may be right. Probably not helped by the fact I live in one of the worst places in the UK for rising house prices (South East) and I am on the verge of owning my own home after saving for two years.

 

[Scam]

What you are interpreting as "strong demand for rental property" is, in many cases "strong demand for somewhere to live, and no choice but to rent"

This. Very well put.

 

[Freakbro]

I know house prices in London are crazy, but the quote from Cameron on PMQ's today

he wanted to see "starter homes" in the capital in the £150,000 to £200,000 price range

Ok, still sounds a lot of money for a starter home, but I accept that's maybe 'cheap' in London. But then he follows it up with

The most a "starter home" in London would cost would be £400,000, he added

£400K....for a starter home....what planet are you living on Cameron.


Oh, and does this win the award for the most nonsensical typo sentence on the BBC website?

The PM also rejected online and workplace voting for industrial action ballots, which trade unions are calling for, saying: "I don't think it's too much to ask someone about to go duty on stick to full out a ballot paper."

 

[dowie]

Firstly, nobody chooses to rent. Literally no-one. Well maybe a select few, those starting a career in a new place etc. but seriously.

LOL

plenty of people chose to rent - students, people starting their first job, single people, new couples, newly divorced people, some people moving house/moving for work, people who need to move temporarily for work or live away from the family home Monday - Friday... and even sometimes people taking a view that house prices are due to fall

+ people who haven't managed to save a deposit still need to live somewhere even if they'd rather buy...


So far the Tories have removed tax relief for buy to let landlords, addressing the issue people on here are complaining about. They've now, as per the subject of this thread, removed the need for developers to build social housing - so encouraging further development - they're also trying to override strict planning laws to encourage more development on brownfield sites and are making councils set aside plots for self builders. They've even got a help to buy scheme to assist with the deposit...

None of that is necessarily going to assist someone who's budget is far away from the current market but who absolutely feels entitled to own a property in a specific area of West London or some particularly popular countryside village where lots of other people want to own a property since, well, if lots of people want to live there then you're going to have to compete. That isn't just down to buy to let landlords - you're likely getting demand from plenty of areas in that scenario.

 

[FoxEye]

LOL

plenty of people chose to rent - students, people starting their first job, single people, new couples, newly divorced people, some people moving house/moving for work, people who need to move temporarily for work or live away from the family home Monday - Friday... and even sometimes people taking a view that house prices are due to fall

Um, you do realise that some of the people on your list wouldn't be able to get a mortgage? So you can cross off students, as well as people starting their first job.

Also of the people on your list - esp "newly divorce couples", how many will want to rent *long term*.

A lot of people who "choose" to rent are doing so as a temporary stop-gap measure. They won't "choose" to rent for long.

So where is your evidence that people want to rent long-term? Very, very few people want to be renting year after year.

It's like saying people in prison are "choosing" to serve their sentences

 

[dowie]

No it is just highlighting that there is demand for rental accommodation and plenty of people out there who either want or need to rent some of whom are in circumstances where owning a home isn't desirable at that point in their life. The idea that nobody chose to rent is flawed - sure there are people who don't want to rent long term but I've not disputed that.

 

[FoxEye]

No it is just highlighting that there is demand for rental accommodation and plenty of people out there who either want or need to rent some of whom are in circumstances where owning a home isn't desirable at that point in their life. The idea that nobody chose to rent is flawed - sure there are people who don't want to rent long term but I've not disputed that.

Right, so when the government itself anticipates the rental market to be 1/3 of the total housing stock by 2030, we can say without too much complaint that "providing a service" won't be the driving force behind that trend.

There might be a small number who choose to rent, but they will be dwarfed by the people forced into long-term rental housing.

And this is because, despite *some* tax breaks being toned down (not removed, btw), BTL landlords will be able to out-compete first time buyers for new housing.

As previously said, over 50% of new houses is bought by BTL.

The idea that this is purely to provide a service to people who choose to rent is wholly ludicrous.