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When will Buy To Let landlords be restricted to assist First Time Buyers
Colin Cloy
Posted: 12 January 2011 10:16:49(UTC)
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The average age of a FTB without parental support is now 37 according todays Daily Telegraph but over 40 and rising according to Paul Howard of the Nationwide Building Society at last months Mortgage Event. FTBs can no longer compete with BTL landlords without parental support as the average deposit required is now approximately one years income. BTL landlords as well as propertyowners have benefited from the rapid house price inflation over the last decade due to easy availability credit.and are in a much stronger position than FTBs to purchase. I understand that this is not just the case in England & Wales but also in Scotland where the legal system differs.

The last government tried to encourage FTBs back into the housing market by increasing the nil rate band on Stamp duty land tax to £250,000 up to 24th March 2012 but this has not worked because of the current prices are still to high. Also whenever a suitable property comes onto the market it is usually snaped up by a BTL landlord. This is particularly prevalent in the South East of England.

The coalition Government has indicated that they intend to try to unblock the housing market by pulling certain levers and I have suggested a couple of posible actions to them:-

Firstly the very radical action of removing tax relief on loan interest for BTL landlords which would certainly go a long way to reducing house prices and making the BTL loan market virtually extinct. It would create a lot of negative equity and be very unpopular with many propertyowners including BTL lanlords. However it would be extremely popular with tenants and a generation of 20-30 year olds still living at home with parents as large numbers would suddenly be in a postion to buy. It would also have an affect on the capital adequacy of many of the lenders which may further restrict funds. It would however stabilise the property market after a period of turmoil.

A second less radical plan that I have suggested is to increase Stamp duty land tax for BTL landlords to such a penal extent that it is no longer cost effective for them to enter the market but this would further dampen an already stagnating housing market. However if the government does nothing many parents will have their offspring continuing to stay with them until their deaths and the children receive an inheritance. In less than ten years the average age of a FTB will probably have reached over age 50 if the government takes no action on the BTL market.

I can now longer see how FTBs can compete with BTL landlords in the housing market. Even if a method was found to assist FTBs without restricting the BTL it would continue to cause the rampant house price inflation we saw during the last government. It is inevitable the Government will act in favour of the FTB at some stage but when? Probably when the media and press start to tell the full story of the FTB issue!
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antigricer on 06/02/2013(UTC)
Redundant (Old Timer?)
Posted: 12 January 2011 13:40:12(UTC)
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I can not see how "the very radical action of removing tax relief on loan interest for BTL landlords.... would create a lot of negative equity and be very unpopular with many propertyowners". Unless I have missed it, tax relief on mortgage interest was reduced to a maximium of the first £30K some years ago and then it was abolished all together. So removing it from BTL should only affect them. BUT they only get relief as the mortgage is classed as a business loan!! What HMG needs to do is specify that a business loan DOES NOT include any loan granted for the purchase or renovation of residential property or for the conversion of any building into residential property. A bit tough on the few builders who convert properties but should stop BTL totally.
derek piper
Posted: 12 January 2011 14:10:54(UTC)
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The problem with the housing market is not BTL but the shortage of mortgage funds for FTB and the high percentage deposit needed and the product fees and other costs attached to these mortgages. Lenders and government should find away make FTB mortgages lower (The Chelsea Building society SVR is 5.79%) It is unfair to blame buy to let landlords as mortgages for any purchase attracts product fees of typically 3% plus 60% loan to value making it not easy to enter the market.
Gristybeasty
Posted: 12 January 2011 14:12:47(UTC)
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The problem as I understand it, is that these BTL's are really not helping the economy. Any damn idiot with a bit of money can go in to the BTL trade and it dosen't take any brains to do let out property! What the country really needs is entrepreneurs who will develop business's and companies which will employ workers and then those workers will earn enough money to put down a deposit and work towards owning their own house!
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antigricer on 06/02/2013(UTC)
Colin Cloy
Posted: 12 January 2011 14:28:02(UTC)
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Redundant,

I intially favoured this option as I thought it would mean a lot of existing BTL landlords would put their homes on the market and create an over supply of cheaper end properties which would allow FTBs to purchase. However the over supply is bound to have a negative impact on house prices initially which could also affect the banks capital adequacy situation. I hope you are right about it not affecting house values as it would bring in a lot of money to the Treasury as well as assisting a whole younger generation!
Kenpen2
Posted: 12 January 2011 14:45:31(UTC)
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Good suggestions, Colin and Old Timer; agree totally. BTL should no longer be considered as just another business opportunity.

Like so many things BTL was OK as long as not too many people did it. But now it's gone mainstream it's seriously b*ggering up the life-chances of the much-put-upon younger generation. Time to pull the plug.
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antigricer on 06/02/2013(UTC)
Anonymous Post
Posted: 12 January 2011 14:53:07(UTC)
#7
Anonymous 1 needed this 'Off the Record'

The market cannot be sustained where we have an earnings ratio disproportionate to the first time buyer ability to pay for a mortgage. We cannot sustain a BTL market where it would be cheaper to buy if only you can get the morgage. Again, this is disproportionate. The correct relationship has to be re-established between buy and let, for the benefit of the economy as a whole to work. As a society none of of us will gain if we have a generation unable to purchase their own home.
Redundant (Old Timer?)
Posted: 12 January 2011 14:55:26(UTC)
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Colin,

You are right that prices could go down, hence care is needed on how the tax relief is withdrawn. The safest way is to stop it for all new loans now (gives FTBs an increased chance) and then withdraw it altogether over say 5 years (20% pa) to allow BTL landlords to rebalance their portfolios. Hopefully this will prevent a sudden big drop in house prices and some small BTL landlords handing the keys back to the bank.

One thing to bear in mind is that average house prices are currently falling and personally I do not see that trend reversing this year, so taking away the relief is unlikely to stop this trend..
richard hickman
Posted: 12 January 2011 15:53:38(UTC)
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Its another example of a government medling in market affairs, with the result that distortions become acute, and remedies painful. Unintended consequences? Yes. Why? Broken Parliamentary process due to too much legislation and too little attention to detail.
The Colonel
Posted: 12 January 2011 15:59:29(UTC)
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Mr Cloy is a Clown .
Does he think that the public sector will or is able provide homes to let ?.
If the BTL market collapses there will be nothing for these people to rent.
Does he not think that the Planning process, the cost of Building the Shortage
of Accommodation, where it is needed ,has anything to do with it.
And what about the Banks/Institutions lending Policies? I suppose they are
completely innocent in all this?
At least if FTB's are not in a position to buy.They have a chance to rent in the BTL
Market, unless they are unmarried mothers or asylum seekers they have no gott a
chance to rent from the Public Sector
The answer is a Govermental Body, to underwrite a proportion of a mortgage to a
FTB.
The risk to be shared by the Buyer by way of their deposit, the Lender and the
New Underwriting Body. The New Body should be authorised to issue Bonds paying
a Dividend that is Tax Free, without any strings if it needs Capital, to fund its Liabilities.
These Bonds should be made attractive to Pension Funds and other long term
Investors. Breaking the Buy to let Market will cause more harm than good.
And what is GristyBeasts experience of the BTL market "Any damn idiot with a bit of
money can go in to the BTL trade and it dosen't take any brains to do let out property"
Its these "damn idiots" who are the ones going broke. The Property auctions are full
of Foreclosures of "Damn Idiots" properties.
It is not easy,to be successful in BTL, it requires experience, brains and an enormous
amount of Hard Work to be successful in BTL. All attributes that I fear are sadly lacking in
GristyBeasts makeup.
The real villains in this is are Blair & particularly that Moronic Idiot Brown for not
Clamping down on excessive lending when they had the opportunity and power to do
so.
THOMAS EAVES
Posted: 12 January 2011 16:36:31(UTC)
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I agree with H Kane,
This type of knee jerk response would only serve to pass the problem to another sector of the Market.
Hit the Buy to Let investors, wait for the pressure to ease on the FTB's, then address the previous action whicjh by then would have damaged the Buy to Let Sector and pass it on to the next poor unsuspecting sector.
Utter stupidity.....
Think of the Economy and the mess that Brown got us into, as a Ship heading slowly towards an Iceberg.
It has no brakes, but if you turn the engines into slow reverse, it will gradually come to a standstill before moving in the opposite direction, without churning up the water and making the voyage too uncomfortable.

Think though the actions, make lots of small changes and dont expect or promise a quick fix to a problem that cnnot be resolved over night.
More importantly, be honest with the public and thus allow them to manage their expectations.

Also, think long and hard about the Banks with the Gun to our Heads....................


Leander
Posted: 13 January 2011 01:01:05(UTC)
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Joined: 17/06/2010(UTC)
Posts: 2

Here we go again. Some humans keep forgetting what we have already learned. Crushing the private rented sector will damage labour mobility. Some people don't need/ don't want to be tied with house purchase. It can be painfully slow and tortuous to sell up and move elsewhere. The private rented sector has a valued place in the economy. Why is it so different to renting a van or a tool? The previous failed Labour government demonised private landlords for its own narrow political purposes and does what it does best: meddling in things it knows nothing of and spawning needless expensive legislation and bureacracy. It also presided over the lowest housebuilding levels since the second World War.
Ultimately, as with any other product, price is determined by supply and demand; but that did not stop the Labour government contriving uncontrolled immigration to boost its own vote - and to hell with our own people seeking housing.
Gristybeasty
Posted: 13 January 2011 08:58:53(UTC)
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And what is GristyBeasts experience of the BTL market "Any damn idiot with a bit of

money can go in to the BTL trade and it dosen't take any brains to do let out property"

Its these "damn idiots" who are the ones going broke. The Property auctions are full

of Foreclosures of "Damn Idiots" properties.

It is not easy,to be successful in BTL, it requires experience, brains and an enormous

amount of Hard Work to be successful in BTL. All attributes that I fear are sadly lacking in

GristyBeasts makeup.

Well H.Kane, I have pasted above your comment (Wed 12 Jan) which relates to my comment made on the same day! Come off it.

Do you really believe that it takes brains to visit your bank manager, and then "charm" him in to giving out a loan? Well By that, I

refer to the Blair/Brown era. I happen to know of no less than 3 individuals who have basic education who managed to do just that

and then carried out basic renovations to the run down properties they bought. They then let them out to immigrants and single parent families through their local councils. Two of these guys are now running around in BMW's and living in up market residences.

So H.Kane I suppose you are a BTL and quite obviously you were offended by my comment above! Sorry about that!

Believe me, the BTL types I refer to can barely read and understand what is a newspaper let alone do any maths!
Terry Nicholas
Posted: 13 January 2011 11:39:40(UTC)
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Joined: 04/12/2006(UTC)
Posts: 3

A staged removal of tax advantages of BTL and the introduction of a Renters saving scheme that transfers a proportion of income tax received from landlords into a fund for the renter to use for a house or pension purchase would calm the housing market and aid renters, while ensuring tax compliance by the majority of landlords.
Kenpen2
Posted: 13 January 2011 11:53:07(UTC)
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Sorry Leander, I disagree. You and the other BTL apologists seem to regard houses as just another commodity or product, but they're not - they're HOMES, a basic human need, and many who would like to own one are being deterred or prevented by the monopolistic behaviour of the relative few.

I say "relative few" because there are actually far too many of you - tens or maybe hundreds of thousands. But the potential FTBs being denied buying opportunities may run into millions (see caveat below).

Isn't there more than a whiff of hypocrisy about your position ? I'll bet a pound to a penny that you and all the others who bang on about the virtues of the private rental sector actually own your OWN homes while happily reducing the chances of other people being able to do so.

Of course we need a private rental sector but it mustn't be allowed, nor encouraged, to get too big. The current rules are out of kilter and Mr Cloy's sensible suggestions for changing them would help redress the current imbalance.

PS This is all surmise on my part, I haven't got a single stat to back up my argument. But that doesn't mean it's wrong - I know so many people who have climbed on the bandwagon in the past decade - that must be true for most of us ? As individuals they're good people acting from understandable motives (collapse of pension funds etc.), but the big picture is of damage to the next generation and it's time for that to be recognised.
THOMAS EAVES
Posted: 13 January 2011 12:13:57(UTC)
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Joined: 16/09/2009(UTC)
Posts: 3

Lets get this right.

Way back, we had a culture where only strictly middle class had mortghages or owned their own home.
The remainder, lived in Council Houses, on Council Estates, whilst most were respectable people, there was a minority who, veiwing that the house would never be theirs, gave little or no care about it, indeed the Council replaced Kitchens, painted the windows etc,
Margret Thatcher changed that, Home Ownership became a new goal...... I know, I was one of them.... people saved hard for about 25% of the purchase price and deposited each and every month to prove that they were reliable people who could and would continue to put the money each month into the Building Society, though the savings each mont was replaced by a Mortgage.
I know I did that too.
Council Estates were mostly eradicated, people bought ( Off the Council) at a greatly subsidised cost their rental hose and became proud Owners, they Changed the front door, Sectors of the Economy also gained by this, Home Improvements, (Whoever had heard of a B&Q or Homebase prior to Thatcher.........
Councils saved by not carrying ourt repairs to their properties.
I am a private Landlord but got to where i am by doing what the whingers are complaining about now....... Saving the 25% deposit and proving to the Lender that you are good for the money........
When i started work for the fist time in the late 1970s, I remeber complaining about the Older Guys, who appeared to work less hard than me, for more pay. The Office manager took me to one side and gave me some advice that has stuck with me ever since.
" Dont try to get his pay down, try top get your pay up"........... Well, why not adopt that principle to the people who are knocking the Private landlord....... Sorry about the Life History lesson Folks........ :)
Andrew Graham
Posted: 13 January 2011 22:03:45(UTC)
#17

Joined: 07/10/2008(UTC)
Posts: 1

Well said Thomas,I had the same experience as you bought my first house aged 20 after saving like mad for the deposit, rented it out moved to the oil industry in the shetlands where I continued to work 7day weeks 12hr days.

As my parents were retiring decided to sell my house ( made £11'500 profit) gave 10k to parents to buy there council house outright
Invested the remainder in a dunderin inn made 12k profit, moved to Belfast started my own business (still working 7day weeks) bought another two houses with profit whilst still renting myself ! Soon was able to buy another two with adjoining church hall which became my retail unit for ten yrs, then and only then did I buy my own house and start a family, it's all about affordability.

I've cleared all my debt now through hard bloody work and determination. it really galls me to read about how the government should do something about the so called BLT it's a sector like any other why would anyone even dream about destroying it, thousands of people have spent a life time building their portfolios some successful some not so, the not so s are more than likely those who accepted there bank managers offer of more money when they didn't even ask for it in the first place ??

Vent your spleens on the banks and the labour party who brought this whole mother of all calamties upon us all, we simply invested in property to provide us with a half decent pension just like the pension funds do.

I earned my wealth and I ain't apologising to anyone for it.
Kenpen2
Posted: 14 January 2011 11:01:44(UTC)
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@Graham, Thomas et al : No-one's accusing you of being bad people. No-one's saying you broke the rules. As Leander said we need a private rental sector, no question. The rules were there to encourage it and you simply spotted and used the opportunity.

But you're missing the point, which is that the present rules have been too successful in promoting BTL to the detriment of FTBs. And now they need to be adjusted. Nothing wrong in advocating that either - that's what Governments are supposed to be for, that's what the execrable Brown & co should have done instead of sleeping at every wheel they ever sat behind.

I read your life stories on last week's thread. Sure you worked hard, millions did. But the hard part was on the oil terminals or wherever. BTL ain't hard, it's money for old rope really. Lots of people know it is, and lots of people have piled in, and some get greedy. One report on the previous thread was of a man who'd accumulated 23 ex-council houses in London. The bloke who owns the house next door to me has a large portfolio of overcrowded, under-maintained student lets and lives abroad on the proceeds. Some Premiership footballers are filling their boots even before they hang them up. There were (are) the couple of ex-maths teachers who had a portfolio running I think to hundreds of millions of pounds, there was talk of them becoming the first BTL billionaires.

All of this MUST be having a dire impact on the FTB market. Graham, I don't know how greedy (sorry, entrepreneurial) you are, but under current rules there's every inducement for you to remortgage your current properties, use the funds as deposits on some more and turn your £1.4 million portfolio into a £4-5 million one almost overnight. Colin's proposed rule change would remove some of this inducement and help stop you becoming a bigger problem to FTBs in your area than you already are.

That's my theory anyway, all I need now are some facts to back it up.
sam a
Posted: 14 January 2011 20:27:53(UTC)
#19

Joined: 23/11/2007(UTC)
Posts: 2

I agree with H Kane-

IN Florida where prices are way down and still no one is buying. And there is a shortage of property to rent. Markets find their own level and governments policy decision should be to 'help' and not hinder .

It's sour grapes blaming private investors. The banks opened the floodgates in 1996. Try getting a commercial loan before then to do 'buy -to -let. They simply branded commercial loans in a different way and then started competing with each other as if this was a new weird and wonderful thing, driving rates down and making them ultimately unviable and toxic.

If there were more write offs and incentives , with less red tape for new business ideas maybe things would take off.

Anyone made any money in VCT's? Now there's a challenge....
Amelia Brown
Posted: 06 February 2013 12:15:18(UTC)
#20

Joined: 14/12/2012(UTC)
Posts: 14

Hi,

Well, I think the exact problem with the housing market is not BTL but the shortage of mortgage funds and the need of high percentage deposit. The product fees and other costs attached to these mortgages are also very high too sustained. However it is wrong to responsible buy to let landlords as mortgages for any purchase to value making it not easy to enter the market.

Buy to let advice@Plazaestates
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