Wednesday, Feb 07, 2007
Landlords not to blame for pricing out first time buyers - really?
Firstrung: Buy to let not to blame for pricing out first time buyers - ARLA
The belief that buy to let investors are pricing first time buyers out of the housing market was discussed by a leading expert in property economics at the Annual Conference of the Association of Residential Letting Agents, ARLA, held in London today, February 7th.
Posted by converted lurker @ 01:33 PM (179 views) Add Comment
27 Comments
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1. inbreda said...
Take him outside and shoot him.
2. converted lurker said...
I know "just build more cheap houses and stop moaning" you couldn't make it up! Wheel in a professor to spout this shite, surprised they didn't use Steven Hawking and simply substitute his machine for a tape!
3. paul said...
"As a result, Professor Ball said that it is not clear that house prices would have been lower without Buy to Let"
That's called covering your arse, rather than jeopardizing your credibility for a few quid at a speaking do.
4. The Capitalist said...
Late-entrant BTLs are not seeing capital gains. Yields are too low, moaning tenants, void periods and rising debt repayments. They will enter en masse for the exits. Too late of course and prices go into freefall. Especially the new flats built in our major cities. Councils we use them for housing asylum seekers and new immigrants (legal or not).
Things are moving fast as the IR rises are beginning to take effect. IMHO of course.
5. rich said...
While I also subscribe to the "common sense" view that BTL investors have added to house price inflation, I'm not closed to the idea that it could be wrong. I'd be interested to see his workings.
Can anyone see a way to get hold of his papers?
http://www.rdg.ac.uk/crer/ball.html
6. dohousescrashinthewoods said...
I think BTL is a good thing. (don't hit me just yet!) There is a lot of talk about how bad it is and about nasty orange ladies in Mercedes, but if I had the opportunity, it would be a welcome way to diversify my income. (I think it's risky only having a job as a source of income - eggs, basket..)
Surely the market will stabilise (anecdotes suggest it is out of whack at the moment). Too many BTLs causes rents to drop and landlords to be forced out because of falling yields. Too few causes rents to rise and landlords to be attracted in. (Caital growth expectations in the mix as "sentiment"?)
At the moment "no-one" wants a pension and "everyone" wants five houses but that should get cleared up (however painfully) in the recession/depression/HPC. (I noticed Standard Life have seen good growth in their pensions this year, so it could be swinging already).
Soon things will return to normal with a healthy balance between BTL and ownership, which may not be what we expect. I for one am mobile and realising that I would much rather be mobile. The plan would be to buy (in order to satisfy my social cravings) and in fact let it out so I can live and work around the world with a base to come back to if and when kids happen. So in a sense, BTL, but renting too. I get to have fun exploring the planet and still end up with a house. Sounds nice.
7. Maddison said...
I am sure there are many people who are happy that rents have not risen much over the years due to lots of BTL. When I first rented a property with friends in Putney on 1995 it was £1100 pcm which took a significant amount of my net income. The same flat now is rented at £1500 pcm 12 years later and graduate salarys are almost twice what they were then.
8. Davros said...
One of the main advantages reasons for doing buy to let, if you ask the 'experts', is the number of first time buyers priced out of the housing market who have to rent the very properties that they would have bought.
Yet, we're supposed to believe that the two are not correlated?
9. sold 2 rent 1 said...
dohousescrashinthewoods,
Thats exactly what I did.
From 1994-2001 I only lived in my house for 3 years - moving away on 4 separate occasions.
One benefit that is rarely mentioned is you always have something to come back to.
If you are constantly moving and have nothing to come back to then there is a risk of becoming a nomad who doesn't belong anywhere.
Once the crash starts proper, we should all meet up in a pub to celebrate
Do it early whilst we all still have jobs
10. paul said...
"Do it early whilst we all still have jobs"
Good point.
I've been thinking hard about the current issues, and there is good reason to be worried that UK plc is heading for the rocks in a bad way. Two factors and one nasty side effect come to mind which bring about the "perfect storm" paving the way for sky-high interest rates.
1. Devaluation of the GBP. In light of the US experience where investors realised that only hot air was holding the currency up and the debt was heavily weighing it down, there was a flight as soon as the rate rises stopped and MEW (and future MEW potential) dried up. International currency traders are naturally a fickle and predicatble bunch, so I fully expect this to happen to GBP within the next 6-12 months. The MPC would have to raise rates to attempt to turnaround any slide in the value of GBP - they would actually have very little choice in the matter because they only have one instrument at their disposal to shore up the value of the currency.
2. Inflation. I am increasingly thinking that current inflationary trends are a direct result of MEW a couple of years back. If this is the case, the MPC hawks won't be able to let up in their attempts to staunch inflation. Ugly for those prople indebted. I also believe that current record-high wage demands are a direct result of MPC raising rates because so much personal income is being taken up by debt. In other words, in trying to extinguish inflation, the MPC are fanning the flames.
The combination of these could see rates going very high, crashing the housing market and burning the fingers of anyone who bought houses after around early 2005. The outcome will be a deep recession as discretionary spending evaporates. City redundancies, followed by national redundancies followed by business closures. The high street survivors will be the Matalans, Primarks and Pounlands. The other retailers will suffer.
Not an optimistic outlook but the record asset prices combined with record currency value are a recipe for economic disaster. The only mitigating factor will be if they don't happen at the same time, but it's very likely that one will trigger the other. Very soon too.
Be careful what you wish for because we're looking down into an abyss - your parachute will be your savings (if you have any).
11. Pedagog said...
Sorry to sound 'chavish' but 'Bring it on'.
If you want to be safe then change job to a safer career. Personally I switched to teaching several years back.
There are certain jobs which see few redundancies at times of economic crisis.
We are moving to a different area at the moment but we are going to sell and rent rather than buy. The area we are moving too is unafforadable for us now but in a years time that may have changed. Lets hope so.
12. Nasha said...
I think his argument is valid, although I don't believe it to be true. Greed has pushed up house prices and that greed has come from a mix of sources including BTL.
Paul ... "your parachute will be your savings"
Indead, but what currency do you think will be best to have your savings in? I've just opened a € account and am in 2 minds to transfer part of my savings into it.
13. glorious sunshine said...
Davros,
You have more money than sense! If I could rent Buckingham Palace or Windsor Castle for 1K a month I would not touch it as it’s a waste of my money unless I could sub let to offset that 12K per annum. People like you are very dangerous on these message boards spouting out advice to the vulnerable. You should carry a health/wealth warning on all your dud advice.
Do you realise there are many people out there earning far less than 1K per month reading your crap and acting on it?
You’re living beyond your means in a property you can not afford.
14. millard said...
I'm hoping to move jobs in the next couple of weeks in to "corporate refinancing", debt or insolvency as it really should be called, I've been looking for a recession proof job and it's about as good a fit as I can find.
While it’s not really where I want to be long term it offers a degree of protection that other positions can’t, plus it looks like a steadily increasing flow of business may well be ahead.
15. sold 2 rent 1 said...
Nasha,
It is good to diversify out of GBP.
The Euro pays a low IR and is quite high already relative to the dollar.
A few more euro rate rises will make it go higher
The Yen pays virtually nothing but there is 1 trillion in the carry trade that could "go home" soon and cause it to appreciate fast
My diversification includes:
gold mining stocks in an ISA wrapper
silver ETF
Turkish Lira earning 17.5%
Japanese equities
16. paul said...
glorious sunshine,
Welcome back! You don't seem to visit that often nowadays. Do you think they'll raise rates again tomorrow? If not then next month? I think so too.
Like the weather tonight, do you think there might be trouble ahead? Yeah, me too.
I don't see anyone giving financial advice, but I see someone thrashing around trying to deny the inevitable coming crash. Sleep well, and get ready for the coming storm.
17. paolo88888 said...
dohousescrashinthewoods,
The problem with renting and BTL is that it is very tax inefficient. You pay income tax on the rent received and capital gains tax on any HPI. Void periods and management charges are additional overhead. And it is difficult to end the arrangement to buy a house because you may not wish to evict tennants to get your money back. As well as the risks and getting "tennants from hell".
As regards the original article, it seems quite reasonable. Without BTL, the tennants would have to buy the houses, so the demand would be the same, so the prices should reach the same level. You might think that landlors would have to drive harder bargains on the prices because they have more overheads to absorb than private purchasers.
18. glorious sunshine said...
Dream Paul, dream on!
I don't post so much now as it’s all a little boring and the same, although there are a few more varied posts these days that makes me think I am not on a HPC site.
Whatever interest rates do though those prices are not doing to drop - least not around my part of the world. Anyway, time will tell the tail and its better to loose 100K and be on board than loose 100K and be locked out in the snow (tomorrow). As with all things you pay your money and take your choice. My money is being on board! Good luck to everyone whatever your preference.
Just hope you don’t sway too many naive and vulnerable people into fucking up their lives!
Until next time, TTFN
19. paul said...
Well, it's been a bit boring for us to, glorious sunshine. But only since you graced us with your presence.
"Better to loose(sic) 100K and be on board than loose(sic) 100K and be locked out ... "
Yeah, umm ... difference is you only lose the 100K if you jump on a boat heading for the rocks.
If you don't get on board you can keep the money and still afford to book the penthouse overlooking to the harbour to watch the ensuing shipwreck.
"Just hope you don’t sway too many naive and vulnerable people into fucking up their lives!"
Haha. You mean by swaying people to join you on the shipwreck? No thanks, the views better here and more interesting.
20. glorious sunshine said...
Doom and gloom paul!
Just as the sun will rise in the morning and melt the snow, house prices keep on rising. With all this inflation you talk about reducing our debts and pushing house prices further.
The outlook looks calm and very sunny to me. Why not enjoy it?
21. george monsoon said...
sunshine.. the outlook is not the same for everyone, and just like the sun must shine, so must it rain.
And rain it does.. on the young and priced out, because all the wealth has been squandered by the older generations.
22. Davros said...
> You have more money than sense!
That's because I'm not paying close to 2K a month in a mortgage, but 1K.
I don't remember offering anyone fanancial advice, however you see fit to tell offer ill informed assurance to anyone who'll listen that house prices won't crash.
Perhaps you can find me a 3 bed detached property in a posh part of Surrey for a mortgage of 1K a month and post it here?
23. dohousescrashinthewoods said...
Strange, the snow didn't melt this morning. Anyone surprised, considering it's the depths of winter? I thought not.
GS, are you Kirstie Allsopp, or one of her propaganda fans (http://www.weluvkirstie.com/ - I kid you not, it's real)? I infer from your command of the English language that you may be a fairly blunt instrument, perhaps not developed with an accurate reading of market conditions in mind. If it's summer and sunny today, I could easily crow and browbeat about it being sunny tomorrow and make myself feel smug. Statistically I will be right, until I'm wrong.
Will you be joining us for the pub meet when the crash starts?
24. Davros said...
BTW, I'm saving close to 1K a month, I live in a house I couldn't afford to buy in the area I want to live in, all maintenance is done for me, I don't owe anyone a penny and what I've saved over the years is in a broad range of investments.
Yet, according to glorious sunshine, I should severly compromise my quality of life, give up all my savings and mortgage myself up to the hilt in order to live in a smaller place in a grotty area I wouldn't want to live in.
Now which seems the most sensible decision?
25. glorious sunshine said...
Davros,
You said you were renting for 1k/month not mortgage repayment!
If you are as previously stated renting a 300k property for 12k/annum you do in fact have more money than sense as you are wasting 12k net!
I stand by my previous statements.
Prices generally won’t fall. Home ownership is a relatively recent thing (post WWII) we are just going back to the bad old days of slavery and wealthy land/property owners controlling the population.
Home ownership is a privilege not a God given right.
You need to decide which you want to be.
26. Davros said...
There is a good time to buy, that was 10 years ago. There is a bad time to buy, now. Your assertion that house prices won't fall is utter nonsense. I shall be a homeowner when it is better for me to buy rather than rent and that time certainly isn't now. If you had an ounce of common sense you'd do likewise.
27. glorious sunshine said...
Case closed.