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slacker

What Changed To Make Btl So Popular?

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BTL was a rarity (I remember one person doing it in early 90s), now many people we know have at least one other property which they rent out.

One of them has a mini empire - adding a new one every month or so. Some friends appeared to come in to a few quid recently and BTL was top of the list.

I seem to remember this happening before IRs dropped.

What was the catalyst for it?

Edited by slacker

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Tory 1988 Housing Act which created insecure short term tenancies on the landlords terms, with relatively easy and straightforward eviction process.

Edited by aSecureTenant

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BTL was a rarity (I remember one person doing it in early 90s), now many people we know have at least one other property which they rent out.

One of them has a mini empire - adding a new one every month or so. Some friends appeared to come in to a few quid recently and BTL was top of the list.

I seem to remember this happening before IRs dropped.

What was the catalyst for it?

I think evolution in mortgage market, so availability of finance was the biggest driver. If people can borrow, they will. Add to that a shortage of house building and you're onto a winner

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You used to have to reside in the property that had the mortgage on, not take out a mortgage for another house that you didn't live in.

I think that's right, My neighbour tried to re-mortgage his wife's pre marital home which they were renting out and it was refused point blank, he had to re-mortgage the family home.

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Scrapping of the dividend tax credit, made BTL pensions make more sense.

Removal of MIRAS gave an innate advantage to BTLers over owner occupiers.

24/7 property porn.

Dot com bubble scared people away from shares.

Only exact things I can think of.

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Government wanted lots of rented accommodation to hide their migrant labour policy push. Student rental demand heavily affected lots of areas too, tertiary education establishments encouraged to grow and no need to provide any accommodation themselves to satisfy demand.

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Government wanted lots of rented accommodation to hide their migrant labour policy push. Student rental demand heavily affected lots of areas too, tertiary education establishments encouraged to grow and no need to provide any accommodation themselves to satisfy demand.

That has all changed now though? Lost count of the student "villages" that I keep coming across in Edinburgh, BTL in those areas must be feeling the pain .

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House prices rising faster than wages created a positive feedback loop whereby people who already owned property could withdraw equity to use as a deposit faster than potential FTBs could save one out of wages.

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For years prior to the introduction of the AST properties were left empty rather than let to "trouble some " tenants. It took a while for the mentality to change but once it did BTL kicked off big time. Initially I get the feeling very little money was borrowed as the money came from mature adults who had inheritances, redundancy money, insurance policies etc.

Introducing cheap and easy money took it up another gear and became possible for another generation (some with very little income or money) to jump on board.

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House prices rising faster than wages created a positive feedback loop whereby people who already owned property could withdraw equity to use as a deposit faster than potential FTBs could save one out of wages.

One of the many reasons the young are pissed off.

Edited by 7 Year Itch

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1. Private sector pensions are rubbish compared to public sector ones.

2. People saw more security in bricks and mortar than in share based pensions.

3. Increase in student numbers.

4. Dinner party conversation.

5. Everyone else is doing it.

6. You can't fail with BTL darlink.

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Availability and ease of credit (i.e. mortgages).

Landlords were wealthy people who happened to own more buildings than they could use. Renting was always more expensive than a mortgage because the landlord was arbitraging his superior credit rating. Lending on property that the borrower wasn't going to live in themselves was considered rather risky. Remember when remortaging was something only cads did - "A second mortgage, Dierdre - the man must be a Communist spy!"

Leveraging property is now the preserve of every moron, not just those that are already rich.

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2. People saw more security in bricks and mortar than in share based pensions.

Plus the increasing suspicion and distrust of private pensions. Those who had them got annual statements and saw the volatility of the market and the charges extracted from the pension pot.

I knew a guy who sold them after one weeks 'training'.

Edited by juvenal

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2. People saw more security in bricks and mortar than in share based pensions.

Equitable Life?

A lot of Boomers lost a lot of money in that one, those that didn't knew people that did.

Also the end of the dot-com bubble, no-one wanted to be near the stock market either.

Factor in declining annuity rates making private pensions even more expensive and the fact that house prices were starting to shoot up anyway and, hey presto, everyone wanted to chuck every spare penny into bricks and mortar.

Edited by Goat

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Because it's "easy" money which requires very little effort to get a profit.

Groucho Marx I'm sure said something along the lines of the 20's share bubble "I've made several thousand dollars and done nothing today".

Why work when you can get "free" money by the value of your BTL empire going up and up and up.

As noted elsewhere Brown fecking about with pensions / interest rates and the dot com crash all helped to push people to alternative investments.

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Might have been BS but in the 80's I was told that financing a BTL required a min 30% deposit and the loan was to be paid in 7 years.

A common theme of home ownership back then was that the mortgage cost more than renting initially but parity came in at about 5 years.

A house nearby converted to 6 flats had between 2000 to 2006 at least 10 tenants that bought their own properties because the mortgage was cheaper than renting. Sort of a courtship ritual, hook up, shack up in a rental for 3 to 6 months to see how they get on, then buy a place.

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Labour changing the way that Local Housing Allowance levels were set so that they automatically tracked the 50th percentile of local rents.

This also created a positive feedback loop by eliminating the incentive for landlords to offer anything for rent at less than last year's 50th percentile, setting a floor under rents in the lower half of the market. When the 50th percentile was recalculated the next year it had - surprise surprise - increased, which meant the LHA rate also increased, which set an even higher floor under rents etc etc

This is how we got to an annual spend of £25bn on housing benefit and the DWP paying >40% of the total rent bill in the "private" rental sector.

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All the above plus the demutualisation of building societies turning them into banks.....equity withdrawal rule changes to enable further property to be purchased from gains made on existing property, the end of protected rents and sitting tenants new AST rental contracts. ;)

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An obsession with housing and money fuelled by Property Porn tv. A few below...

A Place By the Sea

A Place in Greece

A Place in the Sun

A Place in the Sun: Home or Away

Build a New Life in the Country

Build, Buy or Restore

Changing Rooms

Did They Pay Off The Mortgage In 2 Years?

DIY SOS

Escape to the Country

Extreme Makeover

Grand Designs

Grand Designs Abroad

Home

Home From Home

Homes Under the Hammer

Honey I Ruined the House

Hot Property

House Auction

House Busters

House Chain: Under Offer

House Doctor

House Hunters in the Sun

House Invaders

House Price Challenge

House Race

Houses Behaving Badly

How Not to Decorate

How To Be a Property Developer

How to Rescue a House

I Want That House

I Want That House Revisited

Living in the Sun

Living etc

Location Location

Making Space

Moving Day

My Place in the Sun

Nice House… Shame About the Garden

Other People's Houses

Our Home

Pay Off Your Mortgage in 2 Years

Property Dreams

Property Ladder

Put Your Money Where Your House Is

Relocation, Relocation

Restored to Glory

Room For Improvement

Selling Houses

Staying Put

Streets Ahead

Super Agents

Superhomes

Through the Keyhole

To Buy or Not to Buy

Trading Up

Uncharted Territory

Up Your Street

Would You Buy a House with a Stranger?

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The single biggest starter was the 90s HPC.

A lot of people found themselves wanting to move but unable to sell their house. The banks started out tentatively offering a few rental mortgages in the light of the new ASTs. These original "accidental landlords" found it worked - as did the banks. The rest is history (and an enormous wall of borrowed money).

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The single biggest starter was the 90s HPC.

A lot of people found themselves wanting to move but unable to sell their house. The banks started out tentatively offering a few rental mortgages in the light of the new ASTs. These original "accidental landlords" found it worked - as did the banks. The rest is history (and an enormous wall of borrowed money).

I think the shape of the house price graph in the period 1989-1997 was pretty formative for people born in the 1950s-1960s.

Nominal prices:

real-nominal-house-prices-717298.jpg

The early 1990s HPC was primarily a crash in real terms and house prices didn't fall very far in nominal terms. By 1997 the next bubble had lifted everybody out of negative equity and the lesson learned was: HPCs don't really matter, all you have to do is wait a few years and the market will inexorably rise again.

It's clear from the mainstream discourse today that this folk memory from the 1990s is alive and well. Almost everybody assumes that even if there was a bit of an HPC, nominal prices would inexorably rise and bail everybody out again within a few years. The idea that house prices might fall significantly (50%+) in nominal terms and stay there for decades is totally off the radar.

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