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olde guto

The Rise Of Btr

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We've seen some of the recent coverage of L&G getting involved in BTR but this is first definite scheme that I've seen details of to come from their announcement (everything else just gave a list of towns).

http://www.bristolpost.co.uk/150-new-homes-built-Bristol-city-centre-won-t/story-28661489-detail/story.html

This should hopefully add to the misery of BTL LL, might even panic a few more into selling.

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Is this the main reason for BTL assault. Mom and pop type BTLers have generated a rental market and now time to throw them out of market. Big boys always win.

BTLers have generated a rental market by outbidding working young people for existing residential properties using interest only finance, thus forcing them to rent against their will. At least the "Big boys" are actually building to rent rather than making risky deals with bankers to exclude people who would prefer to be owner-occupiers from existing housing stock. Unlike BTLers they actually are providing housing.

Additionally, I don't think it makes sense to label an increase in BTR as the main reason for the change in policy direction towards BTL as BTL does not appear to be the main obstacle to firms that would like to BTR. BTRers are by definition not interested in existing housing stock and so aren't in competition with BTLers (or FTBers, for that matter) for existing properties. They're also likely to be able to outcompete many BTLers in attracting tenants simply through economies of scale (BTRers can potentially afford their own dedicated on call electrician, plumber, janitor, etc and so they can offer better standard accomodation at the same rents or lower, because they're also likely to be able to undercut BTLers in order to attract tenants and financially weather the hit if needs be) and because a significant number of people would generally prefer to rent from a professional organisation with all of the increased stability that implies.

It seems to me that the limiting factors for BTR have previously been planning permission and excessively high land prices, which reduce yields. AIUI planning constraints have largely been alleviated at this point, hence why an uptick in BTR makes sense. Were land prices to correct then BTR would likely become much more attractive than it is now and expand further still.

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Life companies sunk a *lot* of money into commerical real estate - shopping centres and the like.

Putting aside that life cos were massive scams. the idea was that commercial property would provide an infation linked return that would beat governmenr bonds.

They were very wrong - as the empty shops pi;e up.

If they'd bother to think it thru and do something like the Barbican in major cities then they would have been on a better ground.

The problem with rental property in the UK is it tends to be let to the poor and dysfunctional.

They need to develop a model based on letting property to the well-off but short term.

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In London there is loads of purpose-built student accommodation being built. I wonder how much demand that will take out of the one property landlord rental market?

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Gut feel is BTR works. Since they're building new properties, it doesn't put upwards pressure on existing houses (unless Gidiot throws them some tax fix).

Spyguy is right, to make a sustainable return you want a target audience that has a regular income; effectively they need to price attract FTBs to give up home ownership - the best way to make the rents really affordable. They can then mark up with 'homeserve' type insurance to cover maintenance, insurance, and upgrades.

The best thing. It puts downward pressure on rents and the remaining OO stock (since there would be fewer buyers)....BTL get shafted :P

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In London there is loads of purpose-built student accommodation being built. I wonder how much demand that will take out of the one property landlord rental market?

Especially if an international recession deters foreign students - the London Russell group universities have about 1/3 of students from overseas...

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Is this the main reason for BTL assault. Mom and pop type BTLers have generated a rental market and now time to throw them out of market. Big boys always win.

I'll take any help I can get tbh

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In London there is loads of purpose-built student accommodation being built. I wonder how much demand that will take out of the one property landlord rental market?

That market has been destroyed in Leeds. I assume it has been in other provincial town by the big student flat builders.

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At least the "Big boys" are actually building to rent rather than making risky deals with bankers to exclude people who would prefer to be owner-occupiers from existing housing stock. Unlike BTLers they actually are providing housing.

They do not provide building land though. The land is the issue, not the buildings.

Building and letting houses is just a front business. The real 'business' of landlords is blocking people from establishing homes, and then charging them to stop.

If it was just the buildings, then no-one would care about the activity of landlords. They could buy as many houses as they wanted, it wouldn't stop you from buying another house from another company, or building your own. If the total demand couldn't be met, we'd all start building companies until it was. If the cost was too high for people, that would leave scope for low cost innovators to mass produce cheap homes using unusual materials, undercutting the expensive luxury home builders.

They might try and bid up the second hand market at bit, but it wouldn't be profitable because they'd simply be ignored by people buying houses from other companies, and so would have no customers. It'd be like trying to corner the market for cars or food.

In other words, houses by themselves behave like any other free market.

If you don't have land though, you have nowhere to put your house and all this is moot.

Land does not behave like other free markets. Government allocated the land, mostly before any of us were born. If you want some now you have to buy, or rent, from one of the state sanctioned 'owners'. There's no alternative.

This means undercutting current owners isn't possible and there is no meaningful competition. Without the risk of being undercut landowners can, on aggregate, can charge as much as the buyer is able to afford.

The land market is a state operated licensing scheme. A market of sorts but not a free-market.

Edited by BuyToLeech

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Sorry, you're in cloud cuckoo land. How does this help? Do you think that these new developments would not otherwise be built? Of course they would. At the first sniff of planning permission developers would be delighted to build these blocks. But they would instead be sold to owner occupiers.

Apart from in some emotional sense, this is no different for the HPC cause from a block being built and all sold off-plan to greedy, over-leveraged, self-entitled, Daily-Mail-reading baby boomers. The tenants might get a better deal. But they'll still be tenants. And by sucking up supply of newly-built flats this will take the pressure off BTL landlords who are bailing out. First-time buyers will find there are rather less executive slave hutches on the market (because they're going straight to rental), so that segment of demand will be redirected towards buying the older housing stock that landlords want to off-load.

If you want better conditions for tenants then this is a big move in the right direction. If you want a house-price crash, and a swing back towards owner occupation then it's bad news.

As far as I can tell this forum is becoming more about tenants' rights than it about a collapse in prices.

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Gut feel is BTR works. Since they're building new properties, it doesn't put upwards pressure on existing houses (unless Gidiot throws them some tax fix).

Spyguy is right, to make a sustainable return you want a target audience that has a regular income; effectively they need to price attract FTBs to give up home ownership - the best way to make the rents really affordable. They can then mark up with 'homeserve' type insurance to cover maintenance, insurance, and upgrades.

The best thing. It puts downward pressure on rents and the remaining OO stock (since there would be fewer buyers)....BTL get shafted :P

Not to give up home ownership. Rather offer 20s+30s somewhere relative cheap and central, close to theirwork, so they can can save a deposit.

This would be to let FTBs give up buying a crappy started home.

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The have some of these where I live but it seems to be the flats they couldn't sell.

Not as good as buying but a whole owned block will have then additional benefit of anti social idiots being evicted promptly. Single flat landlords aren't going to care but if the rest of your tenants are going to move out you will fix it.

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Sorry, you're in cloud cuckoo land. How does this help? Do you think that these new developments would not otherwise be built? Of course they would. At the first sniff of planning permission developers would be delighted to build these blocks. But they would instead be sold to owner occupiers.

Apart from in some emotional sense, this is no different for the HPC cause from a block being built and all sold off-plan to greedy, over-leveraged, self-entitled, Daily-Mail-reading baby boomers. The tenants might get a better deal. But they'll still be tenants. And by sucking up supply of newly-built flats this will take the pressure off BTL landlords who are bailing out. First-time buyers will find there are rather less executive slave hutches on the market (because they're going straight to rental), so that segment of demand will be redirected towards buying the older housing stock that landlords want to off-load.

If you want better conditions for tenants then this is a big move in the right direction. If you want a house-price crash, and a swing back towards owner occupation then it's bad news.

As far as I can tell this forum is becoming more about tenants' rights than it about a collapse in prices.

Helping make the current BTL business model unsustainable, forcing or panicking BTL LLs into selling-up, making banks a bit more wary about lending for BTL, helping stop new entrants into BTL, all of this and more can help contribute to an HPC.

Also as many of us are renting until house prices crash we'd be morons not to want better tenants rights, mind you I suspect there may be a few people here who are waiting until the HPC to buy themselves a nice little BTL portfolio who might not welcome this sort of thing.

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Yup, read the L&G comments- 'disrupting' the current model of BTL. Sounds good to me.

Of course, if the assumptions about BTL being responsible for 80%+ of recent construction hold water, as is often mooted purely on the back of the fact that those are the hands it ended up in, then we'll see quite a drastic reduction in construction.

besides, I doubt the average developer gives much of a fig about enduring aspects of the build if their involvement ceases once Reckin crew sign on the line. it *might* be possible to get stuff build that people might enjoy living in.

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Is this the main reason for BTL assault. Mom and pop type BTLers have generated a rental market and now time to throw them out of market. Big boys always win.

government created a BTL private rental market by getting rid of council housing.

everything else flows from that including the frankly insane situation of a Tory govt. throwing 40% interest free loans at Londoners.

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Yup, read the L&G comments- 'disrupting' the current model of BTL. Sounds good to me.

Of course, if the assumptions about BTL being responsible for 80%+ of recent construction hold water, as is often mooted purely on the back of the fact that those are the hands it ended up in, then we'll see quite a drastic reduction in construction.

besides, I doubt the average developer gives much of a fig about enduring aspects of the build if their involvement ceases once Reckin crew sign on the line. it *might* be possible to get stuff build that people might enjoy living in.

Finally, someone who gets it.

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What's the hoopla here?

Surely substituting private landlords for institutional ones will have little effect.

The upside is the pension funds have more clout and can probably built these in better or prime locations and not on the periphery of former brown-sites or dilapidated urban centres, as the smaller players see to be doing.

Besides, who wants to live in a multi-story such as the one in the article?

Can't see Brits happily taking on this housing model prevalent in Scandinavia.

If it's not council / state controlled the point is kind of moot.

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I am all for the biggies entering the market. At least tenants will have somewhere decent to live, timely maintenance and reasonable rent(hopefully). Question I had was why are the big boys entering now? Why not earlier? Were they waiting for a rental market to establish?

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I am all for the biggies entering the market. At least tenants will have somewhere decent to live, timely maintenance and reasonable rent(hopefully). Question I had was why are the big boys entering now? Why not earlier? Were they waiting for a rental market to establish?

Because contrary to the reason given by the Treasury (and popular opinion) the recent changes to the tax regime are not about "leveling the playing field" between owner occupiers and landlords. I don't believe they will have much effect there. It's about replacing small private landlords with larger corporate ones. That is now the vehicle which the tax system favours.

I think this will be good for tenants, in the sense that real cowboys and incompetents will certainly diminish, and longer tenancies will be welcomed. I doubt it will affect rents much (at least not downwards). And it's got nothing much to do with a house price crash, except our boilers will be better maintained while we wait for one.

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Question I had was why are the big boys entering now? Why not earlier? Were they waiting for a rental market to establish?

Probably because there is less risk in the British property market?

Pension funds are getting hammered by their heavy exposure oil and gas, banking, big auto, and other not-so-sure-bets.

For example, Canadian fun OTPP has a massive ($20 billion CAD) and very successful portfolio including some big British names; ACORN, CAMELOT.

http://www.otpp.com/investments/asset-groups/private-capital/portfolio

Not too shabby for a bunch of Ontario schoolteachers, all 115,000 of them!

That amounts to about $350k per teacher. Not bad a bad racket at all, innit?

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