Tuesday, Jul 25, 2006

Are buy-to-lets unethical?

Ethical Consumer Magazine: Are buy-to-lets unethical?

Great article from Ethical Consumer Magazine published on the web for the first time by PricedOut.org.uk.

"What are the real costs of the recent trend for buy-to-let investments? Are they as ethically neutral as most people assume them to be? Simon Birch investigates."

Posted by pricedout.org.uk @ 11:39 AM (619 views)
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1. Babitat said...

It's not really fair to asses this based on one half the market cycle (rising house prices).
When the market dips a lot of BTL investors will be stuck with a house they cant sell or make a profit on.

Tuesday, July 25, 2006 12:30PM Report Comment

2. Mikexx said...

Buy-to-lets aren't themselves unethical. Problems in the far flung Highlands, where the indigenous can no longer afford to buy a house, are just another symptom of the housing shortage. The shortage problem in rife elsewhere. Low interest rates exacerbate the problem together with the smart money moving in to make a fast buck. It doesn't normally pay to go against market forces and with the continued shortage of housing from local authorities, the private sector will continue to expand.

The only permanent solution to cope with the demand and influx of immigrants is to give local authorities targets of new builds, and to penalise them if they fail.

Tuesday, July 25, 2006 02:27PM Report Comment

3. Housepricelottery said...

Well you might not agree or disagree on them being ethical but they are definitely causing a major problem right now, given a finite amount of houses, high prices and an unprecedented influx of BTL activity. It's house price speculation pure and simple. Be sure to check out this article if you have any doubt about the scale of them problem: http://www.pricedout.org.uk/Articles/TheIssues/BuyToLet/tabid/141/Default.aspx

Tuesday, July 25, 2006 02:56PM Report Comment

4. paul said...

Taxing vacant properties at the full rate is one way that Pembrokeshire CC has prevented too many second home buyers.

In other words, leaving property vacant has an associated cost.

Tuesday, July 25, 2006 03:11PM Report Comment

5. Daopig said...

The work ethic has been trashed. Who would have thought that the downsizing phenomenon of the 1990s would have such a long-term effect.
Now the relationship between employer and employee is often one of mutual suspicion, exacerbated by socialist nannying and interference.
The adjustment younger people might be making is to look for ways to make money with minimum effort. Perhaps a mind-set correction will come when people realise that success is a better way to happinness than mere money. And success implies winning something against the odds, rather than a lucky number on a lottery or a reality TV game show or exploiting champagne-socialist naivety with respect to interest rates.

House = Shelter != Equity
Let's face it, when the bank of England eventually halls up the interest rate net, this time it will be a record catch. A bubble is a bubble is a bubble.
If the housing market does become more like the equity market then correction might stay closer to the profile, but personally I don't reckon bricks and mortar do a very good impression of an equity. They don't represent anything more dynamic than over population. Whereas investors help to pay salaries, speculators help to prevent increasing numbers of people from achieving domestic independence.

Tuesday, July 25, 2006 03:26PM Report Comment

6. Bloody Annoyed said...

What exactly is the shortfall in property in the uk.is there an official measure of this.if people were living in the 700000 houses that are currently empty how much would that reduce the shortage.Is there enough room for everybody but are greedy bastards holding the rest of us to ransom. If this is the case then this needs government intervention.Everyone needs a home.This situation cannot continue.

Tuesday, July 25, 2006 03:50PM Report Comment

7. inbreda said...

Who says this site is bias?!?!?!

I think the above comments go to show how balanced the arguments really are. And the fact that the vast majority of comments I read on this site are well thought out and intelligent affirms the majority view that things are going to get very nasty quite soon.

Tuesday, July 25, 2006 04:08PM Report Comment

8. Nelson said...

A friend of mine has just BTL an ex-council flat in wandsworth with her boyfriend because they 'can't afford to live in it' themselves (quote) - and have to rent a room in a shared house. First time buyer/landlord. For me, that sums up just how crazy it is all becoming. The only people I know who are buying are buying ex-council - i.e they can' t afford anything snazzy - and are renting it out while still renting themselves.

Tuesday, July 25, 2006 04:56PM Report Comment

9. European-bear said...

The present point is the cycle is fed by speculation, (prices always go up don't they)....but there is plenty of evidence that buying BTLs in many, probably most places is simply uneconomic in terms of price to earnings, so most BTLs buying in now are hoping for capital gains. This cannot continue indefinitely (if it can't go on it won't)....and is a classic pyramid. indeed BTLs who have MEWED their way to 5 or more properties may well be very exposed (something has to pay their mortgages!) One prices turn, then the price will keep on going down and down. How far it goes down depends on the economy and sentiment. I for one think 30% slow retrenchment over 5 years (inflation adjusted) is the most likely scenario, begining anytime soon. But there is also a real risk (or perhaps it would be joy) of a Japanese style 75% meltdown over 10-15 years (its the japanese who invented many exotic mortgage products in the late 80s which we are starting to see in the UK). As for local communities...well if people cannot afford a mortgage, they will not afford the rent demanded by landlords (to pay their mortgage), and so leading to sales once the landlords realise what economic crap this is. And finally as for the north of Scotland, that really is one area with very low population and it it just a matter of easing planning restrictions and giving people land to build on (it cost remarkedly little to build a house...I know I have done it...it is the land that costs maybe up to 75% of the price.....). Capitalism might well work, I just hope a few big lenders go under when the crash comes as that will be the best insurance that HPI will not happen again.....as most of the problem is caused by a combination of "house prices only go up" AND "IF YOU HAVE A PULSE WE WILL LEND YOU 100% (OR MORE) OR THE PURCHASE PRICES"

Wednesday, July 26, 2006 07:19AM Report Comment

10. Ceano said...

Nothing significant will happen until Gordie is in No. 10. After that he won't care.

Wednesday, July 26, 2006 09:40AM Report Comment

11. Miniftse said...

Sometime I wonder just how much of a problem the current bubble really is? As a point of interest I think it would be interesting if everyone here said how much they earn a month. I bet a lot of people could afford 500 a month to get on to the ladder, you just don't want to cos 10 years ago it would have cost you 50 a month; but 10 years ago house prices were as much undervalued as you guys think they are now overvalued. I do think there will be a dip over the comming years and people with 1500 a month interest only mortages will come un stuck, but hasn't in always been hard and isn't it nature that it will only ever become harder? Being a bit of a devils advocate here. Afther a reasonable pension contribution and a 100 a month to pay of my student load I earn 1500 a month, I can afford to to pay 750 a month on repayments, I'm just reluctant.

Wednesday, July 26, 2006 10:41AM Report Comment

12. Housepricelottery said...

> I bet a lot of people could afford 500 a month to get on to the ladder

Pray tell, where exactly can you get on the ladder for 500quid a month? Oh and you are kind ignoring the small and not so insignificant bit about that 500 turning into 750-1000 a month if rates go up aren't you!!!!

Wednesday, July 26, 2006 12:42PM Report Comment

13. inbreda said...

Miniftse - if you're admitting that prices are overvalued why would you expect anyone to buy? And why would you be surprised to find sensible people becoming impatient with a market that is held up by extreme front page Daily Express headlines and vast numbers of ignorant readers rather than any kind fo reality?

Wednesday, July 26, 2006 02:14PM Report Comment

14. Miniftse said...

HousePriceLottery - you see this is why I think some of you guys may be missing the point. Here is a typical 1 bed place in a good area, at the very heart of Edinburgh City centre...


It will go for about 20% over the offers over price, lets say 100k. That works out at about 500 a month. And why would worry about interest rates? You can get a 10 year fix at nationwide at 5.18%, if you really want to fixed for the duration of your mortgage you will get a fix at less than 6%. The property will yield 500 a month rent, if you chose to rent it out, rent will most likely keep place with earnings so will probably go up in future. I think this generation doesn't believe the have to start small like their parents had too and move up? They expect it all now.

Wednesday, July 26, 2006 02:16PM Report Comment

15. Miniftse said...


"If you're admitting that prices are overvalued why would you expect anyone to buy?"

Exactly because their are 'vast numbers of ignorant Daily Express readers'.

Bubbles will last longer than rational people expect because there are irrational people. But as much as the sensationalist press paint the wrong picture, so does the graph on the main page of this site (not to the same extent ofcourse), but it's title is 'Real House Proces' (meaning accounting for inflation) but if you actually map the average house price in excel, the very real number of pounds leaving the account (ie not accounting for inflation) has only dropped once in history (89). It didn't drop in 1980, ie. if you had bought in 81 you would have paid more than in 80, if you had bought in 80 you would have paid more than in 79. So the longer the sensible person holds out, the less time they are paying their own martgage.

I do think they need to come down (to a degree), but I'm not sure it will be massive. It is grossly unfair, we live in a crazy world, but I'm just not sure we should bet against it at all costs. I think some FTB expectations are also inflated.

Wednesday, July 26, 2006 02:37PM Report Comment

16. Daopig said...

Scotland. Yes, the country has been emptying and there are affordable places to live in Scotland. But generally speaking : cheaper priced housing areas have little in the way of employment prospect. The best job are where? In the South East. To get started on the housing ladder down there I dont know what sort of salary would see you being able to eat and pay back your 50 year fixed-rate mortgage.

Wednesday, July 26, 2006 03:42PM Report Comment

17. Miniftse said...

Daopig, you seem to have a very london centric view of the world. If the best jobs are in the SE then why do the best jobs pay so poorly? It's just not true to say the best jobs are in the SE, more jobs, but no necessarily the best jobs. Have you actually visited Edinburgh? It's thriving; you suggest because you could afford to live there, that there are no job prospects - not true, it's a european financial capital. If you really want to take part in the rat race in the SE go ahead, but accept it's not called that for nothing, because it's a rat race, quality of living won't be as high as elsewhere, how about this place in Slough? Lots of jobs along the M4 corridor.


Wednesday, July 26, 2006 04:01PM Report Comment

18. George Monsoon said...

miniftse said "I think some FTB expectations are also inflated."

Absolutely correct, some FTB's are expecting their extortionately priced house to actually go up in value in the next 5 years!!

Ok. Im as far from expert as you can get without falling off the edge, but I will continue to shove my 400 quid a month into the rent drain until I can borrow 3.5 times my wage to buy a house, and afford the extra if the interest rates rise thereafter. Anyone care to contradict common sense?

Wednesday, July 26, 2006 04:30PM Report Comment

19. Indiablue19 said...

Miniftse --

I would differ about the flat in Haymarket as representative of any bargain price or lifestyle. First of all, this is the top floor of one of those massively high tenements, eight or ten flights of stairs each way [in a place that never heard of elevators], home of the dingie hallway and endless stairwells that smell of urine and sick. Mainly student digs. Generous guess, this "pied a terre" is 250 square feet, and by the foot probably on a par with much of London anyway. So, having paid 100,000 pounds for a large closet, even as a single person, plan to spend most of your time standing up or somewhere else! By the by, have you ever been in Edinburgh after 6 pm? It's closed.

Edinburgh is OK on the surface, some nice looking stone buildings, but most still covered in Victorian soot and falling apart. I'm the expert, four years and four flats later, we've got one that isn't spewing carbon monoxide into the bedrooms from an ancient gas flue, nor water through the livingroom ceiling from failed plumbing. If housing is somehow marginally cheaper in Edinburgh, that's no mystery. There has recently been a City survey to determine just how bad the condition is and what could fix the mess, that must be a stunning report indeed.

World Capital it ain't. There are three types of jobs: finance and accounting, education [university including medical college an obvious Edinburgh speciality], and government. Many skilled jobs are 20,000 pounds a year or less and they expect that employees will work "unsociable" hours and mop the floor before leaving. If there are many people from the "world" living in Edinburgh they are working at Starbucks and Tesco's trying to get through a Uni course.

Recent press says that relatively speaking [relative to salaries that is], Edinburgh is the most expensive address in the UK. Everything costs plenty in the largest imaginable tourist trap. Home, for example, of the most expensive taxi ride in Europe. To my thinking, all these things need to be put into perspective before deciding that a place is affordable, let alone desirable.

Wednesday, July 26, 2006 09:11PM Report Comment

20. uncle tom said...

As I've been away for a few days, I am late on parade here, - but just a thought..

Young people of below average earning ability now haven't a chance of setting up home on their own, and the government isn't even giving them hope that things will change..

- It won't take much to kick of a riot right now..

Wednesday, July 26, 2006 11:41PM Report Comment

21. Indiablue19 said...

Welcome back to the fray Uncle Tom! You have been missed by many who are musing aloud on this site....what would Unc' Tom will say? You may have some important catching up to do. For instance...any bets yet on BOE and interest rates/August?

Wednesday, July 26, 2006 11:53PM Report Comment

22. Miniftse said...

This discussion has been more enlightening than I could ever have imagined when I posted this afternoon. I have learnt a lot, my devils advocate statement this afternoon I fear is closer to the truth than I first thought (and clearly anyone responding to this forum will ever believe). George Monsoon\Housepricelottery you both worry about interest rates...a rise in interest rates will affect people with large IR only mortgages, fact. But also it is a fact you can fix your IR for 25 years at less than 6%...now...today, fact, so I fear you are putting an obstacle in your way that doesn't exist by worrying about interest rates.

Indiablue19, contrary to your suggestion in your first sentence, I didn't point to the typical flat in Edinburgh as being a "bargain", and by making such a statement you confirm my suspicions, you are looking for a bargain, I am merely looking for a way onto the property ladder. Infact you're comment is so rediculous I wonder why I bother to reply. I fear you expect too much, you don't just want a flat, you want a flat and elevator. A ground floor flat, as you have a fear of heights? I assume you have a fat arse and can't manage to sit down in 250 sq. ft? And you demand to live in a 24 hour 'World City'. You expect too much. BTW you also do very well to contradict yourself with comments such as, 'world city it ain't' but the 'largest imaginable tourist trap', what is that? Local tourists?

I fully accept that as a % of take home pay, a FTB's mortgage is higher than ever before, but I also suspect we have more disposable income than ever before so this really isn't a surprise. Since my parents bought their first place 25 yrs ago they have had to deal with 17% interest rates, we don't, we can fix for a long period of time at < 6%. I ask you, can you buy today what your parents bought, when they made their first purchase (probably as a couple)? Go an have a look at ta property for sale in the same street they bought. I can buy what they bought, and I suspect most others can. But you don't want to, you want to buy in London, and listening to Indiablue19, I assume you want to buy elevators (for some god unknown reason). You want to buy for prices people paid 10 years ago, but I reckon house prices were probably as much undervalued then as they are overvalued now.

And with regards to the original article, I think as a society it's wrong we have landlords owning 5 properties for a quick buck, a prime minister owning 4, but it should also be remembered, there are people doing an awful lot worse than the fly by night landloard (as inbreda point out our PM in the middle east for one).

Anyhow, cheers for the debate.

Thursday, July 27, 2006 12:26AM Report Comment

23. Indiablue19 said...

Dear Miniftse

Name calling doesn't make your statements more credible.

I think the limitation of your argument is that you assume everyone is you. Your credentials, your particulars and standards to cater for. Our family can't live on in a top floor flat of 250 square feet with a disabled father and two grown children who can't afford their own, [both still at Uni and gathering debt]. If you can carry a man up eight flights of stairs along with the groceries, you're hired. We stay together and living where we are for many reasons, people sometimes must live where the significant medical treatment is, or the job offered takes them, where they are accepted in school, or where they are needed by others.

My son has earned two credentials and can't find a job that makes a whit of difference to our financial stability because there are only three types of jobs -- none what he studied to do. I have a CV a mile long, but it doesn't coincide with Edinburgh's agenda either and I am not, like you, a recent graduate. You had said the property in Edinburgh is typical. It is. I was merely pointing out what "typical" means and that this is in fact what jobs in Edinburgh will probably support -- if you can live in it. That doesn't help many of us at all.

If Edinburgh is a financial Capital, or any type of Capital, few of us have noticed the benefit. A tourist trap is not a commercial centre of anything. It often profits those who, much of the year, live somewhere else. It pays low wages for tour guides. It is designed to cater for a certain idea at a particular time of the year. When the season's over it is closed. Those who still live there are dreadfully inconvenienced during the season and otherwise are lucky to find a job to support them, let alone the range of possibilities you have implied. There are many such places in Britain that are analygous and probably many who can relate to this issue of housing and work possibility.

Your original premise was "a lot of people could afford 500 pounds a month to get on the ladder." You didn't say single people, nor FTB, until later on you began to show that "a lot of people" means only people like you. The point is that many of us could pay 500 a month, but how does that help if you're buying a closet for a family of four? How does that help if you are best advised not to take on a mortgage and must buy cash with your hard won savings? The only thing that will help the prudent is for prices to become realistic, as Inbreda says.

I think the insulting part of your premise is that people should stop whining and live like you.
But if you propose to have "an" answer, it always helps to remember that there's more than one question.

Thursday, July 27, 2006 11:12AM Report Comment

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