When you find the right property, can you find the right mortgage?
What effect will the turmoil of the last few weeks have on the housing market?
Some commentators have suggested house price growth could slow significantly over
the next 12 months. Some
even believe prices could fall.
Meanwhile a group which represents would-be
first-time-buyers is arguing that buy to let investors are pricing them out of the market.
We asked for your comments, a selection of which are below. This debate is now closed.
As a full time property investor, I read all these comments with interest. Was I born a property investor? No - I was once a first-time-buyer. There is nothing to stop any first-time-buyer buying themselves a buy-to-let property and using that property to build a deposit for their own home. Buy-to-let mortgages are not based on your status or income. Anyone can get buy-to-let funding. I have properties in my portfolio valued between £400K and £500K which I could not afford to live in myself on a residential basis. However, I educated myself how to manage the risks and how to buy property with very little financial input. It took me three years to get into a position to give up my day job. So, instead of wasting time complaining about buy-to-let investors, get yourself educated how to do this, and buy some investment properties yourself. There is nothing to stop you other than your lack of knowledge or your lack of ambition.
Vanessa Warwick, Guildford
Can anyone come up with a plausible argument why the following should not be immediately implemented? 1) No one should be allowed to own more than one property in the same town. 2) No property, primarily intended as residential, should be used as a business premises. In fact no residential property should be owned by a business at all. 3) No one should own a property in this country, if they do not pay income tax primarily in this country.
Twenty percent of new mortgages granted have been for Buy to Let over the past couple of years but that that obscures the fact that as the vast majority of these BTLs are in the lowest price bracket they are, of course, excluding the first time buyer. With just a 10% downward move in prices, recent investors will go to the wall and release a great deal of property at a price young people may be able to afford - if Gordon puts the brakes on BTL tax breaks.
Buying a property is a huge risk; consider the monthly repayments, interest rate movements, possibility of negative equity, finding new employment in the event of redundancy etc. Property prices have hit all time highs recently due to people with little nous taking these risks and not considering the consequences.
The idea that buy-to-let investors drive out first time buyers is a myth. One of the reasons why house prices are so high is because people are choosing to live in smaller families or on their own. This means we need more housing than we used to for the same number of people, which pushes prices up. A rented house, on the other hand, will often house several people. If more people rent and share properties with other tenants, then there will be fewer first time buyers trying to buy houses. This means that in the long run buy-to-let investment will make house prices lower, not higher. Increasing the number of rented properties also keeps rents low for those who cannot afford to get on the housing ladder, and give them more choice. We desperately need more renting to help curb house price rises. I own one house, which I bought with a buy-to-let mortgage. I do not earn enough to get on the housing ladder the usual way, so buy-to-let for me has been a godsend.
I think the buy-to-let market has frozen out the first-time buyer by buying up the little, cheap houses, doing them up, and letting, at what seem to me, extortionate amounts of rent. These would previously have been bought by young couples, say. I am increasingly annoyed by the moans that nurses, police and firemen cannot afford to buy - if they can't, with their relatively high salaries, what hope for others who earn far, far less?
Buy to let is undoubtedly distorting house prices because it has broken the link between earnings and prices. In the past when prices grew too quickly first time buyers withdrew from the market, demand fell and prices stabilised. We now have a situation where first time buyers are virtually non-existent and the BTL market is rampant - last year in Oxford 92% of all new housing was 1 or 2 bed flats of which I estimate about 40% were BTL. We are told we need to build more houses because of 'demand'. When are we going to recognise that up to 30% of this 'demand' is from BTL investors who are forcing first time buyers into overpriced rental properties and the less well off onto local authority housing lists. As an existing home owner I can buy a BTL property with no deposit all based on expected rent and repeat this process indefinitely. This is creating a huge social time bomb which will be paid for by succeeding generations. Frankly, we have lost sight of the fact that a house is primarily a home and not a means of making of making money. Future generations will not thank us for this.
I think the feeding frenzy of greedy people out to get rich from housing is morally reprehensible. I'm a home owner, but Homes are for living in - not to make money!
If you want to help the homeless, keep nurses, doctors, teachers, researchers and carers in this country, stop buying to let! What will happen a few generations down the line when those who inherit several buy to let houses come in to play? Will it be a country split into little mini "Wessex"-like areas? Landlords who own sections of street vs those systematically forced into renting? Time to get a code-of-practice and regulation into estate agency methinks.
I found last year that estate agents often keep property details for 'buy-to-let' clients in the hope that the agents will then get to manage the letting. If they sell to a first-time buyer then they get the sale proceeds and that is all. Similarly if two buyers offer the asking price and one is a buy-to-let they will favour them for the same reason. It is very difficult to prove this, as it is all done underhand. But it happened several times to me when agents thought I was a 'buy-to-let'. This action by agents needs somehow to be investigated and stopped (but who regulates estate agents?). Their action is understandable in terms of maximising their own income - but how can we stop it to make it fair for first-time buyers to hear about the property and have a fair chance to buy it?
Constraint on certain limited resources such as land is justifiable, otherwise it would be wasted and others would suffer. At least, BTLetters put their property to good use. How about those owning many houses who leave them empty most of the time? How about improving the beleaguered rail system so that people can live further - Japanese people travel over 300 miles to work. That could mean people can live in Wales, where there is more land, and work in London. How about more work from home jobs? How about a tax on people buying the 2nd, 3rd home (e.g. a 1% surcharge on stamp duty) that goes into a fund to build high rise social housing? This is cheaper and I suppose people who really need a house can't afford to be picky as to whether there is a big garden behind their house or not.
Local councils should be encouraged to offer investment trusts dedicated to building new social housing. This would be an excellent way for people to invest in buy-to-let properties without pushing up house prices. Other advantages are less administration and expenses, lower risk (because of the greater spread of properties) and the opportunity to invest relatively small sums of money in this sector of the market.
Chris Grey, Guildford
I bought a house in 1989 with an interest only mortgage. I took out an endowment that failed and my house was in negative equity until mid 2001. At this point in time I would be very wary of buying a property, learning from my past experiences. Until the lending institutions learn to control their lending, prices will continue to rise.
N Dasey, Norfolk
The newly opened University of Gloucestershire has meant that whole areas of the town have become snapped up for the buy-to-let market for students. These properties are the smaller ones, which used to be ideal for first-time-buyers to get onto the housing ladder.
V M Larner, Cheltenham
The buy-to-let apologists can't get over the basic facts of supply and demand. They are taking houses from the open market, helping to create demand for rented accommodation as a result of the consequent freezing out of first-time-buyers. They are able to do so in part because of favourable tax treatment. Let's also extend security of tenure to all private tenants and then give them the "right to buy". The combined effect should be intense pressure on them to disgorge their housing assets back on to the market.
Harry, East Sussex
I'm concerned that the sharp increase in buy-to-let properties, either as a main source of income or as a substitute pension, is squeezing out first-time-buyers. We need fair levels of taxation to reflect the long-term profits made by private landlords owning multiple properties. We also need an increase in social housing for those not in a position to buy property or rent in the private market. Finally the new pension policy must encourage everyone to save for their retirement over the long-term, rather than purchasing property to secure financial independence in their old age.
Nancy Platts, Brighton
If you watch any of the property programmes that pepper the TV schedules, you will quickly realise that there are plenty of property barons out there who own dozens, if not hundreds of houses. These are the people who are forcing first-time-buyers out of the market. You don't need to be a communist to recognise that this situation is totally unfair, unjust and unsustainable. Commentators talk about the "digital divide" but the "property divide" is far more worrying to anyone concerned about the cohesiveness and stability of our society.
Simon R. Gladdish, Swansea
Of course buy-to-let bears a large degree of responsibility for the lack of affordable homes, particularly for first-time buyers. If you take out a mortgage for a house you intend to live in, you get absolutely no help from the government - not even the minimal amount of tax relief on interest which was provided many years ago. If you take out a mortgage on a property which you intend to make money out of, the government allows you to offset all mortgage interest against income, as a business expense. Which of these two scenarios provides the potential buyer with an advantage? The second one, obviously, as you can afford to take out a larger mortgage, and hence can afford to pay a higher price for the property.
David F M Helliwell, Cumbria
I have been both a tenant and a landlord so can speak from experience of southern England over the last 20 years. Buy-to-let and all the extra capital entering the private rental market have led to a dramatic improvement in the availability and quality of property. I can remember finding it incredibly difficult trying to find somewhere to rent in Reading and London in the 1980s and 1990s. In the countryside, it was next to impossible. The landlords had no incentive to invest in looking after the property. Now, flats and shared houses are much nicer, landlords keen to look after and keep you as a tenant, and it's much easier to move around the country to change jobs or study. However the returns for landlords are now at the point where rents barely cover the mortgage, let alone maintenance costs, insurance, void periods when the house is empty, advertising and so on. New entrants to the buy-to-let market are hoping for a long-term capital gain. There is no money to be made in being a landlord and charging rent, which is why I left the sector. Yes, the housing crash would financially damage buy-to-let landlords, but it would also damage all the other property owners, many of whom are much more highly leveraged. The crash would be accompanied by a big jump in unemployment and high interest rates: does anyone seriously want this? These first-time buyers who want a housing crash may well be the first to lose their jobs in the inevitable shakeout. In my view the principal reason for high prices, besides immigration and the demographic trend to much lower occupation densities (people living alone), is a lack of supply.
There has been so much negatively angled comment on Radio 4 lately about "buy-to-let" and its supposed effect on struggling first time buyers. Has it not occurred to your analysts that the "buy-to-let" phenomenon (thank goodness for it) is stepping into a gap rather than creating it? I get most fed up with home-owning pundits telling us "the fact is..." that us poor tenants are being deprived of our aspirations. Traditionally most housing for working people in this country has been rented. Some of us not only like it that way, we need it, especially if we want to bring up our children ourselves, and not pay someone else to do it while both parents are out working long hours for someone else.
A. Marsh, London
People are becoming obsessed with owning their own home! My Husband and I worked for our house for many years - eventually selling it to use the profit to buy a business that subsequently failed. I now rent a home I could never have afforded to buy - living the good life and as happy as Larry. Not only that, but if the guttering falls off, someone else has to fix it. It's not really so bad not owning. Honest!
Patricia Smith, Beccles, Suffolk
One point that I have never heard raised is the double advantage that many "buy-to-let" landlord have over first-time-buyers: that this cheaper property is usually targeted at tenants who receive housing benefit. They can then arrange for payments to be received direct from the local authorities to themselves. Thus they can receive secure, regular payments at the maximum level permitted by the rent legislation in that area. This plus the tax relief that they receive on their mortgage payments is a double advantage that no first-time-buyer can get.
David Richardson, Lymington
Buy-to-let investors get tax relief on their mortgages, as they should as they are running a business. But owner occupier buyers do not get any tax relief. Is this a factor that distorts the housing market?
Steven Farrall, Ipswich
Buy-to-let operators are enjoying an enormous tax break. They are allowed to offset mortgage interest against the rental income. If they had to pay tax at their marginal rate on the income then they would not be able to buy the property because the rental income would not cover their mortgage. The poor first time buyer does not get any mortgage relief. Take away this tax break and watch the number of properties come onto the market.
Barry, Buckhurst Hill
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