Thursday, 8 August 2013

All [almost] going swimmingly to plan then, isn't it Mark; well so long as we

don't get mired in endless arguments about what "good-quality" and "affordable" really means ..

On Thursday night the housing minister Mark Prisk said: "We're determined to build a bigger and better private rented sector that gives tenants more choice of good-quality homes. This is part of our wider efforts to get Britain building, which also includes transforming the planning system to support growth and delivering 170,000 new affordable homes by 2015."
Buy-to-let fuels house price boom
Britain's buy-to-let mortgage market has surged to levels not seen since the 2008 financial crash, prompting fears that a prolonged period of cheap money is setting off an unsustainable housing boom.

Lending to landlords topped £5bn in the past three months, a period that preceded the Bank of England's pledge this week to keep interest rates low for the next three years. More than one in 10 mortgages are now being handed to a would-be landlord while first-time buyers are still struggling to get on the housing ladder.

About 40,000 buy-to-let mortgages were advanced in the three months to June, up from 33,000 in the first quarter of the year, as landlords cashed in on cheap mortgage deals and investors sought higher returns than they could get from putting their cash in the bank.
David Whittaker, managing director of Mortgages for Business, said: "Demand for rental property remains red-hot. Landlords are refinancing in their droves to raise enough capital to make further additions to their portfolios."
Housebuilders are also reporting a rush to take advantage of government mortgage subsidies for new homes and a top London estate agent said the value of prestige homes in the capital had risen by 18% – adding £500,000 to the price of a central London home in the past year.
Now is there someone prepared to summarise exactly what is going on in a reasonably short sentence ?
Stephen Lewis, chief economist at Monument Securities, said: "The danger is that, when a flood tide of mortgage finance meets a chronic shortage of housing, the result will be an escalation of house prices."
Thank you Stephen - although, not to be picky you understand, I might have had "cheap, subsidised" in front of "mortgage finance".


Physiocrat said...

As a landlord myself, I fail to see why BTL is such a popular investment. I own a flat worth about £200k, which I can let for about £10k a year, gross. £2,700 go in ground rent and maintenance, £1500 in management fees, about £600 in repairs and upkeep, leaving a taxable profit of £5,500 and a net income of around £4,000. It is hardly worth the effort but I inherited the property and will sell when the bubble starts to grow. How can it be worth going into debt for a 2% return?

Rich Tee said...

"How can it be worth going into debt for a 2% return?"

I don't understand it either. I have £1000 invested in the Invesco Leveraged High Yield Fund at 65p a share. If I reinvest the dividends it will give me return of 10 per cent this year.

People say "that's risky" but then so is investing in property, and at least I can diversify my investments amongst different funds and trusts.

But then property owners have the benefit of a taxpayer funded subsidy to keep house prices propped up through the Help to Buy scheme now.

mombers said...

Not quite sure how it fuels a price boom. For every Buy-To-Let, a owner occupier is displaced. In fact, seeing that owner occupiers are more likely to under-occupy, the net effect is probably a slight downward pressure on prices. But then again, renting is so shitty that it forces people to pay over the odds to 'get on the ladder' - but that's to do with poor quality of rentals and insecure contracts, rather than supply and demand factors

Bayard said...

"but that's to do with poor quality of rentals and insecure contracts, rather than supply and demand factors"

plus a fair bit of brainwashing and a desire to make money without doing any work.