Tuesday, 20 August 2013

Return of Buy To Let

I’m barely numerate. I am starting to believe that economics isn’t really a science, but voodoo. Despite – or because - of this mindset of mine, I soon realised that the last housing bubble would end disastrously.

No matter where I looked, all I could see were masses of the newbuild developments I called dovecots. I realised the madness of over-supply was linked to the easy loans doled out to those desperate for pensions or the investments apparently required to pay for their children’s future home and education. I take not joy in being right, but yes, it ended badly, I think you’ll agree.

Have we forgotten the bad old days of queues outside building societies, of people stockpiling debt, even borrowing from their own impoverished families, before being doomed to bankruptcy and ruin. I went through this myself, with a rentier who had obtained 14 buy-to-let mortgages, and who ultimately lost it all.

Do we want the madness to return? For tenants to face eviction because their buy-to-let landlord is insolvent,?

But like a zombie lurching towards another victim, demanding fresh brains for tea, that hideous ‘buy-to-let’ is back. This is terrible, terrible news. No – seriously. It’s really bad. ‘Why’s that?’ you ask. Surely it’s nice, people, buying houses for poor, homeless, desperate people to live. Owners will nurture tenants. They will house them in luxury, they will be sympathetic, responsive, helpful, and responsible.

You see, that’s the problem. Sometimes it’s like that – just a simple transaction, where people pay rent, and rentiers keep the profit but fix and maintain the place. Idealistically, I’d say it’s usually like that. But sometimes… it isn’t.

Few rentiers are trained, so they are often unaware of the laws regulating their behaviour. They plead innocent when told they must organise annual gas safety checks. They are even quite put out that they must observe legal methods of giving notice. The learned Ben Reeves-Lewis frequently encounters owners who are astonished when informed that they can’t do exactly what they like. They say ‘you’ll be laughed out of court,’ when faced with fines for what is, in effect, eviction by harassment.

In London, with the assistance of the universally derided Tory ‘Help To Buy’ scheme, the market for homes is febrile once more and already lurching towards the precipice. Elsewhere, in the North, Scotland etc, once more, guileless investors will snap up newbuilds, which will of course plummet in value, with sad, life-destroying inevitability. People will borrow from friends and families, ruining everybody’s credit, prospects and their lives.

There aren’t enough homes in the private sector, but what we do not need is another episode of rickety, tiny, dovecots – euroboxes or yuppiedromes, snapped up and rented out by resentful but desperate amateur rentiers. We need family homes, well built places for single people to live in, space for multi-generational and blended families to spread out and live in harmony, with space for cupboards and facilities to dry laundry.

So don’t, please don’t re-inflate that poisonous bubble. It will splatter misery everywhere.






Arnie from Newington said...

For the housing market buy to let is a necessary evil.

Without it prices would fall through the floor.

If an investor can get a good return on their investment then they will buy even if their is a possibility that prices might fall.

A first time buyer will not but until they are sure that prices will not fall.

Ajay Ahuja explains it in his excellent book the property clock which was written before the crash of 2007.

Anonymous said...

Why "Euroboxes"? I read claims that houses in the UK are smaller than in the rest of Europe.

Anonymous said...

>Why "Euroboxes"?

It's the art of Rhetoric !

Anonymous said...

'Rentier' comes from French and just means someone who lives by their own means (usually from investments) without having to work.

I know it has the word 'rent' in it, but that is coincidental and has nothing to do with specifically renting property. Rent in french is 'loyer'.

Stick to using 'landlord'.

RenterGirl said...

It's not French. Don't tell me what to do. You missed the discussion about why that word is necessary. http://rentergirl.blogspot.co.uk/2012/10/the-name-of-landlord.html

MattW said...

'Buy to Let' should be abolished. I think that if a rentier plans to buy a house to rent out, then it should be owned outright. No mortgages.

We need to put an end of this pyramid property scheme of 'remortgage property x to fund purchase of property y, etc'.

But what to do with landlords with existing BTLs?

Dazzla said...

"Without it prices would fall through the floor."

It's called a correction and it's long overdue. Borrowers have been subsidised through social and monetary policy for three decades now and it's time for it to stop.