Should the London Buy to Let market be more tightly regulated?

[blacknoire]

The average prices in London are now ridiculous. The fact that a young professional couple earning very very high salaries, cannot even afford a flat anywhere nice is stupid. Lots of the properties that 10+ year ago would've been in the price range for first time buyers are/were sold as "investment opportunities". Often bought from overseas or by those who lucked out by being born 40 years earlier and getting on to the ladder first.

Cities are there for people to live in. It's no surprise that many big law firms are now looking at moving from outside of London, as rents are so high, but importantly they must have staff who can afford a decent lifestyle vs the work put in.

Should the market in central London, zones 1-2 be more tightly regulated?

This could be done by limiting the number of buy-to-let's per person to one, or one per couple. Radical, not so.
Perhaps even higher taxes can be put in place on such properties to make them not worth while.

What are your thoughts? Are your opinions influenced by personal gain of having a buy to let?

I think the buy-to-lets have destroyed entire areas. I live in an area in SE London which is made up of huge Victorian villas, most of which are flats that are poorly maintained and are rentals. We ended up buying a flat in one of the villas only to find out that the other 3 flats are buy to let's and the LLs don't want to spend anything to improve any aspect. The whole area feels transient - it is, we've had 3 different neighbours in the 2 years we've lived here. It's shit and changes the way an area feels.

Well buy-to-let landlords are running businesses and paying tax on it. Maybe their tax is funding your NHS bills.

Introduce quotas for owner occupancy. Bring back rent controls. Bring back security of tenure with limited rights only for landlords to evict tenants. Introduce property tax.

These are all measures that other countries have and they work well in terms of having a stable housing market that is designed to provide housing rather than investment opportunities.

The average prices in London are now ridiculous. The fact that a young professional couple earning very very high salaries, cannot even afford a flat anywhere nice is stupid. Lots of the properties that 10+ year ago would've been in the price range for first time buyers are/were sold as "investment opportunities". Often bought from overseas or by those who lucked out by being born 40 years earlier and getting on to the ladder first.

Were properties 10 years ago affordable for first time buyers? We bought our first property in the 80s when both myself and my husband were working in the city earning a lot of money but couldn't afford a London property, so bought instead in the home counties and had the commute. If you're earning good money, then I'm sure you can afford something further out, but of course that depends on what you are looking for and whether you are being realistic about what your money can get you for your budget.

I do agree that the buy to let market is problematical. My son, a first time buyer earlier this year, was having to view properties and make offers very quickly to compete against buy to let cash landlords. which might be why there are now so many shared ownership and Help to Buy for new builds, because the buy to let landlord would not be interested in these properties.

Were properties 10 years ago affordable for first time buyers? We bought our first property in the 80s when both myself and my husband were working in the city earning a lot of money but couldn't afford a London property,

I agree with comment re 10 years ago but not the 80s. I was a young professional in London in the 80s. By the age of 25 I could afford a 2 bed flat walking distance to the City on x3 my single salary - just an average professional, not exceptional. So could my dBro who is not degree educated and is not a "professional". So could the average plumber / electrician / taxi driver. In fact a lot of these 80s buyers are the BTLers who never got rid of their London pad when they semi-retired / bought a family home in the sticks / overseas. Some of them have multiple BTLs having combined bachelor pads and added a couple more having got the bug.

If I still had my flat (cost £70k) I could rent it out for about £15k a year. The mortgage would be long gone, except I would have kept it at 60% and used the spare cash to fund the next property. This is how portfolios were built up from mid 80s to around about 2000 when prices took off.

Just done some quick googling to check my experience is reflective of the London norm as opposed to anecdata (because I so often counter the "it was always expensive narrative on these threads).

www.theguardian.com/uk-news/2015/sep/02/housing-market-gulf-salaries-house-prices

"In 1995, the median income in London was £19,000 and the median house price was £83,000, meaning that people were spending 4.4 times their income on buying a property. But by 2012-13, the median income in London had increased to £24,600 and the median house price in the capital had increased to £300,000, meaning people were forced to spend 12.2 times their income on a house."

Sounds about right for 1995. I lived in London in the early 90s and certainly had neighbours who were for eg shop workers and postmen etc who owned their own homes in zones 2 and 3 in parts that have since been gentrified to an extent but were fairly unremarkable at the time eg Haringey etc.

No way would a couple who work in a shop be able to buy a house in Finsbury Park now.

I wouldn’t necessarily agree that BTL landlords aren’t interested in new builds. My parents tried to downsize into an area where there are hundreds of new houses being built. Wanted a 2 bed, no chain and cash buyers. Ended up in a 3 bed bigger than the one they sold because BTL landlords got in before they’d even been released by the developer. So wrong.

I don’t think it is the BTL market that is the only problem. The rich Chinese have also all parked their cash in the tower blocks on south bank. These typically 500k.
Money parking in a safe relatively stable economy is an issue.
I think taxes should be increased. I let a property (not buy to let) and think the rules and also tax paying needs tightening up dramatically.

I think taxes should be increased. I let a property (not buy to let) and think the rules and also tax paying needs tightening up dramatically

Whether you actually bought to let or are just letting a place you have lived in and no longer need and couldn’t sell at the time

What would happen if you were given an extra tax bill that made it so costly that you couldn’t afford to pay it because the rent you received didn’t cover the cost of the place.

You would have 3 choices

1. Put up the rent to cover the cost
2. Get rid of the tenants and sell

Or

1. Pay the difference yourself and potentially go under because you cannot afford to support the tenants.

1&2 are what usually happens which is not good for the tenant and 3 wouldn’t be good for the landlord

silkie, too many LLs don't bother declaring their rental income. This is part of the problem. Anecdotally I have heard of several cases, and not long ago I heard via a 3rd party of A telling B (both senior doctors) that she was mad to be declaring her rental income, since - 'We never have!'

I firmly believe that it's rife, and successive govts. have done far too little to crack down.

As for newbuild flats, it's a fact that many of these in cities, not just London, have been heavily marketed in China, Malaysia, etc., as safe places to park money which may or may not have been honestly come by. However it's noticeable recently, at least in my area of outer SW London, that quite a few of these have been reduced. And hardly surprising, when a poky one bed in Putney, with hefty service charges on top, has been priced at £600k.

I do notice that prices are starting to come down generally, at least around here. It's popular to blame it on Brexit, but IMO it's at least as much down to sheer unaffordability.

When the price of an ordinary 2 bed flat in Tooting, hardly a fashionable area, had doubled in rather less than 10 years, something was eventually going to give.

Re additional taxes on rentals, the gradual removal of mortgage interest tax relief for landlords has already resulted in quite a few LLs selling up. Many LLs have been vociferously up in arms about it, reasoning that they deserve the tax breaks, since they are so nobly providing homes for those unable to buy. The way some of them talk, you'd think the properties would magically disappear - pouf! - if they were not so selflessly renting them out.

A lot of the LLs from the 80s and 90s own outright. The mortgage interest changes have no effect on them. In fact they probably benefit from less competition from new entrants to the market. They can already afford to be far more flexible with rents to secure good long term tenants.

I personally would love to see a limit put on BTL and no one allowed to turn any property in to HMO.
In my area HMO are causing so much trouble. Little 2 bedroom starter homes are being purchased and the living room being turned in to 2 or 3 extra bedrooms. My friends street has 4 HMO in it, each housing 8 men!

The way some of them talk, you'd think the properties would magically disappear - pouf! - if they were not so selflessly renting them out

But these places are disappearing.

And less supply coupled with the removal of being able to claim mortgage interest against tax = increase in rent.

Ultimately what ever tax or extra charges a landlord has to pay will be handed down to the tenant and in the case of the mortgage interest issue it just means those LLs who don't have mortgages just make more money either by rents in general rising or the fact they can discount their rents because the policy doesn't include them.

Actually, despite the changes to LL taxation rents in London are stagnant / falling and rising at well below inflation / wages in the rest of the country. LL can only charge what tenants can afford to pay. To the extent that home ownership starts to out compete LL due to tax changes (stamp duty and mortgage interest offset) this reduces the supply of potential tenants who can / choose to afford market rents. This effect accelerates when the potential for capital gains reduces. London is already overpriced and in reverse.

But this is about the UK not just London and as a whole I do think rents will rise and FTBs are not the most able people to buy a place. (You only have to look at Kirsty and Phil and the number of FTBs they have presented who have been looking for years and have run away when a survey on a place they had finally put an offer on has been anything less than perfect)

Yes there is general stagnations in the market and no one wants to jump unless they have to. It is like the quiet before the storm and it could go manic or it could fall off a cliff.
As an aside we moved in 1997 and ended up homeless as there were so few properties for sale and I think it feels a bit like that. Our local EAs (about 4 businesses) have from 0-3 houses for sale.

One EA I know is really worried because ATM they have a handful of rental properties but no properties for sale.
They have struggled for the past 3 months selling anything and everything that has come on their books but nothing is really coming up for sale.

The problem stems from the government not actually understanding what being a Landlord entails and listening to a section of society that has decided that BTL is the work of the devil and needs to be stopped without understanding that not all Landlords
Have a mortgage and/or
Charge obscene amounts

The governments policies only cover certain Landlords and ignore anyone who owns their own properties and provides a decent place to live.

Or those that don't declare their income or are slum Landlords who charge extortionate amounts for sheds or tiny cupboards.
It also feels like they would rather have someone on the street than use a private LL who has perfectly good housing stock available and pay the LL the HB direct to them.

So much money is tied up in property it allows for nothing else.
There is only one way property prices are going to go.
It might not crash but prices I believe are going to slide down because who else is going to buy them.
The government are starting to listen to the young and priced out.