Is BTL the reason many people cannot get onto PL?

[Bananallama858]

Simply this.
Had a really interesting chat with someone recently who felt very strongly that the reason it is so hard nowadays for people to get onto the properly ladder is because there are a huge amount of greedy people who are buying properties to rent out. And if they limited the amount of properties that were bought through BTL scheme then perhaps housing prices would reduce therefore making it easier for many people to buy their first home. Would be really interested to hear people's views on this.

There are two things that cause an issue in my town. A friend struggled three years ago as a single FTB - she had a massive deposit built up but couldn’t get a mortgage on her salary. She found two houses that she absolutely loved but her offer was rejected both times in favour of cash buyers who wanted to BTL. As a vendor, most people would go with a cash buyer rather than someone who had to get a mortgage in place and go through that extra paperwork.

The second point is that we are in a big university town and a lot of houses are snapped up to become student lets. If the university focused on creating desirable student living on campus, more could be done to stop the BTL culture in our town. It is a difficult one because anything affordable is also likely to be in a highly populated student area, which puts non students off.

" Given how much hand holding the FTBs I have come across need, to sell straight away to a reliable buyer is huge."

Yes FTBs need some help/reassurance - I suspect many of us were the same, but now the amounts they are committing are much greater as a multiple of their salaries, so the risk is even greater than it was 30 years ago.

Totally understandable that vendors would prefer to sell to landlords. But the wider question is, do we want a society in which owner/occupation in the age 30s and 40s brackets is falling sharply? Despite the extra costs (new boiler, I know!) owner occupation has so many advantages over renting. Yes some of these advantages are due to security of tenure, which renting could in theory replicate with legislative change, but others relate to the ability to build up some savings (illiquid, obviously, but savings nevertheless), autonomy etc. (And even in Germany, haven of the 'renting could be so great' media commentators, owner occupation has increased to more than 50%!). If we would like home ownership to remain accessible to the majority, that may need policy changes so that landlords are a smaller part of the market.

My impression is that in London/SE that may already be happening - lots of properties lingering on the market that previously would have gone to btlers, I think. Obviously only an impression!

Agreed that there are benefits to buying @soonerthanithought. Also worth bearing in mind is that pension provision is more generous in countries where renting is more prevalent - paying rent in the UK will take up a significant chunk of any pension income, as opposed to the situation where one has only maintenance costs of a paid up house to meet.

However I really am not optimistic that things will change. Property as investment vehicle for both national and international investors has become a huge juggernaut driving prices up which drives investment etc.

Yes FTBs need some help/reassurance

But how much help or reassurance do they actually need. I doubt people have the time to hand hold and reassure.

I buy and sell a lot of property and when an ea tells me they have an offer and how great it is they are FTBs my heart does sink.

I have agreed to sell to a FTB many many times and have yet to have one actually complete. Nothing wrong with the properties. They just get very expensive cold feet by the time they have paid for the mortgage arrangement fee, solicitors fees and surveyors report so I don’t think how much they are spending really comes into it if they are prepared to waste upwards of £2000 each time they go to buy a property then back out.

EA I was chatting to said FTBs he knows regularly can do this 2 or 3 times at least. In some cases they hope for a terrible survey report so they have a reason to back out.

Even the slightest little imperfection can have them running for the hills.

In the past people were reliant on FTBs for the property market to move.

Now we have btl landlords who have cash and can make up their minds in a few minutes.

As a FTB if you get your finger out and buy asap and you keep in mind you are not buying your forever home (just a roof over your head that is close to work) then it really isn’t that complicated

"paying rent in the UK will take up a significant chunk of any pension income"

Yes indeed, the HB bill will presumably have to increase to cover that. Plus the problems of insecure tenure are in some ways very much greater once you are very old - 2 months notice to leave when you are in your 80s won't be much fun. Still, those are all problems for 'Future Government', so no need to worry about them.

Yes I think you're right that the structure of investment in housing has changed and that would certainly make it harder to shift the balance in favour of owner occupation. Still, individuals vote, corporations don't, and individual btl ers are still a minority of voters! In the end it will all depend on how important it is to how many voters, I suppose, whether political parties go for radical measures (eg increasing the second home stamp duty surcharge, annual taxes on any property which is not owner occupied etc. All perfectly feasible, but all likely to lead to a fall in house prices which for many would be very difficult.)

BTL is not the major issue that it is always portrayed to be. Yes it is an issue, but it is not the main cause.

Second homes/holiday homes are a worse issue as they are leaving good properties empty, whereas at least with a BTL it is giving someone housing.

Help to Buy was only brought in to shore up a slump for new builds, which are typically more expensive. A lot of BTL landlords are coming out of the market due to changes in income tax and a number of not coming into it due to the higher stamp duty rate.

Part of the issue is how people are now living. People are moving out to rent, there are more single people living alone and some people have different priorities, such as having a family before buying a house so they are then in the perpetual cycle of not being able to save the deposit.

The biggest issues is not the amount of houses, but the deposit needed and the mortgage. If there was more of a move back to 95-100% mortgages more FTB would be able to buy. I also think they should look at affordability more closely so that, if you have been renting and not had any issues in defaulting on your rent or bills and then are trying for a mortgage which will give you a lower payment that should suffice on affordability (provided you are not making the payments by running up debt elsewhere).

"Second homes/holiday homes are a worse issue as they are leaving good properties empty, whereas at least with a BTL it is giving someone housing. "
It would be interesting to know the numbers - my impression is that although they do as you say effectively leave property empty, weekend/holiday homes are a much smaller proportion of the market than btl - but given your user name I can see that may well not be true in your area!

I agree about the self-perpetuating rent problem, especially once you have dc and childcare costs - very difficult to save for a deposit. The problem about not having dc before buying though is that these days you can't buy until later, but understandably people don't want to put off dc for too long in case it is too late - and that then makes it even harder to buy.

Second homes/holiday homes are a worse issue as they are leaving good properties empty, whereas at least with a BTL it is giving someone housing

Unfortunately with the rules and tax implications on BTL which I think was to get btl landlords to put the place up for sale and the flood of properties coming on the market would drive the price down making it affordable for FTBs to buy their first home hasn’t happened to the extent that was needed.

The move has been to furnish these properties so they can join the ranks of Airbnb’s available for holiday let’s.

Ah yes air bnb, presumably that's an issue although possibly dependent on location! But certainly in London that may well be significant.

It's difficult for policy to keep up with changes - and always the issue of unforseen consequences! I wonder if in the long run the increase in air bnb will be offset by hotels and oldstyle b n bs closing as they lose business, and being converted to residential property - or does the increase in air bnb just reflect (and fuel) an increase in tourism?

There isn't usually much discussion of whether we need even more 'accommodation stock' to cater for growing numbers of tourists, but perhaps that is indeed fuelling house prices as well.

I was thinking that running a place as a holiday let instead of a btl place lets you off set the mortgage interest from your income
And you don’t have to deal with a tenant not paying as you get the money up front.

I think it has more to do with the rising costs of living and house prices.

There’s always been BTL.

There has always been a private rented sector, although I think it fell from around 45% in 1960 to about 15% in 1991 (and interestingly is nowhere near back at the earlier level - now around 27%).

But I don't think it was fuelled by btl mortgages in the same way - it was much harder to get a mortgage to btl before the changes to rent tenure at the beginning of the 1990s.

So i think it's the new (not so new now!) availability of btl finance which has been one of the factors in increasing house prices.

Why do you think the government has got involved? Legislation to try and reduce BTL activity.

This is old news! People aren't buying btl any more, not like they used to anyway. I have one but wouldn't buy one now as there have been measured put in place to curtail it.

But people might buy a holiday let.

The tax implications are not the same for a holiday let as opposed to a BTL

The tax implications are not the same for a holiday let as opposed to a BTL

And neither are the margins!

*The tax implications are not the same for a holiday let as opposed to a BTL

And neither are the margins*

Not necessarily.

I had one flat that fortunately wasn’t trashed but the guy left after a year having only paid for the first 4 months. Took a lot of money and hassle to get him out.

I definitely would have been better off letting it as a holiday let.

Friend rents her garage conversion.
She charges £30 per night and because of where she is located she has at least a 75% occupancy. Usually full virtually every night.

All paid up front and I think she said she gets at least, after laundry and cleaning about £1000 per year more than renting on a longer term let. Also if she is having a party or wants a few days off from having people around she just says she is full.

If she rented it out she would get £400-450 per month.

The return on my holiday let is WAY more than buy to let. £26k from holiday let vs £7k if rented as a long term let.

Even in London people do Air BnB as it can be more profitable.

So a pretty stupid comment really.

Interesting to hear how high the margins are on air b n b are - I'd assumed that after cleaning, laundry etc they'd be fairly minimal.

I wonder if there are any official figures for how much property has moved from private long-term (ie 6 months or more!) rental to air b n b? Do you need planning permission - is it a change of use to move from longer term private rental to very short term air b n b? I have a vague feeling that one city in Europe is clamping down on it, because of the resulting shortage of rental accommodation, but can't remember where!

With Airbnb the customer pays for cleaning in the ones I have used.

I have a vague feeling that one city in Europe is clamping down on it, because of the resulting shortage of rental accommodation

The problem with that is here they have “clamped down” on longer term rentals so people have gone to the holiday let route.

I think people feel comfortable blaming others for their own choices, it's easier isn't it to say I can't do x because others are doing y.

BTL are small fry in comparison to the many buildings which are about to spring up which are BTR. Heard of those? If not they are generally towers 17 plus floors, owned by iarge commercial companies ie solely to make money out of renting homes, in many cases at the moment at least these are American companies and are built with the sole intention of renting. 100 percent of the building built to rent.

So I don't think people need to worry about BTL who own a few properties quite so much when developments are being built that no one will have an option or buying a single flat from 300.

This is all about supply and demand whilst there is an under supply there will always be an over demand
One answer is to build lots of new homes which will then over supply the market which will then drop the value of homes and make more affordable
However why would people build homes that they are then going to drop in value
When all of the council houses were sold off they should have been replaced
An area near me in a London suburb ( called a village by the locals ) is earmarked fo r 700 houses with a new school etc , The locals are up in arms and whist agreeing that we need more homes just dont want them here
Real hypocrisy as most of the home s they live in were all built on fields after the war

Ah, looks as though Amsterdam, Barcelona, Paris have all introduced restrictions on air b n b in the past few years.

I really don't know how significant a factor it is at the moment in the UK or what 'type' of air b n b is most common. If you let one room in your house a few nights a month that is not really having an impact on availability of housing, whereas if you buy an entire flat to air b n b that is rather different.

Interesting about BTR. Which area is that in marchitect?

But in France Spain and Holland if you rent out a flat can you put all of your expenses against your income for tax purposes?

Good question oliversmum - I don't know!

It's more that I was wondering whether cities in the UK may also introduce restrictions on air b n b if it starts 'eating into' the availability of longer-term rentals in a significant way. Have just had a quick look - and from what I can tell from an air b n b link you now already need a permit to do short lets of an entire home in Greater London for more than 90 days per year.