Buy to let unethical ?

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Discussion

wormus

Original Poster:

14,506 posts

202 months

Friday 22nd September 2017
quotequote all
I have mixed feelings on this as I own a second home which I only use as a holiday destination. However, technically I guess I'm still depriving somebody of buying their own home.

I know some people with large portfolios of property who didn't do anything smart or work very hard: They simply starting buying about 15 years ago, rented and remortgaged every property again and again until they had loads of them.

At what point does it become unethical to build your fortune at the expense of others for no other reason than you joined the market at the right time?

voyds9

8,488 posts

282 months

Friday 22nd September 2017
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And if a person can't raise a deposit or show enough income for a mortgage would you say you are providing a service and roof to a person who otherwise not easily get one.

wormus

Original Poster:

14,506 posts

202 months

Friday 22nd September 2017
quotequote all
voyds9 said:
And if a person can't raise a deposit or show enough income for a mortgage would you say you are providing a service and roof to a person who otherwise not easily get one.
But isn't one of the reasons they cannot afford it down to supply and demand? Those who already have the security of capital can afford it whilst those never got the chance to get on the ladder don't.

Doesn't help the only sound investment is property so whilst I don't blame people for doing it, it doesn't mean it's right.

When I bought my first house back in '95, the decision was driven by the fact it was cheaper to buy than rent and I could get a 100%, no deposit mortgage.


Edited by wormus on Friday 22 September 19:04

oilbethere

908 posts

80 months

Friday 22nd September 2017
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I know people who happily rent instead of buying, some are council Tennant's with lots of disposable income and savings.
If there's a market someone has to provide the properties. The biggest issue is the amount of deposit people now have to save before getting on the ladder.

PurpleMoonlight

22,362 posts

156 months

Friday 22nd September 2017
quotequote all
House prices are so high that there is a large section of society that will never be able to afford to buy, even if the prices reduced by 50% overnight. BTL has only caused a small proportion of the high cost.

So a healthy rental market is vital at the moment.

We are well past any workable solution to the problem. Build millions more to depress prices and we have the next banking crisis.

MrBarry123

6,025 posts

120 months

Friday 22nd September 2017
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It's a tricky one this.

The basis of BTL isn't unethical as some people simply don't want to own a property sometimes e.g. someone wanting to live in a place for a short period of time. As such, BTL works brilliantly for these, typically "professional", people and I can't imagine they'd be too pleased having this option removed.

However, I would think it's fair to assume that the majority of those who rent would love to own their own property and that BTL is one of the major factors preventing them from doing so.

What you therefore leave yourself with is the option of the government regulating the rental market which always generates interesting conversation...

ETA: I agree with PurpleMoonlight wholeheartedly.

Bristol spark

4,381 posts

182 months

Friday 22nd September 2017
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Isn't it also the fact you need earnings of way more than the national average wage to get a mortgage.

The cheapest house (that is liveable in) around here is around £250K. I need to show earnings of around £45K plus £25K deposit to get a mortgage on my own.

Until the mortgage companies start lending more generously, rental properties are required.

98elise

26,376 posts

160 months

Friday 22nd September 2017
quotequote all
wormus said:
voyds9 said:
And if a person can't raise a deposit or show enough income for a mortgage would you say you are providing a service and roof to a person who otherwise not easily get one.
But isn't one of the reasons they cannot afford it down to supply and demand? Those who already have the security of capital can afford it whilst those never got the chance to get on the ladder don't.

Doesn't help the only sound investment is property so whilst I don't blame people for doing it, it doesn't mean it's right.

When I bought my first house back in '95, the decision was driven by the fact it was cheaper to buy than rent and I could get a 100%, no deposit mortgage.


Edited by wormus on Friday 22 September 19:04
Have you ever walked into an estate agents and they have no properties for sale? BTL puts one family in one home, no different to shared ownership or owned 100%.

The issue as ever is that we do not have enough supply of new homes in the right areas. If that was that case then property prices would be sensible, renting would be more of a choice, and BTL would really be a service satisfying demand.

The OP's holiday home has of course removed a house from the market, but not housed another family.

98elise

26,376 posts

160 months

Friday 22nd September 2017
quotequote all
MrBarry123 said:
It's a tricky one this.

The basis of BTL isn't unethical as some people simply don't want to own a property sometimes e.g. someone wanting to live in a place for a short period of time. As such, BTL works brilliantly for these, typically "professional", people and I can't imagine they'd be too pleased having this option removed.

However, I would think it's fair to assume that the majority of those who rent would love to own their own property and that BTL is one of the major factors preventing them from doing so.

What you therefore leave yourself with is the option of the government regulating the rental market which always generates interesting conversation...

ETA: I agree with PurpleMoonlight wholeheartedly.
If you turned very tenant into an owner, there would be no more house available than there are now. Same number of houses, same number of properties. No amount of refinancing, regulating, or taxing BTL will change that situation.

AdamFX

242 posts

144 months

Friday 22nd September 2017
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I'd agree with it being a bit unethical, on the basis that (at least in my area) the rent is significantly more p/m than the mortgage payments would be on the same house. That's not providing a service at all; That's primarily the older generations - those with the equity tied up in their own house they bought for a fiver decades ago - leveraging (see: exploiting) their fortunate position to obtain BTLs at the lower end of the housing market. This increases demand, reduces supply and exacerbates the problem almost infinitely until the housing market takes a censored again with the looming rise in interest rates over the next 5-10 years.

Edited by AdamFX on Friday 22 September 19:40

ATG

20,484 posts

271 months

Friday 22nd September 2017
quotequote all
Wormus asks a very good question.

I think the way buy-to-let has developed in the UK is a bit of a disaster for a variety of reasons. It's a bit harsh to say individual buy-to-letters have behaved immorally. We've collectively failed to manage the UK housing market. It's a collective economic and political failure. We all share the blame. If we set up the rules of the game so that it encourages people to stick money into BTL, we can't blame them for doing precisely that.

It's a wider problem than BTL, though. For as long as I can remember, Britons have had a collectively irrational attitude to home ownership. We all know that we are all collectively prepared to borrow to the absolute hilt to plough money into the house market, always expecting that house price inflation will not only save us from our initially massive debt burden, but it'll actually reward us for taking a major risk.

It's such an unproductive way to invest capital. It's such a wasted opportunity to use capital more intelligently to fund companies and foster economic growth.

And it drives a wedge between those who have enough capital to get in on the game, and those who don't. It increases the wealth divide, and that is immoral.

menousername

2,106 posts

141 months

Friday 22nd September 2017
quotequote all
As a society can we really allow this situation to continue?

Can we have an ever increasing proportion of society swept under the rug while private or institutional money turns something as basic and as essential as shelter and protection into a commodity, out of reach to those who need it the most? And sends us back to Victorian levels of inequality.

Dramatic, yes, but can anyone honestly say this path we are on will end well?

BTL is just one of many things likely to be in the firing line. We can agree or disagree on whether it is right or wrong but its almost certainly going to be in the firing line and probably facing the tide of punlic opinion, which might even be stoked up by the government itself




wormus

Original Poster:

14,506 posts

202 months

Friday 22nd September 2017
quotequote all
I think we should prohibit foreign investors from buying property only to keep it empty.

My brother lives in San Francisco. One day last year a Chinese businessman knocked on his front door. His house is worth $1.4m and the man offered him $1.6m including all the furniture on the spot. Sounds dodgy but my sister in law is a realtor and dealt with the transaction. All above board and the man transferred the money within the week. He then rented it back to my brother and his family whilst he looked for another house.

I know this to be true as my brother showed me his rather healthy bank balance!

Edited by wormus on Friday 22 September 20:10

98elise

26,376 posts

160 months

Friday 22nd September 2017
quotequote all
AdamFX said:
I'd agree with it being a bit unethical, on the basis that (at least in my area) the rent is significantly more p/m than the mortgage payments would be on the same house. That's not providing a service at all; That's primarily the older generations - those with the equity tied up in their own house they bought for a fiver decades ago - leveraging (see: exploiting) their fortunate position to obtain BTLs at the lower end of the housing market. This increases demand, reduces supply and exacerbates the problem almost infinitely until the housing market takes a censored again with the looming rise in interest rates over the next 5-10 years.

Edited by AdamFX on Friday 22 September 19:40
So if a family rents a home or buys a home the impact on the local market is different, what happens if they have fractional ownership? At what % ownership does it become problem?

Murph7355

37,649 posts

255 months

Friday 22nd September 2017
quotequote all
menousername said:
As a society can we really allow this situation to continue?

Can we have an ever increasing proportion of society swept under the rug while private or institutional money turns something as basic and as essential as shelter and protection into a commodity, out of reach to those who need it the most? And sends us back to Victorian levels of inequality.

Dramatic, yes, but can anyone honestly say this path we are on will end well?

BTL is just one of many things likely to be in the firing line. We can agree or disagree on whether it is right or wrong but its almost certainly going to be in the firing line and probably facing the tide of punlic opinion, which might even be stoked up by the government itself
Renting works fine in other countries (developed ones too). Why is it a problem here in itself?

voyds9

8,488 posts

282 months

Friday 22nd September 2017
quotequote all
wormus said:
But isn't one of the reasons they cannot afford it down to supply and demand? Those who already have the security of capital can afford it whilst those never got the chance to get on the ladder don't.

Doesn't help the only sound investment is property so whilst I don't blame people for doing it, it doesn't mean it's right.

When I bought my first house back in '95, the decision was driven by the fact it was cheaper to buy than rent and I could get a 100%, no deposit mortgage.


Edited by wormus on Friday 22 September 19:04
My first house was also cheaper to buy than rent, you can still buy a 3 bed semi 10 miles down the road for under £60k, but peoples expectations have also moved.
http://www.rightmove.co.uk/property-for-sale/prope...
This one £35k

Peoples expectation have also changed dramatically
They want a large house in a nice area, two new cars on the drive and 2 foreign holidays a year whilst being out at the weekends.




TwigtheWonderkid

43,248 posts

149 months

Friday 22nd September 2017
quotequote all
There will always be people who need to rent, students, temporary workers, etc. So we will always need landlords. Just make sure you're an ethical landlord.

menousername

2,106 posts

141 months

Friday 22nd September 2017
quotequote all
Been through this a million times on here

That house might sell to someone for whom it works but so what (in reality it will probably go to a BLT buyer who will outbid them)

People need to be somewhere near work which is increasingly meaning they need to be near a station that services a big city.

Given how busy the country has become they NEED off street parking

Given they have to work for longer to save up a bigger deposit and will have a bigger mortgage they will likely need a house that will cover all their needs for themselves and their family for life. People will move less and so people are having to commit to that house that would have been the 3rd or 4th move in the first or second.


Kermit power

28,634 posts

212 months

Friday 22nd September 2017
quotequote all
The really unethical thing is Housing Benefit.

It distorts the housing market more than just about anything, and traps people into never being able to buy the sort of house they can rent.

The view from the Left is that Housing Benefit is necessary because without it normal people wouldn't be able to put a roof over their heads, but that's completely arse about face!

The view from the Left is that if you take away Housing Benefit, normal people would be thrown out of their homes. How's that going to work, though? Are all those private landlords going to find heretofore undetected swathes of people with enough money to pay the previous rent levels, or would they then be forced to drop rents to meet the market demand without Housing Benefit propping it up?

Without Housing Benefit, house prices could never have accelerated as absurdly as they have done over the last few decades, and those normal people that the Left purports to support might still be able to get on the ladder, because the taxpayer subsidised BTL market wouldn't have warped everything.

98elise

26,376 posts

160 months

Friday 22nd September 2017
quotequote all
Kermit power said:
The really unethical thing is Housing Benefit.

It distorts the housing market more than just about anything, and traps people into never being able to buy the sort of house they can rent.

The view from the Left is that Housing Benefit is necessary because without it normal people wouldn't be able to put a roof over their heads, but that's completely arse about face!

The view from the Left is that if you take away Housing Benefit, normal people would be thrown out of their homes. How's that going to work, though? Are all those private landlords going to find heretofore undetected swathes of people with enough money to pay the previous rent levels, or would they then be forced to drop rents to meet the market demand without Housing Benefit propping it up?

Without Housing Benefit, house prices could never have accelerated as absurdly as they have done over the last few decades, and those normal people that the Left purports to support might still be able to get on the ladder, because the taxpayer subsidised BTL market wouldn't have warped everything.
Yields are about 4%, and a BTL mortgage is about 4%. How much cheaper do you think rents could drop to?

Bear in mind that you can no longer offset the whole mortgage and margins are getting pretty thin.

I won't rent to HB tenants due to the chances of non payment and trashing the place. I learnt some expensive lessons in that respect.