Buy-to-let. Where did it all begin? For me, with a torn-out newspaper advert
and a cautious hard-hat tour around a building site. Back in 1999, it was
the same for hundreds of other pioneers. Buy-to-let was an investment
strategy whose main attraction was that it was easy.
What’s not to understand about bricks and mortar? It was simple: property was
cheap, interest rates low and, thanks to cultural influences ranging from
Sex and the City to the Manhattan Loft Corporation, a brave new world was
born, full of energetic renters not afraid to try out life in an urban
block. Putative landlords discovered that a bespoke buy-to-let financial
arrangement had conveniently been invented for them, one that loaned money
according to expected rents rather than actual income.
Building sites slowly became actual flats and houses, tenants arrived, the
rent came in and capital values started to rise. Buy-to-let was suddenly the
smartest thing to have one’s money in. It was an invention born at precisely
the right time, when property was on the up, while more traditional pensions
were going very much the other way. Lenders were happy to play ball and new
investors poured in – particularly people like me, for whom the mere mention
of stocks, bonds and gilts caused pure white noise.
The ripple became a wave. Landlords wanted to club together, partly to moan
about snagging issues, partly to find out how everyone else was coping, and
partly to brag about how smart they all were – at dinner parties, naturally,
but also in more formal groups: clubs, rental associations and syndications
of landlords were born. Naturally, the media was swift to follow. In
particular, the new Home section of The Sunday Times invited me to write
this column. My first commission, back in 2001, was for four weeks. Then it
just went on, week after week. People couldn’t understand how this story
seemed to keep on running.
It was an intriguing tale with any number of different angles and a definite
feelgood factor. With property values on a seemingly unstoppable upward
curve and Britain enjoying an economic boom, buy-to-let was a get-rich-quick
scheme that actually did what it said on the packet.
Plus, it had a catchy title. The term “buy-to-let” was apparently dreamt up by
the Association of Residential Letting Agents (ARLA) at the inaugural press
launch of the buy-to-let mortgage in 1996; a “hallelujah moment”, according
to one of the speakers present. The phrase has since spawned offspring:
build-to-let, let-to-buy, and its overseas sibling, fly-to-let.
It was also a national story, one that the entire country seemed to have taken
to its heart, and from which hundreds of people benefited. Buy-to-let
landlords popped up everywhere. This column has included regular
contributions from landlords in Bristol, Southampton, the West Midlands,
Sheffield, Manchester, Aberdeen, central London and Cornwall. It has
featured everyone from cautious investors with just one property to
landlords such as Fergus and Judith Wilson, former schoolteachers whose
empire comprises about 650 properties in Kent.
By the middle of last year, about 750,000 buy-to-let mortgages were
outstanding, with a total value of £84 billion. ARLA estimates there are now
800,000 landlords in this country. Well past its first teenage flush,
buy-to-let is considered a mature, even rather matronly, figure on the
financial landscape.
The nature of the phenomenon is changing, too. Giant conglomerates are picking
up smaller portfolios, and many investors who first flirted with it have
decided to leave the market. Having made their money, they are quitting
while they are ahead – although, I hope, not before the changes to
capital-gains tax due in April, which will allow people to keep a greater
share of their profits.
Equally, although there has not been a country-wide fall in property prices,
they are levelling out. Anyone starting out as a buy-to-letter now will
struggle to pay their mortgage with the rent, and many landlords have
stopped adding to their portfolios. The quick buck once promised has been
replaced by the necessity to take a long-term view. Meanwhile, in some urban
centres, supply has reached saturation level: Leeds is estimated to have
5,000 too many student flats. Investors have complained of similar problems
in Liverpool and Manchester.
Yet analysts have predicted that the private rental sector, which accounts for
11% of all housing stock, needs to expand to 15% in the next decade, to cope
with demand. In July, the government itself announced a plan to build 3m new
homes by 2020.
When these properties arrive, as Gordon Brown has promised, it is likely
prices will still be beyond many. Britain, traditionally a country of
property ownership, will have to accommodate a flexible workforce and
growing rental market, and the private buy-to-let sector may find itself
having to perform where public housing once reigned supreme. Something
invented as an investment vehicle could become a player of vital social
importance. This is my farewell column, but it is not goodbye to buy-to-let
– far from it.
buytolet@sunday-times.co.uk
Good bye to Good Buy to let. Good, easy times for credit are endend. Now, unless you got cash, buying has not got cheaper and the price on monthly outgoing will be the same. The younger first timers, thinking that bargains are to be had, think again, because you will need to be geographically mobile, house ownership responsibility will shackle that mobility. Job insecurity will not help.
If you have cash, buy the property share easier to manage and less demanding on your time, they are at discount and are managed by experts, not by wannabe professionals.
When you get older, and want to enjoy life, property is more difficult to dispose of and is expensive to administer, and will cause dismay to your heirs.
There is now an opportunity for many to plan for a future by diversifying into shares via ISA's and Sipps, which are tax efficient, cheaper and easier to manage. Manage your wallet not your ego.
Good luck to us all, wisdom now, and may we all be happier healthier
Gold finger, Gloucester, Uk
Admittedly we do have problems in this country with housing, but it is not down to investors, their are thousands of empty house for sale that families are selling due to deaths of parents/relatives, or elderly relative going in to care, some in very poor condition and the ones I usually see are over priced, I have viewed houses in coventry that have been up for sale over a year, the vendors will not negotiate as the property cost them nothing to sit empty, their is also plenty of small fairly modern what were called starter homes available, 1 bed houses and flats under £100,000, that is how I got on the ladder, plus hard work and saving. Investors can't out bid 1st timer buyers as an experienced property investor needs to get property below market value, not pay over market value, ftb do not wantto get their hands dirty and expect to join the ladder half way up, people are more interested in social life and designer obsessed and cannot/will not save for a house.
Gary, Coventry,
btl buyers are the modern day" fagans" they have priced a whole generation of first time buyers out of the market and the coming crash is going to be very sweet for a lot of people ... instead of bragging about your buy to lets .you should be hanging your heads in shame as what you have been up to. is a pure greed festival with the sod the rest mentality.....you know whats comeing be scared,very scared as the cards are about to be dealt..
and you wont like the result,,,,,,
geoff, chester, uk
Jem said that those who want a crash are being selfish and should've bought when prices were cheaper....errr what about those who were still in education, or at the beginning of their working life and not earning enough.
High house prices are a detriment to the overall economy as more of peoples salaries go straight to the banks instead of being spent on other things such as high street spending, or even saving for retirement.
Kev M, Swindon,
I'm beginning to hope that the UK housing crash will hit the economy so hard in 2008/09 that the government will eventually be forced to bring in long-overdue regulation of the property market, to prevent such an orgy of greed occurring again.
After food and water, a house to live in is the next most basic human right. Why should it be withheld from so many of the younger generation by carpet-baggers like you, Rosie? The 'have-it-all baby' boomers have provided us with one of the most powerful arguments against unfettered capitalism.
State regulation of property accumulation by private individuals may be a frightening but inevitable consequence of the increasingly limited resouces we have on this tiny, crowded island.
Antony, Oxford,
rosie and the buyers-to-let have not made money out of nothing; they have made money out of taking risk. this seems fair. the properties they bought could have been bought by those who wished to live in them, but those people did not take the risk, but rented instead. maybe because of the constant doommongering regarding a coming fall in the market.
and, no... I have never bought-to-let. I've never rented either. I made the choice to buy my own property at a time when it was a real stretch financially to afford it. if it were not for rising prices, I'd be under water or trapped in a property that didn't suit my changing needs as I moved from being single to being married and having several children.
those looking forward to a plunge in the market are being utterly selfish. those who will suffer will not just be those buyers-to-let who have money to burn, but one-property families and people like you with slightly different timing. but you'll buy, make money and be hated.
jem, london, uk
Why all the animosity towards btl people? They have taken a risk and have merely been rewarded for it - theoretically, the market could have(may)fallen. Lucky or canny stockmarket players have surely made much stronger gains than btlers in the past - why not hate them more? When a stockmarket rises rapidly, do you hear people moaning that they can't buy stocks in ABC plc? Yes, its all very sad that you can't afford to buy a house, but I'd like to buy a Porsche and I can't afford one - tough.
Do people have a right to buy houses at a given price?For the market to rise, there has to be someone willing to pay - if not, they don't rise, very simple.
Look around the world - governments aren't propping up housing markets because they particularly care about the owners' fortunes - it is because they don't want to risk a recession - which could affect homeowners and non-homeowners alike. Those people that are calling for a massive crash may do well to open an economics text book...
Will, London,
The lowering of Capital gains is really aimed at trying to get rid of the one obstacle that prevents BTL landlords selling. So this tax reduction is a good thing for anyone hoping for a reduction in prices in the coming years.
As with anything in this world BTL was a method of making money. The ONLY person/people to blame are those in government. They are the ONLY people who let it get out of hand.
Cheap short term political points have been scored by this government. But they are likely to suffer the long term consequences - as alot of us are.
Remember that next time you vote.
John Schneider, Worthing, West Sussex
"It was also a national story, one that the entire country seemed to have taken to its heart"
???
By "entire country" presumably you mean wealthy, middle-class professionals with enough cash to buy more houses on top of the one they've already got. Meanwhile the rest of us are wondering if we'll ever find any kind of place we can afford for ourselves. "Wait! There's one...oh no it's been snapped up by another landlord to add to his "portfolio". Never mind I can rent it from them & pay off their mortgage". Yeah, BTL's great. Everyone's a winner.
Paul, London,
rosie and the buyers-to-let have not made money out of nothing; they have made money out of taking risk. this seems fair. the properties they bought could have been bought by those who wished to live in them, but those people did not take the risk, but rented instead. maybe because of the constant doommongering regarding a coming fall in the market.
and, no... I have never bought-to-let. I've never rented either. I made the choice to buy my own property at a time when it was a real stretch financially to afford it. if it were not for rising prices, I'd be under water or trapped in a property that didn't suit my changing needs as I moved from being single to being married and having several children.
those looking forward to a plunge in the market are being utterly selfish. those who will suffer will not just be those buyers-to-let who have money to burn, but one-property families and people like you with slightly different timing. but you'll buy, make money and be hated.
jem, london, uk
I am 23 and a property develper, I do not earn a gigantic wage and I had no help from my parents. People need to stop complaining and start saving! Getting on the ladder is more than possible if a persons finances are managed correctly.
I choose to speculate in property in my spare time because I feel it will provide a more reliable fund in my old age than my pension will. The people who talk bitterly about property speculation and BTL are jealous that they did not see the sense and make a better living for themselves!
Annoyed, Berkshire,
Gordon Brown has said good bye to 'boom and bust', my guess is 'what out below'.
SmileyTim, Perigueux, France
Check out her Web Site....
http://www.rosiemillard.com/
Pete Balchin, Solicitor , Bristol, UK
Geoff, do you see the irony in your statement? First of all you think the problem is down to "insane, seemingly unregulated lending", for which you blame banks. Then you say that the "moaners... just think the world owes them a living".
Are you not suggesting that the government/the world owes BTL landlords some sort of protection from themselves? That they are incapable of resisting the insane lending and have no culpability for taking out loans they can't afford to pay back?
At the end of the day, everyone has to take responsibility for their actions. If you take out a loan you can't repay, you're a fool and have nobody to blame but yourself. I'm a moaner, and I don't think the world owes me anything. I'm working hard and saving up, and one day I'll have earned the right to put nails in walls (well said, Tom!). Until that day, I'll merrily watch as arrogant idiots whose get-rich-quick schemes collapse around them try to blame someone else for their failure.
Neil, London,
I hope the whole housing market crashes, i really do, being born at the wrong time has hit me financially. homes are not for investment.
As someone above said well done for playing the system, iam playing the system in a different way signing on receive free housing while i study ( free study), then plan to leave this country and look for work abroad. i have one more year to complete my 2nd higher level degree. Then iam off there is no way iam going to work like a slave just to either pay some one else’s rent or pay high prices just to have a roof over my head.
Thanks too BTL they have ruined this country and forcing highly skilled people out.
If you all think iam selfish i dont care, iam going to get the maximum benefit i can out of this system to further my skills.
mike, london,
So the state of the housing market is nothing to do with the insane, seemingly unregulated lending over the last few years? Apparently the lesson of the sub-prime issues haven’t sunk in to many of the readership.
If you make the money freely available for property investment, whilst simultaneously devaluing pension funds, all against the backdrop of a stagnant or falling stock market, what do you think people are going to do?
Funnily enough, many BTL landlords actually got into that position by working hard to get into a decently paid job in the first place, and many also bought property at the ‘right’ time, enabling them to leverage for further gains later.
It seems to me most of the moaners were either just born a bit too late (sympathy to them) or just think the world owes them a living.
If you’ve got an axe to grind, tell it to the banks, not the people who played the system…
Geoff, Croydon,
"When these properties arrive, as Gordon Brown has promised, it is likely prices will still be beyond many."
Well, that's hardly surprising, considering that buy-to-let has contributed to a house price boom that has left first time buyers having to pay up an amount roughly equal to 6 times average earnings, when the long term average has been around 3.5 times average earnings.
To say that buy-to-let "was also a national story, one that the entire country seemed to have taken to its heart" ignores the huge number of young people who are now either unable to buy homes, or who are paying an unfairly large multiple of their earnings to do so. Maybe you should consider that not everyone has such a fond view of a method of investment that has left an entire generation destitute.
Fuchsia, London, England
"Property speculators should be hit with higher taxes, rental agreements should be more in favour of longer term tenancy (2+ years)."
Agree completely. People don't want to rent in the UK because what landlords are offering is shoddy, over-priced, insecure housing. If BTL is to become "the new social housing" there needs to be a big change in the way the sector operates and is regulated. At the moment it's a choice of buy or pay someone else's mortgage for no particular service in return.
BTL is the problem in UK housing, not the solution.
Cath, Edinburgh,
Mmmmm. So why is your column ending now ? I suspect it may be that either you, or your editor knows that the "party" is nearly over.
Like others have pointed out, the "boom" in BTL has contributed to the "boom" in house prices. This has priced many out of the market, so the only way they can afford a roof over their head is to feed the dog that has bitten them.
The housing market in the UK over the past few years resembles pyramid selling , and we all know what happens to these schemes in the end.
Andrew, Birmingham, UK
"It was also a national story, one that the entire country seemed to have taken to its heart, and from which hundreds of people benefited"
You really are short sighted.
Whilst all this buy to let nonsense was going on, I was sitting my GCSE's in school. When I left school in 200 when I was 18, i obviously couldn't afford a house and neither wanted one. Now, I'm 22 and looking to buy. I have a geneously sized deposit, but still couldn't cover the Mortgage payments for a house in my area (market town in glos).
So thanks a bunch for pricing an entire generation out of a house. I hope the crash is large and fast. And whats with this nonsense about LOWERING capital gains tax? it should be increased to 60%+. There is a need for private landlords, I agree, but things have gone too far.
Anyway I'm hoping to pick up a nice repo from a failed BTL in the near future, of which there will be many.
Craig, Gloucestershire,
Absolutely, I believe history will prove that the greedy BTL brigade have helped fuel a ludicrous boom and will assist the house coming price crash when they flee for the hills as reality bites.
I have pity for those who exited pensions after the raids by Gordon Brown in the search for a safe investment to fund their retirement, but those poor souls have been shafted twice now by New Labour.
Those who have built businesses profiting at the expense of first time buyers though deserve nothing but contempt.
Andrew Davis, Reading, Berkshire
I believe in Karma,
Rosie, you have used up your goodwill.
I would not say that I wish a lead role in "Cathy Come Home for you"...
And I don't mean as the landlord/lady...
Pete Balchin, Solicitor , Bristol, UK
Not a drop of pity for anyone about to suffer from the crash about to happen. You all made an investment decision involving risk, very happy to take the upside of such risk.
I chose not to take this risk, and the price I paid for my decision was to forgo any benefit of price increase which you had, a home of my own and the freedom to put nails into the wall wherever I bloody well want to, a rental outlay that disappeared into my landlord's pocket, and my furniture in storage.
What I simply don't understand is why my government is obsessed with protecting you arrogant toss-heads from the results of your decision, but doesn't give a damn about those of us who will sit and watch with glee (if only it shuts you up from your endless "my house is worth... now isn't it wonderful!" drawl at dinner parties) in our rented accommodation. Why will this government not let the consequences of a selected group of some people's actions play out? It's skewing the economy. Leave it Gordon.
Tom Franklin, London, UK
Rosie and her crowd want to make money! well in that case earn it through hard work like the rest of us!! those days of easy money are coming to an end and there will be a price to pay for their greed.
When the crash comes maybe we FTB will now be able to get on the property ladder and secure a standard of living that previous generations enjoyed.
Be Afraid, Be Very Afraid because Gordon Browns miracle economy is going to come tumbling down in 2008..
william , Eastbourne, UK
Ask not for whom the bell tolls, it tolls for the housing market.
Nick Elmslie, New Milton, UK
matthew strong, oxford. Well said! Let's hope that Ms M gets caught up in what will soon be the biggest property crash the UK has seen in living memory. Unfortunately, we have no easy way of knowing whether she has been quietly selling up over the past year or so whilst talking up the market to the other poor suckers in the BTL game. If that were the case, they will get to watch their financial future flushed down the drain whilst she is able to jet off to sunnier climes!
Clive, Sussex, UK
Quote "it was also a national story, one that the entire country seemed to have taken to its heart, and from which hundreds of people benefited"
At the expense of thousands of young homebuyers having to pay extortionate sums to get themselves some security of tenure?.
BTL landlords are the work of the devil, the prospect of moving every 6 months or so isn't much fun - but Mrs Millard and her ilk won't know what that's like, will they?
Property speculators should be hit with higher taxes, rental agreements should be more in favour of longer term tenancy (2+ years).
Homes are for living in, not for making money in my opinion.
matthew strong, oxford, oxfordshire
What are you going to be doing now Rosie? Will miss your articles.
John Miller, Atlanta, GA