Earlier today I read an article by Katie Morley, which appeared in the Telegraph on Wednesday:
Buy-to-let crackdown will ‘end the dreams’ of middle-class investors
I didn’t cry when I finished reading which, given the speed we seemingly do nowadays, must be saying something.
No, I didn’t cry, I shrugged. Yes, that’s right, I SHRUGGED.
I’ve believed for several years that the BTL market is out of control, growing rapaciously like a tumour on the torso of the bloated property market. It’s grown unchecked and untreated, and has now completely suffocated the first-time buyer. So please excuse me a touch of schadenfreude, at all the recent obstacles thrown in front of this juggernaut to try and slow it down
Why?
Because I’m fed up of hearing distraught young people, telling me they were 31st in the queue at various open days across London. The other 30 being landlords, developers and, on many occasions, chancers and gamblers.
The landlord resistance
As a business, we have never been focused on BTL as a source of revenue. Yes, over the years we may have missed a trick only taking orders from people “investing” in bricks and mortar, and not promoting BTL more heavily. But that is all we did, took orders, discussed the risk and implications, played devil’s advocate and made it clear that it wasn’t all going to be as easy as it looks on ‘Homes Under The Hammer’.
Some carried on regardless, others deferred and some thought a bit more and decided that owning more than one house wasn’t for them; the latter are so far as we are aware all still alive and thriving. For us, an advisory firm, buying an investment property was all about complimenting an existing financial plan as opposed to it actually being the plan.
Maybe this approach is a contributing factor to why we have not completed a single BTL purchase within the M25 since April. More obvious contributing factors may well be the additional 3% stamp duty on second properties, the gradual removal of mortgage payments being tax deductible and, from January onwards, a host of new rules that will make the BTL market the preserve of professionals, the well-funded and, dare I say it, the brave.
Landlords have been up in arms over these changes. We’ve seen petitions, court cases and an awful lot of foot stamping. But like with any business, landlords need to understand that things change and the BTL sector has had a very good run of being unregulated, uncontrolled and relatively untaxed.
A property “guru” recently wrote that the removal of tax relief on mortgage payments was akin to a taxi driver not being allowed to offset fuel costs against income. I countered that had his taxi gone up in value by 300% since he purchased it, then that may help sweeten the pill. It’s hard to point a finger without at least three pointing back at you.
And that for me is the crux of the issue. The music has stopped; the party is over and someone must pay to get the Pernod out of your mum’s carpet. I have always advocated the need for a strong private rental market but was never convinced that we needed 1.75m private landlords. The days of the aching bore-fest of smug people sat at dinner parties toasting their ability to buy an investment flat and then open a tin of Sail White emulsion is coming to an end; particularly in London.
The return of the first-time buyer
And who is that now coming over the hill in numbers not seen for a decade or more?
Why it is the lesser spotted First Time Buyer.
Where we have failed to complete a BTL purchase in London since April, we have done countless of mortgage applications for First Time Buyers. Frankly, it fills our hearts with joy and hope.
I won’t apologise for London Money being traditionalists, nor craving the days of yore when we had a property cycle that started with the young and ended with the old.
The BTL market won’t disappear, but it will evolve into something completely different. The smart money will move further out of the capital in a search for yield. Professionals will adapt their business to include commercial property and HMO’s. Specialist lenders will help those serious investors with innovative products and landlords will ring his accountant before they call an estate agent to understand how best to make a tax efficient purchase.
What a refreshing change this will make.
But, for first-time buyers still squirreling away your deposit, studying the small print of the government’s various schemes (remember the Lifetime ISA launches next year) or buttering up the grandparents, here is some more good news.
Many people will sell their investment property at some point in the next two years. More properties will be available for you to buy and continue to give life to the long held mantra than an Englishman’s home is his castle.
I for one very much look forward to helping you to buy it.