Property prices thread

[Tamas]

I still don't understand why writing off interest on a business loan was considered a scandal.

It's not a business loan. "Buy to let" is a mortgage type which you can get for properties where you agree not to live in them for X months (6 months I think).

So people who could only get 0.2%  interest on their retirement nest egg from a bank could swoop in and buy up second-fourth properties with better conditions than people who actually wanted to live in them and had the same amount of deposit, driving prices higher.

And most of them would do that on interest-only mortgages, again being able to get even lower rates than people who needed the property to live in AND write that mortgage interest of.

[crazy canuck]

If it's not a residential property, how is it not a business loan? 

And why the angst against interest only mortgages?  If the lender is prepared to take the risk on a loan that never declines, why is that a problem?  And of course people that are more credit worthy get lower rates.  Is this the first time people have realized that?

There is some subtext that is going on that is at the heart of the angst but I am not sure what it is.

[Jacob]

If it's not a residential property, how is it not a business loan? 

And why the angst against interest only mortgages?  If the lender is prepared to take the risk on a loan that never declines, why is that a problem?  And of course people that are more credit worthy get lower rates.  Is this the first time people have realized that?

There is some subtext that is going on that is at the heart of the angst but I am not sure what it is.

Pretty sure this is about residential properties?

My understanding is that the legislation provided tax benefits for people to buy residential properties to rent out, but those same tax benefits were not available to people who wanted to buy residential properties for the purpose of living in them themselves.

[crazy canuck]

If it's not a residential property, how is it not a business loan? 

And why the angst against interest only mortgages?  If the lender is prepared to take the risk on a loan that never declines, why is that a problem?  And of course people that are more credit worthy get lower rates.  Is this the first time people have realized that?

There is some subtext that is going on that is at the heart of the angst but I am not sure what it is.

Pretty sure this is about residential properties?

My understanding is that the legislation provided tax benefits for people to buy residential properties to rent out, but those same tax benefits were not available to people who wanted to buy residential properties for the purpose of living in them themselves.

A residential property is one in which the owner resides.  Hence the name 

If the properties are bought for the purpose of being rented to others, that property by definition is not a residential property. It is a rental property.

But I am starting to see the subtext, there appears to be angst that properties that might be bought as residential properties are instead being purchased and used as rental properties.  Why is that a bad thing?

[Tamas]

But I am starting to see the subtext, there appears to be angst that properties that might be bought as residential properties are instead being purchased and used as rental properties.  Why is that a bad thing?

Because it forces people to remain renters in a country where renters have little to no rights and safeguards.

[Jacob]

A residential property is one in which the owner resides.  Hence the name 

If the properties are bought for the purpose of being rented to others, that property by definition is not a residential property, it is a rental property.

Ok.

And you don't understand the problem people have with the state providing financial benefits to people buying residential property and turning it into rental property, compared to the benefits provided to people wanting to buy residential property to reside in it?

[crazy canuck]

But I am starting to see the subtext, there appears to be angst that properties that might be bought as residential properties are instead being purchased and used as rental properties.  Why is that a bad thing?

Because it forces people to remain renters in a country where renters have little to no rights and safeguards.

How does it force them? A person with a sufficient downpayment and income could also purchase the property.  The reason people rent is because they lack one or both of those things.  And so there is a necessity to create more rental units.  So back to my question.  If the imperative is to create more rental so that people can be housed, why the angst against policies designed to create more rental units?

A residential property is one in which the owner resides.  Hence the name 

If the properties are bought for the purpose of being rented to others, that property by definition is not a residential property, it is a rental property.

Ok.

And you don't understand the problem people have with the state providing financial benefits to people buying residential property and turning it into rental property, compared to the benefits provided to people wanting to buy residential property to reside in it?

A property is not inherently either residential or rental property. Although I suppose if the state wished to make it so, it could do so by way of zoning restrictions. 

Same question to you, if the imperative is to create more housing, why the angst against policies which encourage the creation of rental units?

Is there some unstated assumption being made that if the properties were not being rented that the price of residential properties (i.e. those in which the owner resides) would drop?

[The Brain]

In Sweden home prices are going up again after the dip.

[Grey Fox]

If it's not a residential property, how is it not a business loan? 

And why the angst against interest only mortgages?  If the lender is prepared to take the risk on a loan that never declines, why is that a problem?  And of course people that are more credit worthy get lower rates.  Is this the first time people have realized that?

There is some subtext that is going on that is at the heart of the angst but I am not sure what it is.

Pretty sure this is about residential properties?

My understanding is that the legislation provided tax benefits for people to buy residential properties to rent out, but those same tax benefits were not available to people who wanted to buy residential properties for the purpose of living in them themselves.

A residential property is one in which the owner resides.  Hence the name 

If the properties are bought for the purpose of being rented to others, that property by definition is not a residential property. It is a rental property.

But I am starting to see the subtext, there appears to be angst that properties that might be bought as residential properties are instead being purchased and used as rental properties.  Why is that a bad thing?

It appears that it's because a) creating more landlords is not a good thing b) rent is more expensive than mortgages.

[crazy canuck]

Isn't the answer to that to create even more rental supply?

[Jacob]

A property is not inherently either residential or rental property. Although I suppose if the state wished to make it so, it could do so by way of zoning restrictions.

I'm not interested in arguing definitions with you.

People buying existing housing for the purpose of renting it out got financial benefits that were not provided for people buying housing for the purpose of living in it.

This is either good public policy or not good public policy. The prevailing opinion in the UK seems to be that it's poor public policy, hence it's "a scandal".

You seem to be arguing that it was good public policy?

Same question to you, if the imperative is to create more housing, why the angst against policies which encourage the creation of rental units?

I think the criticism is that the scheme only created more rental units by cannibalizing units that previously were owner-occupied, not by increasing the housing stock?

And therefore served as a giveaway to people with enough capital to become landlords, with no impact on the amount of housing stock.

... but maybe that's not what happened?

Is there some unstated assumption being made that if the properties were not being rented that the price of residential properties (i.e. those in which the owner resides) would drop?

No, I think the criticism is that it made it harder for new buyers to enter the market as buyers while providing financial support for people with more money to build their wealth by becoming landlords - and that this happened without increasing housing stocks appreciably.

Now, the criticism may be incorrect - but that is what I understand the substance of the criticism to be.

Is it your contention that the buy-to-let scheme actually increased housing stock in the UK?

[crazy canuck]

I'm not interested in arguing definitions with you.

If you look back at your first post, you were the one who proposed a definition.  It was wrong, but it suited your argument.  It is too cute by half to now say you don't want to discuss whether the definition you gave that is the whole basis for your position is flawed or not.

[Tamas]

I'm not interested in arguing definitions with you.

If you look back at your first post, you were the one who proposed a definition.  It was wrong, but it suited your argument.  It is too cute by half to now say you don't want to discuss whether the definition you gave that is the whole basis for your position is flawed or not.

It was not a wrong definition in the UK. A property with tenants or owner-occupiers in it is a residential property, NOT a commercial one.

[Sheilbh]

People buying existing housing for the purpose of renting it out got financial benefits that were not provided for people buying housing for the purpose of living in it.

Yes. The other side of this is that this tax relief applies to individuals who buy a property in their own name with a personal mortgage.

This type of tax relief (and lower taxes generally) would be available if they set up a company to hold the property. As I say on balance I think it's probably right to have got rid of it because I broadly think those individual, hobbyist landlords who are buying for retirement income are generally worse landlords than a corporate.

This is either good public policy or not good public policy. The prevailing opinion in the UK seems to be that it's poor public policy, hence it's "a scandal".

You seem to be arguing that it was good public policy?

I think six of one half of the other

I think it's probably better to get rid of it than not. The downside has been that it has really impacted the profit for individual landlords, so I believe there has been a decline of properties available on the private rental market as those landlords get out - either selling properties to corporates or to individuals as owner-occupiers. I don't necessarily think it was a scandal though.

But I think the purpose was broadly to encourage that type of investment as a form of retirement saving. For an individual it was a tax efficient way to invest. For that policy goal of the 90s/00s Britain I think it worked.

On the other hand the reason it was got rid of was "fairness". For all that's posted on here, the last 14 years of Tory government have always tried to produce tax changes that can broadly be described as progressive (in particular by the IfS scorecard) - and have significantly increased the tax take as a proportion of GDP. I think a lot of that has actually just been by introducing complications.

But to the extent that their goal was to increase the tax take on higher rate tax payers v lower rate tax payers (while also leveling the plaing field between owner-occupiers and landlords) then they've met their goal.

I don't think either goal was to increase housing supply because it's not about supply or demand just ownership.

[garbon]

I see CC is in a mood again