Let’s hope the gentle slowdown in house prices continues for a long time

London flats under construction
60% of “luxury” flats are privately rented

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House-price growth slowed again last month, according to the latest figures from Nationwide.

The building society reports that house prices fell by 0.2% during the month of May, while the annual growth rate slipped to 2.4% from 2.6% in April.

Given that the consumer price index (CPI), the Bank of England’s key inflation measure, is also 2.4%, that means that house prices are flat in “real” (after-inflation) terms.

Overall, this is the ideal. (I’ll explain why below).

The question is though, will it stay like this – or are there bigger falls on the way?

Why we need UK property to lose its appeal as an investment  

Despite the legislative kicking that buy-to-let has had in recent years, and continuing evidence of a sharp slowdown in the UK housing market, the idea of property as a decent investment is dying hard. Yet there are signs that it no longer has the same hold on the imagination as it once did.

Here’s a little anecdote to illutrate the point: last month, private bank Weatherbys held an event for their clients, at which they very kindly asked a question on the behalf of MoneyWeek.

It’s a question Merryn often asks when she’s interviewing a fund manager or other investment celebrity: “If you had to lock up your money in one asset for ten years, and you couldn’t touch it during that time, what would you invest in?”

It’s an interesting question – it’s distant enough that you have to consider your views on the long run and on how much risk you’re willing to take, but it’s not so far out that you can simply opt for “reliable” stores of value.

After all, the history of the last century or so suggests that British or American stocks will mostly deliver satisfactory returns once you’ve held them for 20 years, but a decade-long holding period is not such a sure thing.

Anyway, we gave a series of options – bitcoin; a portfolio of developed-market stocks; emerging-market stocks; US dollars; physical gold; developed-market government bonds; emerging-market government bonds; or a property in prime central London. The audience members then voted for their preferred option.

Hardly anyone opted for bitcoin (3%) or US dollars (2%). Government bonds of either stripe also won very few votes (3% developed; 4% emerging). Interestingly, almost the same proportion of people (13%) voted for gold as voted for developed market stocks (12%).

In the end, the victor surprised me – it was emerging-market stocks, with a whopping 40% of the vote. I was quite impressed by this, although it may reflect a strong “risk-on” mentality – it would be interesting to see what the outcome was today, for example.

Prime central London property did manage to come in second, on 25%. This shows the enduring appeal of the idea that “you can’t go wrong with bricks and mortar”. Of all areas of the UK housing market, prime central London has probably been hit hardest. Depending on who you ask, prices in London’s poshest postcodes are now back to 2013 levels. Yet despite that, it’s still seen as a good place to put your money.

However, I reckon that five years ago prime central London property would have won outright (that’s a guess, but I don’t think it’s a bad one). The massive increases in stamp duty on that end of the market has had a huge impact there.

But today, it seems clear that the main driving force behind the wider slowdown in the UK property market is the fall from grace of the amateur landlord.

Why speculative landlords leaving the market is good news

This could be good news – not for landlords, maybe, but for the wider economy.

As we’ve said on many occasions, you want house prices to stay roughly where they are or to head gently lower in “nominal” terms. But you want them to fall in “real” terms – in other words, get cheaper relative to inflation.

That way, you don’t bankrupt your banking sector (which has loaned lots of money against property), or get consumers in too much of a panic (British households seem to based their view of the economy on what’s going on with the price of their own house). But at the same time, house prices become more affordable and mortgages – assuming they are fixed rate, which most are now – become less onerous in real terms.

For a gentle slowdown, rather than a crash, you need a number of things to happen. For one, you need mortgage lending to be steady rather than rampant (boom), or collapsing (bust). That seems to be the case. The Bank of England is tightly monitoring that side of things, so while money remains cheap, it’s not always easily available.

You also need to avoid a big jump in unemployment. Forced selling on a wide-scale basis is most likely to happen if unemployment soars. So far, that seems unlikely too.

Finally, buying property as an investment needs to look less appealing. In 1997 – when property was still recovering from the 1990s crash – private landlords owned 10% of Britain’s housing stock, reports Nationwide. By 2017, that had risen to 20%.

Regardless of whether you think that’s a good, bad or indifferent thing, there is no doubt that it has had an effect on property prices. If you suddenly introduce a whole new class of buyer into a market, then you’re going to not only boost demand, but you’re going to change the nature of the market too.

Want to know why Britain is so inundated with “luxury flats”? That’s down to builders meeting demand from landlords (as Nationwide notes, roughly 60% of flats are privately rented, compared to the average of 18% for other property types).

But now, demand from landlords is collapsing as tax changes make the whole thing far less attractive. The Association of Residential Letting Agents just reported that the number of landlords selling their properties rose sharply in April. And in the longer run, what we’ll be left with is landlords who know what they’re doing, rather than crossing their fingers and taking a punt on a combination of massive leverage and constantly falling interest rates.

If we can get back to a situation where properties are viewed by most people as places to dwell, rather than as potential lottery tickets, then not only will we take some heat out of the market, but the sense of inequality will diminish as home ownership starts to rise again. Combine that with a pick up in wages (which seems to be happening), and an undeniable increase in physical housebuilding, and we might just get to the point where the market is at something close to sensible valuations again (relative to income), without causing a catastrophic economic collapse.

  • James McKindley

    Alas another journalist using the term ‘amateur landlord’ with no reference to what they mean by it.

    And as someone that really should know better Mr Stepek blames rising property values, at least in part, on private landlords. He ignores the fact that whilst private landlord’s percentage of the market has increased, the percentage in social housing has declined. Whilst he mentions ZIRP, he ignores the other reasons that values have increased. QE has introduced a staggering £435 BILLION of extra money into the economy that has inflated all asset classes and he ignores the massive increase in our population whilst housing output has not kept anywhere near the same level. As an economist I would have expected a better grasp of supply and demand. However he blames extra demand on landlords when in fact they have provided housing to those that cannot buy. A large part of that group being the immigrants that have been mainly responsible for the swell in our numbers.

    Worse still is that he appears to have no understanding of the additions to housing stock that landlords have been responsible for. They have:

    1. Turned large under-utilised houses into flats, bedsits and HMOs therefore helping to relieve pressure at the lower end.
    2. Converted commercial properties into residential therefore increasing the stock of housing.
    3. Brought back long-term empty, sometimes near-derelict properties into good use again.
    4. Built new units themselves. One landlord I know is actually building a block of flats where others are building smaller numbers of units.
    5. Put down deposits on off-plan schemes, thus providing developers with free finance to continue the build. Sometimes the landlord doesn’t get the keys for 2 years. One major house-builder has recently reported that they will not hit targets because landlords are no longer buying.

    Mr Stepek, wake up to what really goes on with BTL!

    • Kevin Hoque

      Hi James, interesting input. Your points are valid and make sense. I understand where you are coming from. Thank you for posting.

      My experience with landlords is a bit different. They are my friends, colleagues and family. Many of them own properties that they rent out. As far as I know, all of these properties were existing homes/flats. Some they might have lived in previously and did not sell when moving to their next home. Others are properties bought solely to rent out as an investment. Nothing illegal or untoward. Just small time landlords hoping to make some money.

      I think it would be much better for our country/society if we had more BTL as you describe and quite a bit less of the BTL that I know of. Perhaps that is what John Stepek has in mind? – although I would not wish to put words in his mouth! 🙂

      • Gromit

        “….and quite a bit less of the BTL that I know of.”

        Why? it’s not as though those properties were being demolished, they are still there just providing a home for someone who doesn’t want to buy or is not in a position to buy instead.

        • Kevin Hoque

          Gromit, the reason I made that statement is because I have many friends who cannot afford to buy. They are forced to rent from those who can afford to buy and see their buying choices as investments. “…not in a position to buy”, for the people whom I know, more often than not, is short-hand for “cannot afford to buy”.

          I would much rather some small BTL landlords (like my friends and family) were dissuaded from the property market as their purchases competes with young first time buyers. So I look forward to a little redress in this area. Of course, one can be of the attitude that there is nothing wrong with profiting at the expense of those first time buyers who are out-bid in the market. But I would much rather young people have the chance to buy more affordable homes and older people, who may have excess savings, put their money to work investing in the businesses of the future.

          Having said this, I have a genuine respect and understanding for those who add value and extra properties to the housing market, such as James. There will always be some people who wish to rent and their needs to be catered for. Thanks James for your thoughtful and insightful reply that has somehow gone missing…

          Anyway, these are personal my views. Others may have diametrically opposite viewpoints and that is fine. I very much appreciate hearing these.

          • Gromit

            “….their purchases competes with young first time buyers.”
            This not the case if you read the report from National Housing and Planning Advice Unit, NHPAU, of course, there may some pockets were the average doesn’t hold true.
            You have to look at the bigger picture with a housing crisis in full swing any investment in housing from any source (probably with the exception of foreign buyers in central London) should be encouraged, and certainly not discouraged. The country needs housing for all tenures.

            Renters have just as many rights to have a home as owner-occupiers, Landlords bridge the gap for renters. Yes Landlords are providing a service (just like Lenders, conveyancers, valuers, insurers, etc) and should be rewarded for their provision.

            • Kevin Hoque

              Hello Gromit, thanks for your reply.

              An investment in housing that genuinely adds to the country’s housing stock is definitely welcomed by me.

              However, an “investment” that merely buys an existing property and rents it out to a young family, who really would like to buy, if prices were more reasonable, is not something that I similarly welcome. It adds nothing, in aggregate, to the economy and it denies a young family the chance to have a home of their own. Renting isn’t fun for young families. I know this very well.

              But as I said before, there will always be some people who desire the flexibility of renting and that is fine. Where we are today though, is that we have enough homes (mostly). But young people rent them when they would rather buy and often see no hope in being able to buy in the future. They rent from other people who are able to purchase their own homes (homeowners) and are also positioned to purchase the homes that young families desire to purchase themselves (becoming landlords).

              The government is trying to tip the scales towards young families and away from investors. They want more young people to be homeowners – not tenants. I welcome their actions, for all the reasons that I gave previously.

              I agree with you though. We do have a housing crisis and the solutions are undoubtedly many. For instance,
              ridiculous interest rates have completely distorted all markets, including housing.

              • Gromit

                “…an “investment” that merely buys an existing property…….is not something that I similarly welcome.”

                As you know house transaction tend to be in chains.So although not a direct purchase there may be at the end of a chain a new build. So purchasing of an existing property maywell result in a new build being sold (and being build in the first place). Hence my assertion that any investment is, with few exceptions, good.

                • Kevin Hoque

                  Gromit, your statement does not make sense to me. The chain will always exist. It does not care who is in it. Therefore having young families buying their own home at the bottom of the chain does not invalidate the chain? What exactly are you trying to say? Sorry, you may well have a valid point, but at the moment I do not see it.

                  • Gromit

                    The point is any investment either directly or indirectly (through a chain) has to be good. Builders will not build new houses unless they can sell them (excess supply will result in price falls that builders do not want to see). Yes it doesn’t matter whether investment comes from an owner-occupier or FTB nor a property investor, the more the merrier.

                    • Kevin Hoque

                      Thanks Gromit for your reply. As I said before, new builds are a good thing. I am not suggesting anything that would get in the way of building new homes. What I am proposing, and what the government are doing is to slightly discourage BTL and to slightly encourage young family purchases. So to take your chain analogy, the investors at the bottom of the chain, who are buying already existing homes, are in some cases being replaced by young families. The chain is intact. It just has a slightly different composition. Plus the would-be investors at the bottom of the chain will now possibly rather invest in businesses, rather than buying existing homes and forcing young families into tenure. For me this is a win-win. The government appear to agree.

                    • James McKindley

                      Whilst I understand where you’re coming fro Kevin I would totally disagree with the reasoning that Government has presented. The attacks have primarily been about tax take and Government knows only too well that whilst we have so many immigrants in the country the ratio of home ownership is not likely to increase much. I’d also point out that if Osborne was really interested in doing something to help aspiring buyers he would have listened to the representation made by landlord bodies to reduce CGT if a landlord sells to a first time buyer. Not only did he dismiss it out of hand but he loaded CGT for property sales!

                      However putting to one side the issue of getting on the ladder, what the attacks are doing is massively increasing homelessness, as something similar did in Ireland. The taxation measures in Ireland were far less Draconian there though so you can imagine the effects here will be much, much worse.

                    • Kevin Hoque

                      Hi James. It is good to hear from you again. Even if we disagree, which is completely fine 🙂

                      I think that the government are just trying to discourage would-be small-time landlords from entering the market and also to nudge these same people out of the market. If they had decreased CGT for landlords selling to first-time buyers then this does not fit well with that plan. Why give a handout to landlords who are going to leave of their own accord? Plus they are hard-up for cash. So I can see why they would not go down that route. They have weighed up the pros and cons and decided against it.

                      I do not see the government’s tinkering with the tax system as an attack. That word is too strong. A Corbyn government might be an attack. Not May’s. Too many landlords vote conservative. They are slightly discouraging small-time would-be landlords from buying existing homes.

                      I hope that your dire prediction do not come true. Many people at the very bottom of society rent homes privately. Many of these people would be better served by social housing. I know several people who are lucky enough to live in social housing. But the waiting lists are extremely long. Fingers crossed a future government will build more and house more vulnerable people.

                    • James McKindley

                      I fear you’re missing the point about CGT Kevin. Osborne didn’t just turn down the opportunity of helping FTBs by discounting it for landlords selling to them, he INCREASED CGT compared to any other asset class.

                      My own Tory MP admitted outright that it was a tax grab and not intended to help first time buyers. It’s just smoke and mirrors.

                      Paul Johnson (Director of IFS) said the day after Osborne’s announcements that it would do nothing to help people get on the ladder. David Cameron described the IFS as the ‘gold standard’ of independent financial experts.

                      The evidence of the consequences of the removal of mortgage interest relief is screaming at us from across the Irish Sea.

                      As you say yourself, Govt is hard up for cash and that is what this is all about.

                      You think this is tinkering and not an attack??? There will be people bankrupted from this move, though fortunately many that might have been, have planned. An example is someone I know that would have been taxed more than his total income but he has instead had to evict many long-term tenants that could not afford the higher rents he has had to charge. He sold off a couple of properties but all the other evicted tenants have been replaced with wealthier ones.

                      Everything that Mr Osborne did was in regard to short-term gain at the expense of long-term loss. The crazy pensions reform netted enormous windfalls for the Treasury but will starve future Chancellors of the taxable income from people taking pensions. The money taken out under the reforms will be spent in various ways and mostly taxed in some manner. Again future Chancellors will not see the tax take. Osborne was looking to sell off many State assets such as Air Traffic, Land Registry, The Royal Mint, Ordnance Survey, etc, etc, etc. They are all extremely profitable but he wanted cash now. Future Chancellors would be deprived of the income. Think how this will affect people in the future!

                      Kevin I am not making predictions, I am stating what is happening NOW. Please put in a FOI request to your local council and ask them what the homeless figures are for now, the end of 2017 and for one year ago.

                    • James McKindley

                      Kevin, I really hope you get to see this, it’s been a few days since we have been commenting on this article.

                      Here is another article which highlights exactly what I mean…


                      The tax attacks are social cleansing and are forcing the lower income families (generally not Tory voters) into emergency accommodation for the benefit of those that might put an ‘x’ next to a Conservative candidate. This article demonstrate the cost to the public purse via council tax but it does not show the human tragedy of it all.

                      From your pic you look like you are a family man. How would you feel if you had to leave your home and move into one or two rooms in Travelodge, maybe even way away from your current home?

                    • Gromit

                      We will have to disagree on this point of how investments can filter through to new builds, but at least we are in agreement that more houses need to be built.

                    • Kevin Hoque

                      Gromit, perhaps we are disagreeing on how investments can filter through to new builds. I did not see your point there, but it might well have been valid. I am glad that we do agree that more houses need to be built.

                • Hedgehog

                  It would work as you described if the housing market was free and elastic without an artificially constrained land supply and with a more flexible planning policy (like in Germany). As long as we have wast green belts and rigid planning process, only a few large builders know how to “lubricate” the planning system (and the council officials) to get their projects approved and zoning changed. The result is a fixed housing supply while only a demand is variable. In those circumstances any extra money will only increase the prices without increasing the supply. If it was some other country where the supply side was elastic, or where the land market was available to private individuals and small builders, the capitalism would work and your argument would hold well.

                  • Kevin Hoque

                    Reply, I completely agree Hedgehog. The greenbelt is more like a green noose. If we increase our population then we need more space to house people. That is the cost of the extra people.

      • James McKindley

        Interesting that my response to you seem to has been removed Kevin. There was nothing inflammatory in it as far as I’m aware. I see from my profile it was apparently detected as spam. Most curious.

        • Kevin Hoque

          Hi James. That’s a little strange. Perhaps there is a glitch in the Matrix? 😀

    • michael flynn

      All good points James. Moneyweek is just biased against housing. The arguments they use are spurious and the line of reasoning is half baked. I despair at the total lack of critical thinking and objectivity that all MoneyWeek journalists continually espouse.

      They know nothing about the law of supply and demand and economic and property cycles. This is ineptitude on a grand scale.

      • Peter Edwards

        It’s not just biased, its that right wing view you hear espoused by many financial rags. I would like to see an analysis of the effect of the loss of social housing on the supply side instead of the Corbyn bashing.

      • James McKindley

        Thank you Michael.

    • You raise some valid points James but you’re off topic. The point of this article is that house prices are either flat or falling in real terms, which is fantastic news for the people of Britain. We’ve been living with unhealthily high property prices for the best part of the last 2 decades.

      Moneyweek has consistently criticised excessively low interest rates, QE, bank bailouts, right to buy and all the other hair-brained ideas successive governments have had in trying to prop-up property prices. Moneyweek is not against BTL or amateur landlords (professionals who rent property on the side for extra income / retirement planning). They’re the first to champion adding value and the 5 examples you’ve listed as good deeds of some BTLers are all adding value. Good on them and long may that continue.

      The much more important point here is that it is in everyone’s best interests that house prices are fair value and do not swing wildly up or down. Since we all need homes and they’re the most expensive things we’ll ever purchase, its very important that we collectively understand and agree on this.

      • James McKindley

        Thank you for your feedback Jake but I disagree to some extent. Moneyweek has consistently bashed landlords and John Stepek particularly so. I would concur that house prices are too high and it would be beneficial if they were a better ratio of earnings.

        The two points I strongly object to with the article are the ubiquitous but unexplained use of the term ‘amateur landlord’ and the statement that landlords are responsible for increasing prices. Perhaps Mr Stepek could actually produce some evidence for this?

        • An “amateur” is one who engages in an art, science, study, or athletic activity as a pastime rather than as a profession.

          Therefore, an amateur landlord is someone who has a job doing something else and has purchased one or a few properties as an investment. It shouldn’t be taken as an offensive term – an “amateur” landlord can still be caring and contentious landlord and undoubtedly many amateur landlords provide better quality and better value than professional landlords.

          By purchasing a property for the purpose of letting it, that property is being removed from the housing stock available for purchase. Home buyers are competing against amateur and professional landlords. The more demand, the higher prices go. Imagine if everyone decided to invest in UK residential property instead of investing in stocks/bonds/savings – the demand for properties would rise causing the price of property to rise.

          Landlords have benefited from extremely low interested for 10 years since the financial crisis. Before that they benefited from 100% or even 110% BTL mortgages. They also received tax relief on the interest they paid for their property (which is now being phased out). This favourable environment encouraged huge number “amateur” landlords. In 2006, there were 840,000 BTL mortgages with a total balance of £93.2bn. By the end of 2015, there 1.8 million BTL mortgages with
          an aggregate balance of £214bn.

          By gradually unwinding those policies, the hope is that BTL does not look like such an attractive investment. Britain can avoid another house price crash, instead seeing gradually falling house prices, just like Singapore successfully engineered from 2013-2017. Their cooling measures reduced house price inflation to between -4% and 0% for 5 years in a row. If Britain can achieve such success for about 10 straight years, our property market, our society and our economy will be in a much healthier position than it is today.

  • TheLandlordWhisperer

    Oops. Usual gunshot in foot from Moneyweek. Obviously hasnt realised NHPAU concluded rises due to landlords were proven as negligable, nor that developers rely on investment money to build anything at all. All this does is lower supply of new build.

  • Sunil Puri

    I still remember MoneyWeek doomsayers years ago announcing Britains Imminent House Price Crash …. now it’s a gentle slope down to ‘sensible valuations” … – Is this a contrarian indicator?? short the housing market…

    • APJ

      Yes, I noticed Money Week suddenly changed its tune. Is it an editorial change imposed by its new owners, or perhaps Merryn has bought a house?

  • Gromit

    Economics 101: if demand exceeds supply then prices rise.
    Ergo with demand for housing increasing unless there is a massive increase in house building prices will continue to rise. Demand for housing is not just for owner-occupiers but also for rented accommodation.

    Unless capital comes in through Government (unlikely); then private investment, if denied capital growth, in order to make a reasonable return will seek higher yields to compensate, i.e. higher rents. Discouraging investment will only make matters worse.

    • Leitmotif

      Yes but demand need to be affordable. You completely fail to understand that the money to support ever increasing price rises HAS to come from somewhere. Where will it come from? If the population rises this is not “increasing demand” in the economic sense. Bangladesh has a lot of demand but I dont see high prices

      • James McKindley

        But… and I ask because I don’t know the answer, are prices high in Bangladesh compared to incomes?

      • Gromit

        Economics 101: if prices increases demand falls to restore demand/supply balance. It’s because supply is short that prices are high.
        How is increasing population increasing demand (assuming households have the same average number of people in them)?

        Plus the housing market is not homogenous. If I can’t afford a $1m+ property in one area then I’ll buy a £500k in another area, or look for a smaller less expensive property.

        Is there a shortage of houses in Bangladesh?

      • FromFrais

        You are correct.

        Demand is nothing without the credit to make it so.

        Cash man wants to buy a house for sale 90k he has 90k in cash only.

        He is the only buyer = no sale or 90k or less.

        Mortgage Man wants to buy a house he has 50k cash and 50k mortgage.

        He is against cash man and then both demand it the same (desperately) = sale over 90K

        The rental argument unfortunately does not carry either as rents (from income/cash) are not linked to sale prices (credit) in the main.

        Rents can rise as house prices fall if wages go up. However in the absence of rising wages or benefits landlords are tied unless of course they where not charging the market rent at that place/time.

        In saturated areas like flats in city centres rent falls could also occur when properties are transacted at lower prices.

        In Bangladesh they have very expensive rents for the folks whom live there. I am also told they had a large boom and fal (20%+ source dhaka tribune)….whilst rents have remained expensive and risen inline with inflation.

    • Horiboyable .

      Supply and demand is only one component of house prices. If interests rates returned to their norms of 5 or 6% house prices would decline 20%+.
      Anyone buying a house now will lose money. There is so much risk in the market at the moment and CBs will not be able to save you this time because they will be bankrupt themselves.

      All western European nations are broke and they will default on their sovereign bonds which mean many people will lose their pensions. Italy 2 year bond rose by 2% in a week when risk is on, that is how quickly interest rates can move. Deutche Bank is on the edge, Italian Banks are on the edge and any belief in the state is an illusion. The whole of Europe defaulted on their sovereign bonds in 1931/32, technically the UK did not because they went into a moratorium.

      Make no mistake that the housing market in the UK has peaked and if you buy now you could lose your whole deposit in months. There are so many folks still out there from the 2008 GFC on interest only and they will all bail and the exits will become over crowded.

  • I am A Tenant

    MFW a Landlord says that supply and demand is responsible for the massive increase in house prices and not, having hoovered up ~4m houses from from the supply side, Buy to Let.

    • James McKindley

      And are you suggesting that these houses have been left empty??? If they have then of course it has affected supply, but they haven’t have they? People are living in them.

      • I am A Tenant

        Oh Jesus, no, I’m not suggesting that Landlords have purchased ~4m houses and left them empty.

        Have a little think, see if you can come up with a response that’s relevant to supply and house prices.

        • James McKindley

          Err.. I suggest that you have a little think my friend. The houses have people living in them and are therefore people are housed and out of the market. In the main they are people that either want or need to rent. There’s a long list of reasons that this may be the case but landlords haven’t made the properties disappear. Good grief, you mentioned supply and demand in your original post but show you don’t understand it. And where do you think social tenants are going to live as Government has increasingly slope-shouldered responsibility for them. Social housing is declining when the need is increasing. Those social tenants that are better off are being offered their homes at a substantial discount and unsurprisingly they’re buying them! Who wouldn’t? Now that landlords are being forced out of this particular market the homelessness rate is going through the roof. Here’s an idea, phone your local council, or put in an FOI request if you have to. Ask them what the numbers were for homelessness this time last year and what they are now. In my area it’s already up 10% since the end of 2017. Not your problem though is it?

    • michael flynn

      BTL is not responsible for massive increases in house prices. In fact I would argue just the opposite. As a landlord with many houses I can tell you that the houses I rent out have many more people living in them than they did before I bought them. I have therefore decreased housing demand which has helped keep prices lower than they otherwise would have been. I have also refurbished all my houses and improved the housing stock. Thank God for landlords like me who provide nice houses for people like you to live in. Just keep paying my mortgage for me, there’s a good chap.

  • michael flynn

    Let’s also conveniently forget to mention that it is foreign investors that are buying up most of the flats. Let’s also have yet another London centric article.

    Houses are cheap in the North and there is no need for anyone to rent unless they want to or are feckless with their money. A couple on minimum wage could afford to buy a house in the North. House prices are rising in the North.

    Any sensible journalist would treat London and the South east as a separate housing market. Using the falls in the South combined with the rises in the North paints a very distorted view of the market as an average.

    House prices in the North are about 25% down in real terms since 2008. You wouldn’t think so though would you after reading yet another London centric article.

  • Hear, hear. I wish every policy maker in Britain would read and heed this article.

    Housing is not something that should be speculated upon. First things first – they are our homes. Let them return to fair value and have cross party commitment to keeping them at fair value, so we may end our unhealthy fascination with house prices, permit young people to pay a sensible amount for their home and turn our collective attention and effort to more important endeavours. It will reap great rewards not only for our personal sanity but also our community at large and our economy too.

  • APJ

    If BTL buyers carry on increasing the proportion of UK housing stock they own, by 2100 they will own virtually every property in the UK, and virtually everyone will be a renter, reliant on landlords to provide accommodation. No wonder the government wants to put a stop to the perverse BTL trend.

    • Gromit

      Not a dissimilar situation to what it was 100 years ago. A recent RICS report estimated that there’d be a shortfall of ~1.8m homes to rent by 2025, i.e. 4m people; where are they going to live?
      But a lot can happen in 80+years.

      • APJ

        The smart landlords are probably already selling up or have indeed sold up, leaving the naive ones to take the pain.

    • michael flynn

      Your post is ridiculous and totally over the top. Allow me to educate you and give you a history lesson. 100 years ago 10 per cent of people were living in their own homes, 89 per cent were private renters and 1 per cent were renting from local authorities. All that is happening is that we are heading back to what used to be the norm.

      Buying a home is a ridiculous waste of money for the economy. Just think what could be done if that money was used to boost the economy. It makes total sense for us to become a nation of renters again and for the private sector to fund the transformation.

      The world of work is changing at a rapid pace. The economy needs people to be flexible about where they will live. Buying a house and tying yourself to one location is going to severely restrict the growth and productivity of the economy.

      Renting is the way forward and BTL landlords should be lauded for allowing this transformation of the economy to take place.

      • APJ

        It’s a good thing parliament does not agree with you, and has passed laws to make sure your opinion does not prevail. You have already lost the fight. The wise BTL owners are selling up or have sold up, leaving the foolish ones to suffer all the pain.

  • AAJ

    It is often quoted that people want to rent to give them flexibility. I don’t think this is ever the case, it’s more the case that they’ve been told/conditioned to think they should rent. If you made buying a house as ‘flexible’ (whatever that means) as say buying a car, I wonder how many people would then want to rent?

    • Horiboyable .

      There is a big problem with home ownership.

      All governments in the west are bankrupt and will default on their sovereign bonds. Historically when governments get into this situation they turn on their own citizens for revenue because it is never their fault. So home owners are a very easy target because you can not move your house, they know who owns and they know where you live, they will simply introduce a house tax, like they have done in Greece. The other easy target is private pension schemes, they will simply confiscate your money like they did in Hungary & Poland.

      Have you not noticed how broke the state is? No longer pick up bins weekly, roads are falling apart, civil enforcement offices everywhere, over zealous parking patrol, street lighting turned off, BBC sending heavies round to little old ladies and the NHS is a disaster. Soon they be round your house to stick their hands down the back of your sofa for any change. Believe me you have NO idea what is coming to this country.

  • LG

    The statistics you mention don’t seem to fit the ‘BTL – bad’ narrative.

    In the 20 years since 1997, private landlords have risen from 10% to 20%. Over 20 years that’s a tiny increment.

  • FriarStuck

    @James McKindley,

    The meteoric rise in house prices in the last 20 years has had almost everything to do with cheap money, it’s why Ireland and Spain, despite having a massive over supply of housing, also saw huge price rices (it happened in the 1920s before the great depression too).

    It’s worth mentioning that many BTL landlords got into the game because they could make more from the increase in the property value, than they could from the rent.

    For example, between 2001 and 2008 (using the Halifax price index), house prices increased year on year, at a rate of 12.75% (to get the same sort of net yield from rental income would be impressive)..

    Taking into account the price falls between 2008 and 2012, prices have still increased by 6% year on year, between 2001 and 2018.

    In other words many people were attracted to idle property speculation because it seemed like a one way bet by which to make easy money.

    An economy based on speculation is ultimately not a productive one, which makes everyone poorer (we collectively get richer by invention and production, which cannot happen if everyone is sitting on their backside speculating over the value of bits of paper and/or promissory notes).

    I disagree with the BTL tax changes purely from the point of view, that re-focusing people’s efforts on productive enterprises rather than on parasitic speculation in the property markets (or any other asset market for that matter), could be addressed by simply raising interest rates (it also increases regulatory burden and complexity, which the UK needs less of, not more, given that our tax code is now one of the longest and most complicated in the world, and has tripled in size since 1997).

    The BTL tax changes do nothing to curtail speculation in stocks, bonds, derivatives, fine art, etc., which still continues, and continues to be a problem.

    • James McKindley

      Sorry… who says that many people get into BTL for capital gains? I’d very much like to see that piece of research.

      • FriarStuck

        Historical precedent for starters, to say that cheap money increases speculation on the price of assets and inflates asset prices (in other words trading motivated almost purely on the expectation of capital appreciation), is hardly a controversial statement.

        Take your pick, South Sea Bubble, Mississippi Company, Tulipmania, Roaring 20s, etc.

        There are plenty of academics and researchers that have noted the correlation.

        Here’s a book on the subject from one such academic:


        Interest rates have almost continually fallen since the mid-90s, and unless the Bank of England is willing to experiment with negative rates, they can’t go any lower. Further, nearly half a trillion pounds of QE, has made borrowing sterling substantially cheaper.

        Despite that, I’m sure the tax changes for a BTL business man like yourself are an inconsequential dot of red ink on your bottom line, and will hardly affect you or other BTL business owners, because they would have ensured they had sufficient rental yield, were in the business of BTL to provide a service, had no expectation of much capital appreciation beyond that of inflation, and would never have considered borrowing on the expectation of captial gains making them the bulk of their profits, on an interest only basis the maximum that the banks would allow provided the rental income covered the interest payments (I’m also sure Northern Rock’s lending rather similar lending practices had nothing to do with their bankruptcy either and it was an American precipitated crisis that unexpectedly affected the UK, because any rational person can see that the price of UK property rising at more than 4 times the rate of inflation, in perpetuity, represents fundamental value).

        And in logical conclusion to this line of reasoning, we can also be sure that the government is clearly mistaken and their clumsy attempts to slow the BTL market based on the misguided idea that house prices have been fueled by speculation, are a futile attempt to tilt at windmills:



        • James McKindley

          Like I said where’s the proper research? I know literally hundreds of landlords and I cannot think of any one of them that are in the business for speculation. I’m afraid you are not speaking from a position of experience.

          I do not disagree at all that ZIRP has helped to fuel prices. Of course it has, along with QE and a population explosion. However you seem to automatically link these things with people becoming landlords for speculation. It’s a crazy assumption.

          As to my own borrowings, it is of course not your concern. As it happens I, like pretty much every full-time landlord I know, has always had the stance that we don’t put up rents on existing tenants. I am changing that now and whilst profits will remain pretty much constant, rents will increase to pay the extra tax.

          The links you gave are somewhat irrelevant. Plus I was heavily involved with the judicial review but if you are offering article by the Guardian you really are clutching at straws.

          However, as you like to include links to other articles, let me point you to one which shows what is happening because of Osborne’s social cleansing policies…


    • Rico

      House price inflation is, to a significant extent, decoupled from demand for housing, Compare the chart showing HPI with that of demand for housing as a utility. The real driver of HPI is supply – that is, the supply of credit that feeds into mortgages and their derivatives. Now compare the chart of HPI with that of money supply and you will see that they move in tandem.
      As far as BTL over the last 20 years or so, it has only been necessary for rents to cover mortgage payment, possibly interest only, and HPI, courtesy of expanding money supply would deliver the real profits. The UK government bent over backward, mainly through tax rebates, to ensure that BTLer could continue to cover mortgage payments while providing an ever expanding pool of willing customers for mortgages to take up the new money they created.

      • James McKindley

        What tax rebates??? If you’re referring to Generally Accepted Accounting Principles then you’d better have a word with the Institute of Chartered Accountants England & Wales (ICAEW) as they strongly disagree with you.

        • Rico

          I’m talking about the 40% upper rate rebate that BTLers could until recently claim for against mortgage payment. Nothing to do with the Institute of Chartered Accountants, they don’t set the levels of tax relief. Everything to do with the government policies designed to keep BTL solvent thereby protecting banks loan books.