SPECIAL FEATURE: Government housing plans will boost BTL
Bob Young, managing director of CHL Mortgages, explains his views on what’s in store for UK housing:
“Whatever your feelings about the proposals within the Government’s housing strategy, it is fair to say that the issue of how we go about housing the UK’s population in the future has been shoved into the limelight by its publication.
“I have been saying for some time that the Government is increasingly looking to the private rental sector in order to bridge the housing gap, and nothing in these ‘new’ proposals suggests this has changed.
“We all know that there is a lack of affordable housing at present, however this is not a simple issue to resolve.
“The measures outlined in the housing strategy will go a little way to helping but, when all is said and done, we are unlikely to be building the number of new homes necessary to fulfil the growing need that is out there.
“Throw into the mix the lack of appetite by the major banks to lend, the difficulty first-time buyers have in securing a deposit, the cuts in housing benefit, and we can see why the Government might be wishing for a much stronger PRS in order to meet its ambitions.
“The fact is of course that many private landlords face the same sort of finance dilemmas that other potential purchasers of properties do.
“While there is clearly a growing demand for private rental properties, meeting it is another matter entirely.
“Plus, as a traditional owner-occupier society, the Government must be wary of being seen to favour the PRS.
“Many would suggest that landlords already hold a particularly strong hand over other purchasers and I have seen calls for the sector to be taxed far more than it is already in an effort, one assumes, to give first-timers a fairer chance.
“Of course this goes against everything the Government wants from the PRS and is therefore highly unlikely to happen.
“Indeed, in a speech this week MPC external member, David Miles, suggested that as we were moving towards a renting society anyway landlords were disadvantaged by the current taxation system given they pay tax on rental income and capital gains tax is levied from any gains made on rental properties.
“As can be seen, with this argument there are countless sides and I suspect that (as with much Government policy) everyone will feel aggrieved by some aspect of it.
“Given the difficulties private landlords are having it is clear the Government is looking for a much more proactive role for institutional investors within the PRS.
“At the moment just 1% of all residential property stock is owned this way and the Government is clearly looking for a move towards the norm in other European countries where this sort of ownership hits the heights of 10-15%.
“To do this it is changing the way stamp duty is calculated on portfolio purchases and Real Estate Investment Trusts (REITs) are to be reformed in order to entice in more investment.
“I suspect that it will still be some time before we see the large institutions grasping this opportunity however, given the volatility of the global marketplace, they may well view a sector with strong demand and the potential for solid returns as something of a safe haven.
“To my mind there is absolutely no doubt that the number of private renters in the UK is going to see a significant rise over the coming years.
“It is likely to be serviced for a considerable while longer by private landlords and this being the case, there are some loud calls for much more onus on the rights of tenants.
“If we are seeing a shift to a rental society then this focus is right. Without wanting to take away the entrepreneurial right of the landlord to use their property as they see fit, it is clearly in the long-term interests of landlords to have a clear system where everyone knows their responsibilities.
“Calls for a national landlord register have so far gone unheeded however this would be a step in the right direction.
“We need an influx of quality landlords who can deliver both in terms of properties and in terms of the care they give to their tenants and the service they provide.
“Overall the housing strategy should be welcomed. It will result, I am certain, in a growing buy-to-let lending market.
“There were estimates made at the recent Mortgage Business Expo that buy-to-let lending could hit £20bn by 2015 – I see no reason why this shouldn’t be the case.
“2012 is likely to bring with it more appetite from existing players and some new lenders dipping their toes in.
“Demand from tenants is strong, it is now all about how we meet that demand in the months and years ahead.”