Buy to Let Restrictions from Labour

We look at why proposed Labour restrictions to limit buy to let on new build properties could backfire – and why there is a huge latent demand to buy from frustrated first time buyers.

Ed Milliband has proposed that, if Labour are elected in 2015, that new builds could be restricted in some areas to first time buyers, thus restricting people (and presumably also institutional buyers) looking to buy for investment. (How such a restriction could be administered is anyone’s guess though).

It is an interesting proposal.

However, according to the Department for Communities and Local Government’s data, since 1986, some 57% of the 5 million plus new dwellings have been created in the private rented sector.

So, Labour will still need to be careful to not scare off too many investors to avoid killing the proverbial golden goose.

Labour, Buy to Let and the First Time Buyer Shortfall

Meanwhile, according to a recent report from the mortgage insurer Genworth (no, I have not heard of them either), the decline of mortgage lending in the UK has led to a 1.8 million shortfall in the number of first time buyers from 2007 to 2013.

Apparently the insurer worked the maths from demographic data on what the number of first time buyers might have been (based on the historic entry age of first time buyers) and compared it to the number of first time buyers who actually bought.

There could be many reasons for the decline in first time buyers – lack of confidence in their own employment prospects, high house prices in some areas and tighter mortgage lending will all be playing a part.

And the mortgage market review (which came in from 2014) will only have made things worse, (though there is some recent evidence of mortgage criteria being eased and mortgage interest rates being reduced, so maybe it’s not all doom and gloom for the first timers).

If these people are not buying, they must be renting – and pushing rents up. But if and when they buy, this latent demand, when released, could really push up house prices fast in the future.

Private Rent Meddling

But who knows what the future holds, except that it is a fair bet that we will see more meddling from the government in the workings of the private rented sector – and not all the meddling will be good.

In the meantime, the population in places like London will continue to rise. This is driven principally by immigration from Europe. (In the last two years we have noticed massively rising rental how to order viagra demand from new migrants from S Europe, especially from Italy, which has a huge level of youth unemployment). This migration from Europe is, of course, also a huge issue vexing the Conservative party in particular.

Oh, and in the run up to the general election, we will be certain to see more ideas that may be totally unworkable in practice. Enjoy the ride!

(The data on first time buyers from the insurer, Genworth was originally quoted by Peter Hemple in the property investors’ magazine, “Property Investor News”).

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