Dabbing the brakes on buy-to-let won't stop juggernaught

Both George Osborne and Mark Carney have dabbed the brakes on buy-to-let. Will the Chancellor’s three per cent stamp duty hike slow the juggernaut or speed sales before the rise takes effect next April? Will the Governor of the Bank of England’s warning that a 3% rise in interest rates would be ill-affordable for 60 per cent of buy-to-let landlords, give pause for thought? Or are the demographic forces driving the buy-to-let simply too powerful to slow, at least by fiscal dabbling?

In November 2015 estate agent, Countrywide, revealed that 1,550,000 properties had gone from being lived in by their owner to being lived in by a tenant since 2005. OK, 550,000 have moved from tenant to owner. But the net result has been that an extra one million homes are being rented out, equivalent to the number of households in the north east of England. The market will slow from time to time. But the army of millions of small landlords are not going to retreat.

Those idling at the bottom of the housing ladder will be frustrated to hear that buy-to-let landlords have the wherewithal to keep them in place. Savills calculates that buy-to-let landlords have enjoyed £190billion in capital gains since 2009. In October 2015 the agent put the number of privately-rented homes at 5.4million, up by 1.2million since 2009. Stock that has risen in value by 57 per cent in 5  years and is worth £1.2trillion today. One in five homes UK is now privately rented.

A vicious or virtuous circle has been created, depending upon your point of view. Virtuous, if you are a landlord, vicious if you are trying to buy. The number of homes owned without a mortgage has risen by 437,000 in the past five years to over 8.3m by 2015. In contrast mortgaged home ownership numbers have fallen by over one fifth, or 1.9million in a decade. What’s going on here is simple. Baby boomers are using their gains to shut out first-time buyers.

It’s boring being retired. Every afternoon the telly is filled with property-porn. Loans to landlords have quadrupled since 2000. In the third quarter of 2015 they accounted for 16 per cent of all new advances. No wonder Osborne is getting edgy. Things are getting silly. On November 9, it took just 10 minutes and 43 seconds for a company called Property Partners to raise £843,100 online from 318 investors, vying for slivers of equity in 42 new rental flats in Gainsborough, Lincolnshire.

Mom and Pop investors are now being joined by pension fund managers.. Legal & General and M&G are starting to invest in buy-to-let, typically, in whole blocks of new-build flats. They’ll be needed. ! The Office of National Statistics forecast the UK population will rise by 10million to 74.3million by 2040. Or maybe more. The ONS figures are based on net migration falling from 336,000 in 2015 to to around 250,000 per year by 2020.

Any relief for wannabe fist-time buyers? Some. Activity is slowing.  Countrywide has reported an eight per cent drop in sales in Q3. In London transactions are down 14 per cent in the third quarter, says research firm LonRes - who also reports lettings down 10%. Will prices fall?  Bravest you get is a Halifax, warning that high prices mean an “increasing difficulty in getting on the housing ladder is expected to start to put the brakes on house price growth during 2016.”

This is an edited version of an article posted on the residential Web site, OnTheMarket, in December 2015