Private Renting In Oakham Set To Hit 929 Households By 2021 –
Is Buy-To-Let Immoral? (Part 1)
Can we blame the 55 to 70-year-olds
for the current housing crisis in our towns? Also known as the ‘Baby Boomer
Generation’, they were born after the end of WWII as the country saw a massive population
explosion and recovered from the economic hardships experienced during wartime.
Throughout the 1970’s and
1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled
level of economic growth and prosperity throughout their working lifetime on
the back of improved education, government subsidies, escalating property
prices and technological developments... they have emerged as a successful and prosperous
generation.
Yet some have suggested these
baby boomers have (and are) making too much money to the detriment of
their children, creating a ‘generational economic
imbalance’, where mature people benefit from house-price growth whilst
their children are forced either to pay massive rents or pay large
mortgages.
The issue of housing is
particularly acute with the generation called the ‘Millennials’, who are young
people born between the mid 1980’s and the late 1990’s. These 18 to 30 years, moulded
by the computer and internet revolution are finding it very hard to buy a
property, as these ‘greedy’ landlords are buying up all the property to rent
out back to them at exorbitant rents
... it’s no wonder these Millennials are lashing out at buy-to-let landlords,
as they are seen as the greedy, immoral, wicked people who are cashing in on a
social despair.
Like all things in life,
we must look to the past, to appreciate where we are now.
The 3 biggest influencing
factors on the property market in the later half of the 20th Century
were, firstly, the mass building of council housing in the 1950’s and 60’s,
secondly for the Tory’s to sell most of those council houses off in the 1980’s
and, finally, 15% interest rates in the early 1990’s which resulted in many houses
being repossessed. It was these major
factors that underpinned the housing crisis we have today.
To start with, in 1995 the USA relaxed its lending rules by rewriting the ‘Community
Reinvestment Act’. This Act saw a relaxation on the banks’ lending criteria as there was pressure on these banks to lend on mortgages in low
wage neighbourhoods, the American
viewpoint was that anyone, (even someone on the minimum wage / any working class
person) should be able to buy a home. Unsurprisingly, the UK followed suit in the
early 2000’s, as banks and building societies relaxed their lending criteria
and marketed 100% mortgages, even Northern Rock offered 125% mortgages.
Today we can observe those
very same footloose banks from the early/mid 2000’s (lending 125% with a just note from your Mum and a couple of breakfast
cereal tokens), ironically reciting the Bank of England backed hymn-sheet
of responsible-lending. On every first
time buyer mortgage application, they are now looking at every line on the 20-something’s
banks statements, asking if they are spending too much on socialising and
holidays ... no wonder these Millennials are afraid to ask for a mortgage (as
more often than not after all that – the answer is negative).
Conversely, you have unregulated
Buy-To-Let mortgages. As long as you
have a 25% deposit, have a pulse, pass a few very basic yardsticks and have a
reasonable job, the banks will literally throw money at you ... E.g., Virgin
Money are offering 2.99% fixed for 3 years – so cheap!
So, in Part 2 next week, I will continue this emotive article and
show you some very interesting findings on why young people aren’t buying
property anymore - and it’s not what you think!
Understanding
People & Property
We are here to help you buy, sell, rent and manage your homes
& property investments
Oakham 01572 725 825
& Stamford 01780 484 554
