Page 50 - The Economist20171214

Britain
50 The Economist December 16th 2017

Also in this section
51 The economics of crime
51 Brexiteers go quiet
52 The Grenfell fire, six months on
Bagehot is on holiday

For daily analysis and debate on Britain, visit
Economist.com/britain

The housing market skills. Thatisgood forproductivity growth.
Yet the buy-to-let boom also has its
Struggles of the landed gentry downsides. Like the gentry ofold, Britain’s
new class oflandlords is often amateurish.
Most operate on a very small scale: six in
ten have just one property. And many
seem to manage their houses poorly. Al-
most 30% of private-rented dwellings are
officially classed as “non-decent”, mean-
An unprecedented boom in “buy-to-let” investmentis coming to an end
ingthattheyfail to meetbasicstandards for
ICKNAMED “God” byhisfans, Robbie housingmarkethasseemed like a one-way things such as heating or their state of re-
NFowler scored 183 goals for Liverpool bet, with prices trending upwards in real pair. (By contrast, 15% of council housing is
Football Club. But his career as a property terms for four decades, mainly because in such a condition.)
magnate may have been even more suc- governmentaftergovernmenthasfailed to Young folk who would prefer to own a
cessful. As he banged in the goals, fans loosen planning restrictions on building house than pay rent to their elders com-
chanted, to the tune of “Yellow Subma- newhouses. Now, however, there are signs plain that the buy-to-let boom is one ofthe
rine”, “We all live in a Robbie Fowler that regulatory changes have begun to great injustices of modern Britain. The
house.” Mr Fowler has since hung up his send the buy-to-letboom into reverse. That Conservative Party is worried. Over half
boots and is now the face of the Robbie is bad news for Mr Fowler’s disciples, but of private renters voted for Jeremy Cor-
Fowler Property Academy, which offers there could be benefits, too. byn’s Labour Party at the general election
seminars on how to make it bigin housing. The growth ofthe rental marketis notin in June, a higher share of private renters
With what is believed to be a portfolio of itself an unwelcome trend. As the supply than voted for Tony Blair when he won by
over 50 properties, his fortune may run ofplacesto letrises, the costofrenting falls. a landslide in 1997.
into the tens ofmillions ofpounds. Though many tenants may prefer to own Life has lately become harder for land-
Plenty of Britons want to emulate Mr their home, others like the flexibility of lords. In 2016 the government raised stamp
Fowler. In the past two decades they have renting. Ifworkerscan up stickseasily, they duty, a tax on homebuyers, by three per-
piled into the “buy-to-let” market, acquir- are likelier to find work that suits their centage points for those buying second
inghomes to rent out. These days one in 30 homes, including buy-to-let properties. It
adults—and around one in four MPs—is a abolished a generous “wear and tear” al-
landlord. Roughly a third of them are re- Piling in lowance forthose lettingfurnished proper-
tired, many having turned to the housing Britain, number of dwellings ties, and in April began tighteningthe rules
market as the returns on their savings in private-rented sector, m on how landlords write off interest costs
dwindled. The rent from buy-to-let proper- 6 against income tax. These changes are
ties, which we estimate at £55bn-65bn With buy-to-let enough to turn healthy annual profits into
mortgage 5
($73bn-87bn) a year, isequivalentto the sal- Other losses, especiallyforinvestorsin higher tax
ary bill for the financial and insurance in- 4 brackets and with large mortgages.
dustries, in which over1m people work. 3 Meanwhile, yields on rental properties
The buy-to-let phenomenon got going have fallen. House prices have risen faster
in 1996, with the introduction ofmortgages 2 than rents, in part because buy-to-letters
which no longer required the borrower to 1 have increased the demand for properties
live in the house they were buying, says 0 available for purchase, while simulta-
Lawrence Bowles of Savills, a property 1999 2005 10 16 neously increasing the supply of places to
firm. The years since then have seen fren- Sources: HM Government; CML; rent. Britain’s ratio of house prices to rents
zied growth (see chart). Investing in the HM Treasury; DCLG; The Economist is now 50% above its long-run average. All 1