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Buy-to-let is an arbitrage between the rent a property commands and the mortgage payments required to buy it. If the mortgage payments are low relative to rents, buy-to-let will lead to rising demand for building purchases and higher demand for credit. It is quite easy to nip such a bubble in the bud by slightly increasing interest rates so that the property prices don't increase too much and the demand for credit is curtailed.
If, instead, interest rates are kept low or are even lowered further, then property prices start appreciating at double-digit rates and within a couple of years, when the trend has established itself, it becomes more profitable to buy property to resell it rather than to live in it or rent it.
I have no sympathy for buy-to-letters but they were not responsible for the bubble lasting 10 years, only for seeding it. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
What helped this was that multiple buyers became preferred bidders via estate agents. When I sold my flat it never went on the open market as it was bought by a buy-to-let-er who was on their contact list.
Now they are making losses cos the rents aren't equalling the mortgage costs, and are having to sell at a loss. Good, I hope they all lose a lot of money. But I would have preferred such a distortion had been prevented in the first place. keep to the Fen Causeway
Home Truths
which I have yet to digest fully....
