The love affair is over. The dream has died. The British infatuation with all things bricks and mortar has finally come to an end, in my opinion. New figures from landlord association ARLA Propertymark show investors rushing out of buy-to-let, with an average of four selling up per estate agency branch in March, up from three in February. This is because of appalling rates of personal debt resulting in too many tenants simply stopping paying their rent, knowing they can get away with it for months. At the same time, fewer buyers are being tempted into the market, with purchases halving in the last year from 142,000 to just 70,000, according to separate figures from the Council of Mortgage Lenders. After more than twenty passionate years the buy-to-let looks doomed, but this one did not die a natural death. Former Chancellor George Osborne has forcibly separated the British public from its one true investment passion.
Osbornea��s tax assault started with last yeara��s stamp duty surcharge on second properties and reduced wear and tear allowances. This April saw the scrapping of higher rate tax relief on mortgage interest repayments, and the ban on letting agent fees. The regulator has forced lenders to impose more stringent affordability tests on buy-to-let applicants. No wonder investorsa�� ardour has cooled.
Landlords may be heartbroken but their joy came at the expense of first-time buyers, who were competing for the same one and two-bedroom flats. As landlords decline, first-time buyers are fighting back, with registrations jumping nearly 20% in April and almost 30% in London, according to estate agency Haart. The age of the average first-time buyers has fallen from 32 to 31, giving some hope to the next generation of homeowners.
I always felt that buy-to-let was overrated as an investment, especially in comparison to stocks and shares. Firstly, it is highly illiquid. It takes months to buy and sell a property, whereas you can trade stocks and funds in seconds. Property is also costly to buy with stamp duty, conveyancing and mortgage arrangement fees, refurbishment and maintenance costs, and the expense of finding tenants. By contrast, investing is cheaper and easier than it has ever been.
Finally, and crucially, stock markets have quietly thrashed the housing market. House prices rose just 3.5% over the last year, according to Halifax, while the FTSE 100 grew a whopping 19.7% ! This is no flash in the pan, the FTSE 100 has risen by 53% over five years against just 36% for house prices, and has triumphed by 69% to 14% over 10 years, according to Fidelity International. The only clear advantage that buy-to-let can boast is gearing, allowing ordinary people to borrow to invest, but this has its risks. The buy-to-let affair may be over but most people should find greater fulfilment in the stock market.
Dona��t be the last one out, left holding the baby!