Tuesday, 25 January 2005

Buying to let

by Ted Hoffman

According to Zoe Williams in the Guardian : -

There is absolutely no moral justification for buying somewhere to rent out. It has a direct impact on the welfare of other people, specifically other people with less money than yourself. It garners cash that you didn't earn.

I happen to be moving into a new flat at the moment, which was bought by the landlord on a buy-to-let basis. Even if I could afford to get into the housing market, which is debatable, I would not wish to. I’m pretty convinced the market is due for quite a dramatic correction, and I’m hardly alone in this analysis. Thanks in part to there being a large amount of buy-to-let properties available at the present time, the letting market is competitive. Rental prices haven’t gone up nearly as much as mortgages and I believe (based solely on anecdotal evidence) some have gone down.

My new rented accommodation also happens to be up for sale, so I have a good idea of the current value. I couldn’t afford the mortgage on the property, even paying just the interest. My calculations make the repayments over ½ again of the rental amount. This leaves me, if the funds were available, with enough money to invest elsewhere to make up for not benefiting from the increase in value of the property. As I think the value is likely to go down, this strikes me as a good deal.

I can only speak for myself, but the direct impact of my buy-to-let landlord is to allow me to live in a better place than I could afford to buy, whilst not exposing me to the risk of a housing market at its peak. So, for the time being at least, I think his place in hell should be reserved for more dangerous offenders.

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