Q: As Mark Carney expresses concern over lending to landlords, should we be worried about the buy-to-let boom?
Simon French is chief economist at Panmure Gordon, says Yes
The growth of the buy-to-let sector has increased the amount of flighty investment capital in the UK property market, posing a direct risk to financial stability. Any downturn in sentiment towards property as an asset has the potential to be amplified by buy-to-let investors withdrawing their funds from the market. Given this risk, the Financial Policy Committee is entirely correct in seeking to deflate the current bubble. The boom in buy-to-let has triggered a decline in home ownership rates from over 70 per cent in the early part of the century to just 63 per cent today, and concentrated the private and social benefits of home ownership. This is a worry, as one of the themes of the Bank of England’s recent Open Forum was how markets establish their social licence – the consent of society to operate and innovate. The buy-to-let market has failed to generate that licence in the eyes of many and, if we want the public to back capitalism and not push back against the wider benefits of free markets, we need to show that the housing market can work for the many and not the few.
Alan Ward is chairman of the Residential Landlords Association, says No
There is no clear evidence that the property boom is caused by buy-to-let investors, when rising prices are mainly concentrated in London and the South East. This is largely fuelled by foreign investors and speculators treating our property as a commodity. The Residential Landlords Association supports the principle of the Bank of England ensuring that lending does not pose a risk to the stability of the financial sector. It is important that lenders do not saddle landlords with debts which they cannot pay back. But landlord investment is essential to the supply of homes to rent. Between 1996 and 2013, 83 per cent of all new dwellings created were in the private rented sector. With surveys showing that, by 2025, 25 per cent of UK households will be in the private rented sector, it is important that this momentum is maintained. The overwhelming majority of landlords are responsible borrowers providing homes as a long-term business.