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The Government’s approach to the private rented sector is “incoherent” according for a former member of the Bank of England’s Monetary Policy Committee.David Miles, now a Professor of Financial Economics at Imperial College London, has argued that contrary to the Government’s stated aims, there are “few signs” that tax increases on the sector have benefited those hoping to become homeowners. He argues that they are, meanwhile, “left in a rental sector with reduced choice and where rents are likely to be higher as supply gradually shrinks.”Since 2015 the Government has introduced measures to restrict mortgage interest relief on the private rented sector to the basic rate of income tax and imposed a stamp duty levy on the purchase of new homes to rent out.In his exclusive article for the Residential Landlords Association Professor Miles attacks the Government’s approach which has sought to cut investment in the rental market to support aspiring first-time buyers. He argues that such buyers “are hardly helped by squeezing the supply of rental property and driving rents up.”He goes on to say that there is nothing “intrinsically wrong with people being in the rented sector for an extended phase of their life. We should want to avoid a situation where people feel pressurised into taking big mortgages relative to their income early in life because the rental option is so poor.”Professor Miles goes on to conclude: “In a world where house prices might be consistently higher relative to incomes than in the past we might naturally expect the period in which people are in the rented sector is longer. And there are good economic reasons for believing that in a country with a rising population and where real incomes tend to increase over time house prices might well rise at least as fast as incomes. To have then introduced measures that reduce the supply of rented property is perverse.”David Smith, Policy Director for the Residential Landlords Association, said:“Professor Miles hits the nail on the head. Choking off the supply of rental properties does nothing to help aspiring home first-time buyers who need somewhere to live now.“It is time to change tack and recognise that we need more homes to rent as well as to buy in order to meet growing demand and have policies that support investment.”SEE ALSO - Abolishment of Section 21 - curated viewsUP NEXT - Section 24 - I am in total shock!DON'T MISS - What causes homelessness in the UK?NOW WATCH:
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Not sure there is lack of supply per se - UK added 2/3rds to original housing stock over past 50 yrs (extra 10 million homes) - hence despite 10 million pop increase lowered average occupancy rate by 30%.
Noteworthy is that extra 10 million homes did nil to lower prices - in fact the converse as over time prices rose in both real and nominal terms.
My view is there is lack of affordable homes in locations where people choose to live - primarily London/SE - due to excess demand often from low income households which would be better served relocating to places where housing costs are a mere fraction of those in especially London.
The number of dwelling has been increasing faster than the number of housholds, so overall supply is not the problem.
Low interest rates pushed up prices. Lack of low deposit mortgages after the credit crunch stopped FTB for a while. Last year the home ownership rate increased for the first time since the credit crunch so it looks like things mght be improving a little.
The surplus housing not being in the areas where most people want to live, and a shortage of "affordable" housing are still problems.
I'm inspired by Poor Dad Rich Dad book and want to invest in real estate. But I haven not enough funds to buy a property myself. Robert Kiyosaki tells about loans, but I am afraid about huge interest rates. Are there any alternatives?
If your savings are low maybe you could (even with a mortgage) buy only a BTL in a cheap location where the net rental profit after taxes (see S.24) may be as little as say £200 pcm.
Sounds like you need to save up a bigger nest egg - and ideally buy a home of your own at outset - otherwise you get hit with 3% SD surcharge on both properties.
"""The Government’s approach to the private rented sector is “incoherent” according for a former member of the Bank of England’s Monetary Policy Committee."""
Can't see why he restricted his comments to PRS: This bunch of clowns are incoherent on pretty much everything.
Making Mrs May look good..