If you want to Rent a Flat in London once BTL stood for Bacon Tomato and Lettuce, but in the 90s it became Buy to Let. The concept that providing homes could be a financial investment actually saved the rental market from extinction because in 5 decades homes available to let had fallen from 90% of homes to 7%. The issue of the Nineties & Naughties was that providing homes became a financial transaction in the same mould as buying and selling Wheat, Gold, and Pigs.
In 2004, economist Kate Barker, on behalf of the Government’s grand housing plans, called for three million new homes to be built by 2020 – about 200,000 a year. Even then housebuilders were failing to hit that target. The next financial year, though, will see the number of homes built halve from 142,000 to about 70,000, according to a forecast by the National Housing Federation last week. Excluding the Second World War, the UK will build fewer homes than at any time since 1921.
This slump is driven by a reversion of house prices to their historical mean. In truth there is much further to go as Mortgage Loans revert to the historical Loan to Income of 2.5 which would lead to prices falling into line with the widely leaked report from financial analysts Numis Securities which says that the collapse in house prices is not ‘anywhere near over’, having fallen 21 per cent from their peak, they will slump further by up to 55 per cent if the correction in prices is as bad as in the early 1990s.
The response of the Economy & Building Industry hardly needs highlighting. Bovis Homes, for example, had the capacity to start construction of 3,406 houses in 2007, but remodelled its business for only 1,179 the following year. The Government’s three million new homes target by 2020 is not achievable now, it’s not even dreamable, it will have a shortfall of one million homes by the end of 2010 and the UK is heading for a real housing crisis.
Is there a solution in the form of the Continental business model of Build-To-Let? We at Pimlico Flats are trying to do that, but there are barriers in every level of society, from government legislation, through local authority planners, down to the neighbours. It simply isn’t the British way of doing things.
So Britain sticks with the idea that our biggest financial investment is our home! If our homes are just another investment then we must accept that there are occasionally business failures. We are seeing our homes go bust, but it will be a temporary phenomenon. As outlined above, business investments are self correcting by supply and demand. There will be a shortage of housing until the shortage drives prices up to the economic level that will stimulate supply.
Put simply – a lot of people aren’t going to be able to afford a home. Is that really what we want from our society?
So what do YOU want BTL to stand for? We want it to stand for Build to Let. Can we be forgiven for saying that it seems that the decision makers in British Society seem to want it to stand for Bacon Tomato and Lettuce?
