Property Investment : The Has and Has Nots

Really interesting profile of a couple of successful investors in todays Guardian

http://www.guardian.co.uk/money/2011/jun/04/generation-rent-the-winners

I always enjoy reading the heated comments that the public write below the article.

The comments on this article are fairly civilized- if the article was published in The Times or the Daily Telegraph's then you might as well get ready for ww3!

The crux of these articles always come down to the same points with those that make these comments.

1) Do BTL investors distort the market by increasing the price of properties and therefore prevent 1st time buyers getting onto the ladder

2) Is that a bad thing.

I could write and essay on these and I'm sure I will at a later date, but for now I want to draw your attention to a couple of points

With reference to point one - It is assumed that because BTL investors buy more property than1st time buyers / single occupiers they drive up the price of property.

However that isn't really true given that owner occupiers make up a far greater proportion of the market than BTL investors

Secondly you will find that in the Boom times of the housing market- it is owner-occupiers who drive up the price of property as they are willing to pay a higher price than an investor for the same property (on the basis that its a home to live in etc). For an investor its always about the numbers, so if the price increases too much, the yield falls making the investment less attractive.

With reference to point 2) - the morality of BTL- Ultimately it comes to what your political beliefs are. If your a capitalist then ultimately your going to argue that the free market dictates what happens to an asset's price and that the profit motive benefits all of society.

If you don't have the capital to invest, then its highly likely that you won't approve of those who build BTL empires.

However I would also like to make one observation- its interesting that the government gives some of the biggest tax breaks to property investors compared to other asset classes.

Ultimately this is because they want to incentivise the property owner to provide the accomodation they can't provide.

Others may argue that the government has a number of vested to do otherwise......