Is the buy-to-let bonanza fair?

6th June 2011

By crisis we mean Generation Rent.

This is the term the Halifax have used to described a generation of people unlikely to ever own their own home due to a lack of mortgage affordability, and average prices too high for even a small property in an average area.

Investors have been cashing in on BTL for years – and it's paying off.

Mortgage lenders, brokers and estate agents are reporting booming business as investors take advantage of Britain's growing army of tenants. Rental returns of 10% are not uncommon and if you can benefit from some capital appreciation too, all the better.

So, if you're a landlord or are cash-rich enough to become one, good for you.

But what about tenants and would-be potential first-time buyers who are falling victim to the double-whammy of high rents and the realisation that owning their own home might never happen?

The Guardian ran an article at the weekend examining the plight of Generation Rent.

It looked at two brothers, Phillip and Mark Stewardson who have amassed a property empire of 120 homes with a target of 200. They buy properties in cash which means they easily appear a more attractive buyer then a first-timer reliant on a mortgage. Only after purchase do the pair refinance the property, with commercial or buy-to-let loans.

Elsewhere in the article campaigners at refer to Generation Rent as the jilted generation bearing the brunt of the costs of the downturn.

The article has seen fierce debate on the Guardian, Marcospurs wrote: "Hard work, an eye for an investment and willing to take calculated risks. In any other industry you would be applauded.  However for some reason many people seem to think that property investment does not count. They think it's easy. They see it as unfair. Whingers."

But other readers disagreed. Adundeeemonkey wrote: "How is it ethical to own 120 properties? Especially when there is a shortage of supply."

Other readers blamed the Government and tax system for making it easy for BTL landlords to make a killing. Jamesoverseas said: "These brothers do appear to have added value, and they should be rewarded for that. However, the majority of their gains have come from the fact that the tax system has been skewed in the favour of BTL and against both productive enterprise and owner occupiers."

So, is it ethical for the wealthy or opportunist to invest heavily in property and make money out of a generation forced to rent? Are these entrepreneurs simply recognising an opportunity and making the most of it or should the rules be different when it comes to property? One thing's for sure, the debate looks set to run and run.

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