Buy-to-let – impact on housing costs

The Government, in common with many commentators (who usually repeat what they have heard rather than analyse information themselves), fail to look at the demand side of the supply/demand equation when it comes to housing. An interesting insight into the impact of the Buy-to-let sector was made by the National Housing and Planning Advice Unit in 2008, who stated that the sector had led to an increase in house prices. The question is what is the impact now?

Taking the last period that a comparison can be made in quarter 2 2007, the actual mix adjusted house price was then £183,000 and the estimated house price without buy-to-let lending was £169,000. This implies that buy-to-let lending had increased prices by up to £13,000 (or 7 per cent) over and above what they would otherwise have been.

The growth of buy-to-let investment has impacted on mortgage costs, with buyers of the average priced home on a 100 per cent mortgage paying around £1,190 rather than £1,100 a month as a result of house prices being 7 per cent higher.
However, buy-to-let has also helped to increase the size of the private rented sector and helped to keep rents low. This has provided much needed affordable accommodation for those who do not wish or cannot afford to become homeowners.

National Housing and Planning Advice Unit, Affordability still matters, July 2008.


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