After the goldrush

Among all the anecdotal evidence that the UK property boom is over, here's the most convincing sign: the awful Rosie Millard has dropped her long-running column on buy-to-let in the Sunday Times. As the market heads over the edge, she (or the paper)may have begun to worry about lawsuits from people she has induced to become amateur landlords. (By the way, fans of Rosie need not despair. She has already started a new weekly column called Lust, Greed and Envy. These are, of course, three of the Seven Deadly Sins, but Rosie seems quite keen on them).

It will be some time before we can judge the long-term impact of the past decade's buy-to-let frenzy. However, it's not too soon to suggest that it may have done a lot to frustrate the Government's long-term housing goals.

Firstly, it was reported recently that the proportion of households that own their homes has started to decline recently, after rising steadily since the Thatcher sell-off of council houses. There are many factors at work here, but the buy-to-let mob have surely contributed in at least two ways. Obviously enough, the added competition for available properties accounts for a large part of the run-up in prices. Moreover, the contest for financing between middle-class professionals such as Ms Millard and her ilk on the one hand, and young couples just starting out on the other, is pretty one-sided: any bank will always prefer to lend to someone with a higher income or more security, especially as the investor gets a tax deduction on the mortgage. I can't think of any other reason why the banks would have allowed the ratio of prices to average earnings to soar to unprecedented heights, as it has in recent years. That ratio is no longer meaningful if a lot of the borrowers are wealthy investors with several homes.

Secondly, the buy-to-letters seem to have distorted the new housing market. The keenness of ill-informed but greedy amateurs to buy off plan, whether to let or simply to flip, has induced developers to build enormous numbers of new apartments. Trouble is, nobody wants to live in these jerry-built shoeboxes. In cities such as Leeds, as many as 70% of new-built apartments may be empty. By coincidence, that's the same proportion of the total apartment stock that buy-to-let investors now apparently control. Prices in this sector are falling fast, which serves the investors right; but that won't change the fact that a large part of the homebuilding effort of the past decade has been misdirected.

I think the malign effect of buy-to-let in the apartment sector may go further than this. We are thinking of downsizing from our big commuter-belt house to an apartment, so we have started to look at what's available. We went to look at a new-build development in Brighton. Leaving aside the pokiness of the flats themselves, there were plenty of signs of the malign buy-to-let influence: in my experience, people spending several hundred thousand pounds on a place to live don't use flattened cardboard boxes as window coverings. Why would we, or any other empty nesters, choose to move into a building largely owned by absentee landlords interested only in turning a quick profit? We may well wind up staying put, thereby keeping our decent-sized family property off the market.

The current market turmoil will shake out a lot of buy-to-letters, which is a good thing. The Government can ensure that the sector doesn't bounce back too quickly by removing the council tax concession that currently applies to empty properties. That change would also create an incentive to do something about the 840,000 homes that are currently sitting empty in the UK. Renovating those, or knocking them down and replacing them with something more modern, would be a much better use of developers' time than slapping up another block of flats in Leeds.