While buy to let investments have attracted much attention over recent months some experts suspect that “buy to leave” investments could be adding to the woes of investors looking towards the London property market in particular. The so-called buy to leave investor is not a new phenomenon and is basically an investor buying a property which they do not intend to occupy. It is quite literally acquired as an investment asset to be sold at some point in the future when demand pushes prices higher.
Should buy to leave be allowed?
Even though buy to leave is probably a phenomenon which we will hear more of in the weeks and months ahead, as the politicians get involved, is it possible to outlaw buy to leave investments? The whole premise of the UK property market, and other investment arenas, is the fact they are transparent and “free markets”. So, if you begin to outlaw a particular type of investment strategy is this not a form of manipulation?
Is buy to leave a major problem?
While buy to leave is certainly on the political agenda even the most ardent critics of this particular strategy admit we will never know the full picture. It is almost impossible to check and record buy to leave investments even though many parts of London which house the “rich and famous” have areas akin to ghost towns.
The more informed comments about this particular type of investment strategy believe it is relatively small compared to the overall UK market. However, perhaps the main problem is the fact that in markets which are heavily in demand, with relatively few sellers, even this small band of investors can help to squeeze prices higher. The higher prices go the more out of the reach of the “general public” which places an obligation on politicians to put things right.
As we move towards the elections for the Mayor of London in May 2016 the two main candidates seem to be promising the earth. They are suggesting that a mixture of planning permission rulings and a specific clause requiring that new properties are not “buy to leave” investments will be used to reduce the number of these properties. In reality it is difficult to see how you classify a property as “buy to leave” and whether indeed it is feasible and cost-effective to do so.
The reality is that politicians had no such gripe with “buy to leave” investments when property prices were moving higher and the general public were more than happy to see their assets grow in value. Now that we are in a situation where many potential first-time buyers are struggling to climb aboard the property ladder it seems the property market is now fair game for politicians.
The buy to leave phenomenon is one which has been around for many years and is probably akin to the suggestion by the mass media that overseas investors are moving markets. While there is no doubt that overseas investors in all parts of the world are increasing in number it is believed they have minimal impact upon local property prices. The fact is that they are such a relatively small group compared to the overall market that their influence is negligible.
The estimated number of buy to leave houses in the UK is minimal so perhaps we can look at it in the same light as the constant, and incorrect, assumption that overseas investors are moving markets?