Why are banks willing to lend money to individuals to buy property but not other asset classes? In the UK there has been a "buy to let" trend over recent years where people have purchased property with the sole intention of renting it out. Since the same individual may repeat this trick almost ad infinitum any money they might earn as a salary becomes negligible when relied upon to service all the debt, so the loans are collateralised simply by the assets themselves.And yet if I went to a succession of banks wanting them to repeatedly lend me hundreds of thousands of pounds to purchase shares/gold/antiques/bonds/annuities or any other form of asset class I would be shown the door - even if I was willing to use the assets themselves as collateral.Is this illogical? Does it lead to property being mis-priced?

Good questions Matt, can I add another??Why is the government planning on giving tax breaks to property investors, but not to first time buyers? If there is a future problem with too many assets being owned by the baby boomers and not enough demand from the younger generation will tax breaks for the boomers make the situation worse??

QuoteOriginally posted by: MattFWhy are banks willing to lend money to individuals to buy property but not other asset classes? In the UK there has been a "buy to let" trend over recent years where people have purchased property with the sole intention of renting it out. Since the same individual may repeat this trick almost ad infinitum any money they might earn as a salary becomes negligible when relied upon to service all the debt, so the loans are collateralised simply by the assets themselves.And yet if I went to a succession of banks wanting them to repeatedly lend me hundreds of thousands of pounds to purchase shares/gold/antiques/bonds/annuities or any other form of asset class I would be shown the door - even if I was willing to use the assets themselves as collateral.Is this illogical? Does it lead to property being mis-priced?I think that the answer is easy.

QuoteIn the UK there has been a "buy to let" trend over recent years where people have purchased property with the sole intention of renting it out. Since the same individual may repeat this trick almost ad infinitum any money they might earn as a salary becomes negligible when relied upon to service all the debt, so the loans are collateralised simply by the assets themselves.Do you get 100% finance? I think usually this is not the case, thus cant be repeated ad infinitum. Second, supply of property is inelastic at least in the short to mid term. Third property market is fragmented, informationally innefficient, with low volatility and strong trends mainly driven by supply demand mismatch, cost of funding, and credit restrictions.

QuoteOriginally posted by: MattFWhy are banks willing to lend money to individuals to buy property but not other asset classes? In the UK there has been a "buy to let" trend over recent years where people have purchased property with the sole intention of renting it out. Since the same individual may repeat this trick almost ad infinitum any money they might earn as a salary becomes negligible when relied upon to service all the debt, so the loans are collateralised simply by the assets themselves.And yet if I went to a succession of banks wanting them to repeatedly lend me hundreds of thousands of pounds to purchase shares/gold/antiques/bonds/annuities or any other form of asset class I would be shown the door - even if I was willing to use the assets themselves as collateral.Is this illogical? Does it lead to property being mis-priced?I would think mis-pricing and active real-estate market is exactly what banks want. They have their fees and interests. If the whole thing will collapse and pricesdrops they will take over whole real-estate and other assets of borrowers. I guess they could agree about fair rent after that Imagine - one landlord is HSBC and other is DeutcheBank.QuoteWhy is the government planning on giving tax breaks to property investors, but not to first time buyers?Goverment probably likes this idea also.As far as I can judge In US situation is the same: there are people who own few houses. I guess the difference from UK sitation is there is a lot of undeveloped land further inside of country but the trasportationis highway with effective speed limit 65 mph (at very best) and rail with speed about the same. Meaning whole working population have to livenot further than 60 miles out of job-creation center. In US all railroads which i've seen where built in 50's latest and looks like they were never repaired.Someone here is not interested in developing fast rail to settle people working in big cities further than 60 miles:Florida Bullet Train"# Gov. Jeb Bush and Chief Financial Officer Tom Gallagher lead a political campaign to repeal the constitutional requirement to build a high speed rail system. Using inflammatory and misleading anti-rail rhetoric predicting financial ruin for Florida, the campaign succeeds in removing the constitutional requirement. However, legislation creating the FHSRA and authorizing the state to begin building a system remains in place. "lowtech

AFAICT, In the US, at least, the gov't ensures that this state of affairs remains true for two reasons: 1) home ownership is the government's primary tool to manage so-called 'grey poverty' 2) the fed's primary method of regulating the US economy is by creating housing booms/busts, so there are frequently (purposeful) effective mis-pricings of real estate assets.

QuoteOriginally posted by: MattFAnd yet if I went to a succession of banks wanting them to repeatedly lend me hundreds of thousands of pounds to purchase shares they don't have margin loans in the UK ?A better question might be why the margin is so much less on real estate than on shares