Buy-to-let curbs are logical but will cause pain to small investors

Some level of house price buoyancy was traditionally thought a good thing because it makes people feel affluent and more likely to spend.

It also provides an incentive to house builders to construct homes and keeps the construction industry moving.

But in the run-up to the global financial crisis in 2008, house prices in countries around the world ballooned disastrously.

Inappropriate lending to people on low incomes to buy over-priced homes was one of the contributory factors in the bubble, and subsequent collapse.

Nowhere has more experience of the perils of a house price boom than Northern Ireland.

It is young people who lose out in such a boom, paying grossly inflated prices and taking on decades of heavy debt to do so. Meanwhile, the older generation benefits.

The southeast of England, however, has enough wealth to sustain expensive house prices, and experienced a more modest downturn in 2008 and 2009, after the UK-wide peak in 2007. It is now booming again.

That has meant that the southeast of England, and in particular greater London, is not as wary of sky high house prices as is Ireland (both north and south) now is.

Vast amounts of money have been pumped into property in the hope of asset growth and also a reasonable rental return (in a time of ultra low interest rates).

Now even a Conservative government is seeking to curb buy-to-let and the Bank of England has plans to subject amateur landlords to tighter borrowing rules. Tax on buy-to-let purchases is set to rise next month.

This is painful for small investors in parts of the UK such as Northern Ireland where prices have returned to a sensible level. But these restrictions are necessary to help shift the balance back towards young homeowners, and a more normal market in which they can aspire to own their own home.