Thursday, Apr 26, 2007
Feudal Future!?
Daily Mail: Buy-to-let could double by 2010
The number of buy-to-let landlords could double within three years despite fears of a property crash, a report reveals.
Posted by nearly30 @ 08:23 AM (162 views) Add Comment
6 Comments
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1. sold 2 rent 1 said...
I guess in 1929 the number of stock traders was set to double by 1932.
2. nearly30 said...
S2R1 - true but I am slightly concerned now that BTLers and chancers are capturing this area of the market.
Once cornered and with house building remaining low - even though they have paid over-the-odds for the properties - they could be beligerant and not sell-up - only trying to force renters to covers most or as much of their costs.
Could be a very irritating situation in the future with BTLers feeding on their own properties - i.e. 1 BTLer gives up a property then another BTLer snaps it up straight away - basically a very strange Housing Food Chain of recycling debts.
The only way a FTB could get a home in this situation would be to have money ready, act fast or pay a premium - a situation that has eluded FTBs for sometime.
The situation could get even more strange if BTLers morph/evolve into 'investment groups' - a survival strategy where serveral independent BTLers get together to defend their assets/capital. Scary indeed. And may even be an option in order to hibernate and wait for the storm to pass - 5% growth or less for several years in some cases
We have already seen cases of Buy-To-Leave-Empty - this is just another reaction to market conditions.
3. Scott666 said...
......it's possible, but don't you think it's more likely that if house prices start to drop they will want to bank their capital gain and start to dump properties as they watch their paper gains evaporate?
4. Davros said...
Good stuff. Let some other mug buy at the top of the market and rent it out at a loss. I'm paying a third of the cost of the mortgage for my place, so long may it continue.
5. sold 2 rent 1 said...
nearly30,
You are just describing the fear of NOT getting on the property ladder.
Once the liquidity crisis that we have seen emerging since the Feb stock sell-off gathers pace over the summer, we will see economic conditions change and this fear you have will evaporate.
This expansion requires an ever increasing amount of debt to continue.
It is unsustainable and will end in a massive bust
6. Sam said...
"BTLers feeding on their own properties" - think that would cause the housing version of CJD.
OK, I think certainly some landlords will try to increase rents according to interest only payments and yes if there are enough of them some of them will initially get away with it.
The problem is that the amount people can pay in rent has little to do with the cost of borrowing (interest rates). It’s directly related to how much they get paid in salary.
As we know house prices have increased over the last few years, one reason is interest rates being low. – But salaries have been increasing at a slower rate so rents have been slower (OK London where I live is different, but only marginally). There is simply no way a landlord can simply say ‘you will cover my expenses’ and raise rent and be damned.
Here’s the clincher. Suppose there are enough landlords to drive rent up regardless of what people can afford, and there are enough of them to make this happen (perhaps working like a cartel) what happens then? Easy – the figures for inflation while not taking in HPI do consider rent as a figure worth including. So this could be what happens.
Landlord increase rent inline with interest rates – tenant decides to pay this amount but requires a salary increase to get it. His rents gone up, and so has his salary – two figures taking into account when measuring inflation, also the employers produce/product will have to go up in value accordingly. This will cause inflation to go up, requiring more interest rate rises.
I think someone said it on this site before. The best way to explain this is that people pay rent with the money they earn – and people pay for houses with the money they can borrow. – no-one borrows to rent.