Friday, Jun 08, 2007
A bad outlook for the BTLs
Times: How to be a buy-to-let survivor
After the triumphant b/s from Professor Nickell, this article is far more realistic picture of a market that is not crashing perhaps, but where making profit going forward will be very difficult. "Investors must learn to protect themselves as the going gets rough. The optimist: Ezekiel does not believe in worrying about rental returns, which in few cases seem to cover management and agents’ fees: “They are a zero-sum game. The only way to make money from property is by one day selling up at a profit.” ... sorry I am missing the optimism...
Posted by confused76 @ 11:05 PM (148 views) Add Comment
2 Comments
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1. dobber said...
'But it is the prospect of paying high levels of capital gains tax that prevents him contemplating selling any of his £2.8 million portfolio, even if the market turns. Fortunately, he believes property prices will continue to rise in London': “The slowdown hasn’t started. Loads of properties are still going to sealed bids.”
Oh really, such a shame he is probably two young to have friends who invested in dotcom shares (or has a poor memory). Those that held through the bursting of that bubble lost all their gains (no tax to pay!) but unfortunately many lost 90% of their original capital too.
Mr Ezekiel the difference is you are heavily geared this time round old boy, they call this foreclosure in the United States, you might have heard of the term bankruptcy.
2. tony marshall said...
This article was just part of a three page spread imploring BTL investors not to lose their nerve - the front page (Friday's Times) had a banner headline, right at the top of page 1, saying "Buy to let? Don’t panic”. Most people over a certain age will associate this with Corporal Jones in Dad’s Army, imploring Captain Mainwaring not to panic – a sure signal that there was a reason why he might well start panicking!
The main feature was in the ‘Bricks and Mortar’ supplement, under the heading “The buy-to-let investors army holds its never” and gave us details of half a dozen BTLers who were basically just trying to sound optimistic. (I can't find the actual article online). Most shocking was the ‘concerned parent’ who had paid £250k for a house on which they put down £100k from savings and “believe that that the rent will cover the £150k mortgage”. They are not expecting their children to live there – they just want to get a foot on the ladder for their children – currently (wait for it…) aged 6 and 10. Then there are the ‘Pension savers’ who bought 2 properties totalling £246k on which they are ‘just breaking even’, but which they think someone else would be prepared to pay them a total of £370k for – presumably someone who likes making significant losses…
Of course, in the current climate, they probably could find someone prepared to make losses, but once the masses realise that losses are a mugs game, the game will be well and truly up – we shall then see values return to sensible levels.