Monday, Oct 29, 2007
As safe as houses
The Mail: Thousands of families face ruin from the buy-to-let timebomb
"Many saw it as a get-rich- quick scheme in a buoyant market. But interest rates have risen, house prices are falling and people who have borrowed beyond their means, or didn't set aside money to cover periods when the property is empty, are finding themselves unable to pay the mortgage and being forced to hand back the keys to the bank."
Posted by sovietuk @ 12:15 AM (1969 views) Add Comment
31 Comments
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1. little professor said...
A must-read, great bear food.
"The two-bedroom flat in the Castlefield area was valued at £175,950, but the developer was offering a 15 per cent discount, and no downpayment was required.
After 18 months, in which Manchester, like many northern cities, has seen a massive oversupply of new city centre apartments, Paula's flat is now worth just £140,000.
Her mortgage costs her £900 a month, but she receives only £600 a month in rent. That's when she could find a tenant. Now the flat is lying empty.
"I paid such a high price, partly because independent valuers told us it was worth a lot more, and now I can't sell because there are so many apartments in the area. I'm at a desperate stage. I've lost an enormous amount of money - about £14,000"
PWNED!!!
2. stillthinking said...
I was surprised by how cheap flats in Manchester are. I think I probably mentioned it on this sight before. 500/600 month gets you a two bedroomed place !
Will rents go down in London as well? I don't think they are much different at the moment from about 5 years ago, but will they fall in London? There must have been building here too, perhaps not as much.
Floodgates have burst if its in the Mail. A typical BTL rag.
3. japanese uncle said...
Rents will be under severe downward pressure, despite the oracle of some charlatans. I am looking forward to it.
4. Borisina said...
The article states that Paula's flat is now worth just 140,000 pounds. Has she sold it for that? Who says her flat is worth 140,000. An estate agent? Her flat is worth whatever greater fool is prepared to pay for it. It is wrong to suggest that a property is worth this much or that much, you only know how much its worth when the money is in your bank, so the loss may be greater than that which is stated.
5. taffee said...
I like the 'my boyfriend had a few buy-to-lets so I thought I would give it a go'
off the cuff remark as if they were pairs of shoes..very worrying.
6. yorkshireman said...
If sounds too good to be true, then it definitely is. It never ceases to amaze me how naiive people can be. Still, they should have no difficulty in selling the property because there is a shortage - or is there ?
7. autopilotengage said...
I live in Manchester, tempted to go on a few viewings just to waste a bit of BTL/EA time and just to laugh hysterically at the price, confused76 style! Actually, that would be a bigger waste of my time, the imaginary trip has already given me the satisfaction i was looking for! If rents come down a bit more though, might fancy living city centre for a bit, before it becomes the slum of the future.
8. Turdburger said...
the population by 2020 will be 71 million - 11 million more than today. Few new properties are being built. If there isn't a shortage right now there will be a massive shortage soon.
9. talking rot said...
This brought a large smile to my face. I am looking forward to seeing some friends who, over the years, have bored me with tales of how much easy money they are making. Should this contagion spread to London, this Blog will, at long, long last, be proved correct. Ha ha ha ha ha ha ha ha ha etc.
I wonder if this will cause Gordon's economic miracle to finally be shown for what it is?
10. taffee said...
They should be flying off the shelves with the pent up demand out there....
11. Axxo said...
More fool them... if they sat down with a calculator and worked throught the figures they would never had added up!!
In fact 2 years ago they never added up!
As for London, prices are falling here too!
12. planning4acrash said...
Actually, this all could be quite a good thing, cheap flats and people wanting smaller places moving from the suburbs to city centre. It would be great if we get a trend of re-converting subdivided Victorian houses back into family houses again, if that happens our cities will be more vibrant overall, albeit with an initial market shock.
13. Jj said...
Are these people living in the real world. They pay out that much on a mortgage and believe £14000.00 loss is an enormous amount of money. Do they not realise yet that prices could fall in a big way and then the losses could be classed as an "enormous amount of money" but not £14000.
Wake UP !!!!!!
14. japanese uncle said...
Given the accelerating pace of HPC, 2012 London Olympic must be some sight featured with the unprecedented economic misery, I bet, My educated hunch tells London property price is destined to drop by 90% in some areas.
Theoretically, someone who started BTL say 7 years ago, must have been in a quite advantageous financial position. But in too many cases, they could not stop at where they were with the successful existing portfolio, but recklessly expand it in an insatiable drive for more profit (capital gain), after having appreciated the initial taste of easy money, guiding themselves towards ruin. The same old story in any part of the world, and in any century, indeed.
Suicides statistics of the UK will be some gloomy readings for the next few years to come.
15. paulos said...
I love the quote "It has greatly affected our chances of being able to buy a house of our own now, and it has certainly left me disillusioned with the buy-to-let market."
I can never understand why BTL folks think they can afford a BTL property when they can't afford to buy their own place! Someone I work with who rents is still considering a BTL "investment" in County Durham because she "knows what the young professional market needs". Never mind the fact that in any given week there are 50+ EMPTY rental properties in DH1 between £300 and £600pcm (I know - I've been tracking since April!).
16. Bootstrap said...
What's the problem? They're in it for the long term, right? ;o)
17. eyeoftheweasel said...
We rent in London and my experience has been that rents in London really aren't that high. I guess it depends on the part of London, but there are plenty of cheap(ish) to rent nice areas that aren't Chelsea/Mayfair/etc. Round where we live (SE London) I think you'd typically be looking at around £650 - £750/month for a 2 bed flat. Rents don't really seem to have risen over the last 4 years (at least), although there are possibly certain areas where that doesn't hold true.
18. Kitten said...
I charge less rent on my London flat than I did 4 years ago. And I'm just about to do it up and still not raise the rent.
19. inbreda said...
"the population by 2020 will be 71 million "
turdburger - do you fancy a wager on that? I'll happily put a few grand on it because I think the population will be nowhere near 71mill by 2020.
Someone just said it to keep BTLs / BNP happy.
20. Si said...
Sometime shortly after the war there was a baby boom. These baby boomers are shortly nearing retirement. By 2020 they will be nearing 80, and one can only presume there will be a fair number less of them by then. Meanwhile the next (my) generation are not having children, one reason being that they are having to work 2 jobs just to keep a 1 bed flat. Possibly a good proportion those that have bought recently won't find themselves in a better situation for a while, either because they continue to pay a crippling mortgage, or have been reposessed and have bad credit ratings. A fair proportion of others, such as myself, haven't even settled down yet...
Does anyone else think this might be a factor in the future population of england?
21. Cheekie Charlie said...
"the population by 2020 will be 71 million"
This prediction is based on trends of the last five years which, you guessed, have been the most over indulgent and prove to be an economical catastrophy. It wouldn't suprise me if the UK has great problems with depopulation of the educated/skilled workforce leaving a pension funding crises. Oh and not forgetting a CHAV funding crises
22. fahrenheit451 said...
Agghhh! This is bad, repeat after me "I want to be a bear, I want to be a bear, ..."
Ok, lets all get on the crash bang band waggon. The only reliable part of this article is at the end ...
"You have to be smarter now," says Tim Crighton ...
So before any fool could jump on BTL and make a small ??? profit. But now its the people who want to run a business (I repeat "a business") renting accomodation that will stay in the game. Wasn't there an article in the Times over the w/e that said something about there being only 11% ??? of property in the rental market and the government wants to increase this to 15%, and then that various groups were buying up other small-time investors ???
This reminds me of back in 1996 around the time of the previous (commercial property) crash, investors had buildt new offices everywhere, then could not find tenants. They had to off-load quickly to avoid increasing costs. The new entrepreneurs bought cheap, and did very well thank-you, undercutting the rest of the market and driving prices down further.
Which brings me to the Euopean model, where there is a much higher proportion of rented accomodation, but there is a social system in place which supports this as well, you cannot have one without the other, otherwise there will be a dramatic increase in homeless-ness. But his means turning the clock back on the Rent Act and its predecessors, which in turn changes the whole outlook of the BTL and rental sector, and without much in the form of council housing to keep this all going. Agghhh ... this is GBH's plan isn't it, crash the market, and buy back all those council houses, "Compulsory Purchase" of course for any property that is empty for more than 6 seconds.
Or am I just a bit cynical ...
23. uncle tom said...
The property market needs the speculators to flood back in if it is not to fall over in short order - with mainstream reportage like this, what chance is there?
Note the reference to mis-selling - will the smug get-rich-quick crowd suddenly re-invent themselves as innocent victims?
The answer: - Probably. Those who are old enough to remember the Lloyds crisis will have seen it all before...
24. The Reaper said...
uncle tom they already are.appearing on TV shows like the truth about property and moaning how they paid thousands in fees for poxy flats.Yeah like they'd have been bitching if they'd made a fortune.
25. Bug16 said...
"paulos said... I can never understand why BTL folks think they can afford a BTL property when they can't afford to buy their own place! Someone I work with who rents is still considering a BTL "investment" in County Durham because she "
Somebody my girlfriend works with bought a massive 3 bed semi two years ago for herself. She went on and on to my gf about how great it was owning such a great house and how much it kept going up in value etc etc.
Last week she confided that she's broke and has been using her CC to pay her mortgage. The good news is that she's found a solution! That's right! She's buying 3 flats and the money earned from them will have her owning her own private island in no time.
It's quite scary that there are people like this still out there.
26. C'mon Correction said...
"the population by 2020 will be 71 million "
Our economy can't support 60 million currently, the government, public services and the public in general are all massively in debt and getting worse.
Take into account North sea oil fields running dry soon, our manufacturing sector in permanent decline meaning we're ultra-reliant on foreign made goods with rising prices, other European countries becoming far more attractive to migrant workers and I'd say our population will be no where near 70 million.
27. taffee said...
don't forget...property is the most illiquid asset in the whole world and more people sell when prices fall and less interest is shown.
You get bargain hunting on shares not property.
28. Cstanhope707 said...
Uncle Tom great point I remember the Lloyds Names asking Mr and Mrs Taxpayer to bail them out. But guys get ready to get mad because I am predicting the D E and other tabloids to start a campaigne for a Taxpayer backed rescue package for these clowns!!!!
Miss Selling is not when you buy into an investment and it does not work out that is a business risk and one the investor is responsible for!!!!!!
29. Techieman said...
"Astonishingly, 300,000 buy-to-let mortgages were taken out last year alone, creating one million properties financed on similar deals". Johnny come latelys - always indicates the top of a market when the "amateur" / joe public punts in enmass.
30. Orwell said...
Oh dear oh dear....
And what is the avergae wage in Manchester (centre) then ? £15000 ish ? (That is about as much as Bristol which never forget is in the South)... Thagt's 10 times earnings and not 9 times....
31. geed said...
I am about to leave for Cuba for a week just before I return to the UK after a 6 month sabbatical in south america, canada. I will be looking to rent for a few months before i get my new business venture of the ground. Cheaper rents and cheaper commercial properties, I certainly dont look as dumb (or white after cuba!!) as my stupid greedy buy to let freinds do now. I have a huge huge grin on my face.