Tuesday, Nov 27, 2007
Bad news for buy to let will impact the whole market
MoneyWeek: Why buy-to-let will be the British subprime
Last week's crisis at buy-to-let lender Paragon was the latest in a slew of bad news for landlords. And since they've been driving house prices higher for some time, it's bad news for the market as a whole.
Posted by mary @ 09:00 AM (1016 views) Add Comment
18 Comments
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1. yorkshireman said...
I am sure it will be bad news for "the market". I have no interest in "the market". It will be good for people who wish to buy a house. Now there is some good news.
2. Pelethar said...
Familiar ground but still a lovely article. But we need to see more - much more - of this type of thing in the Daily Mail, Daily Express, even the Sun.
3. paul said...
"Seems that my refusal to handcuff myself to the property ladder alongside the rest of the country has become something of a standing joke in the financial community. Good news then that it looks – to me and to most of them – more and more like I’m about to have the last laugh."
I was reading yesterday in the Metro how Goldman Sachs have made a fortune by shorting the US property market before anyone else did, and that as a consequence when everyone else is tightening their belts, Goldman Sachs' bonuses this year are as good as the last and the previous.
The bears are certainly having the last laugh, and Kirtsy Allslopp is (nearly) singing!
4. george monsoon said...
I have not heard the term "soft landing" for a while... I think it's time to edit Wikipedia...!!
5. handle_it said...
It will be interesting to see how many of these BTL's start bailing out next year... Even the most optimistic of fools will realize the game's up. I'm looking forward to the riches to rags reality TV programmes. We all know the smug types who often reminded everyone how he/she could sell up and walk away with 250k...
6. Jason74 said...
This article could be right. However, the (depressing!) alternative, is that the result of house prices being too high relative to rents isn't that prices fall, but that rents catch up. There is an interesting piece on BBC today suggesting that this is starting to happen
7. crash bandicoot said...
Last time that I watched "property ladder" they were asking for people to volunteer for the new series. Since most of the people on there ignore the advice that they are given, blow the budget on high-spec kitchens and other "lifestyle" additions and then are bailed out by rising house prices. The next series should have a different feel to it!
8. little professor said...
Yep, it's been frustrating for the last few years watching all those donkeys on the property pr0n programmes manage to end up with huge profits no matter how badly they messed up. It's going to be hilarious seeing how things change over the next 18 months,
9. bidin'matime said...
"Not long now.." But beware of the 'dead cat bounce' - prices will drop, then a lot of people will be drawn into the market, thinking it has bottomed - prices will steady - then confidence will go again and down it will go again. I'm looking for a fall of around 50% before I buy back in.
10. george monsoon said...
Bidin'matime - can you quantify your estimate of 50% drop?
11. drewster said...
bidin: I think we've already had the dead cat bounce, broadly the period from the hiccup in mid-2005 (when growth stopped and the BoE had to cut rates to avert a crash), up til this summer.
The dead cat bounce doesn't apply to the housing market in the same way that it applies to, say, the market in Northern Rock shares. When NR first tumbled, a lot of people thought "hey prices are low now, I'll dive in and buy a bargain with my spare cash". That caused a dead-cat bounce.
However the housing market is different because it is funded by mortgages. There will be quite a few people over the next few months who look at prices in their area and think, "hey prices are low now, I'll dive in and buy a bargain with a huge mortgage". However the credit crunch means cheap mortgages are no longer available. Even if enough people believed prices were cheap, they simply wouldn't be able to borrow money to fund that belief. Therefore there will be no dead-cat bounce here.
12. seanb303 said...
the further the market falls the more reluctant banks will be to lend , negative equity
13. Pipsqueak said...
the further the market falls the more reluctant banks will be to lend , negative equity, and then the further it will fall
14. jack c said...
Prior to the current state of affairs at Northern Rock the FSA (Financial Services Authority) on one of their regulatory visits to the Bank “stress tested” NR’s business model to see if it could withstand a 40% drop in UK house prices. This in conjunction with recent official statements from the BOE must tell even the most blinkered of people where prices are now most likely headed.
15. Locationlocationlocation said...
I like my hat with mayonaise and ketchup!!! Blrrpbpppp .... err, pass the salt please. Cheers, Kristy
16. disillusioned said...
Was there a dead-cat-bounce in previous HPCs? Very interested to know.
17. taffee said...
I worked in the late 80's to mid 90's and can confirm there were many false dawns...one thing in hindsight is for sure.When a bubble exists, it take many many years to unwind
18. bidin'matime said...
George - in case you see this - I haven't had a chance to reply but will do so soon