Friday, Nov 30, 2007
BTL in for a rough ride as yield is low and capital gains is also declining
Times: House price plunge heralds fears of ‘double whammy’ for investors
Some fear the BTL may be in for a rough ride as the rental income does not pay the mortgage and capital gains are declining. In recent weeks BTL have been trying to get out before the market gets worse. TFS Brokers are predicting a 7% fall in house prices next year. Here comes the crash!
Posted by who stole my pension? @ 04:27 AM (670 views) Add Comment
12 Comments
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1. planning4acrash said...
Shouldn't they say that Capital Loss is Increasing?!?!?!?!?!
The words used are like those you use to sooth a distressed child, but these BTL's are adults!!
2. tyrellcorporation said...
WOW! This is the most bearish and heartening artcile I think I've ever read on this site! After too many false dawns I think this marks a significant shift in opinion and to cap it all it's from the Times - Labour's broadsheet.
3. dohousescrashinthewoods said...
I'm increasingly realising how fundamental easy credit is to the whole equation. In 2005 things choked and then revived on an interest-rate cut. Now credit has seized all over and things are moving quite dramatically - and not just in houses. The West is getting exposed for what it is - a debt-junkie that can't stand on its own two feet without being pumped with imaginary money.
As others have said, I don't think a BoE rate cut (or two) can save housing now, with borrowing rates diverging from libor. It may sweeten the fall by a couple of percent, but then, 48% instead of 50% isn't particularly comforting.
4. confused76 said...
"Yesterday’s data was much bleaker than predicted by economists and added credence to a report this week from HSBC that house prices faced a substantial correction over the coming year. HSBC argued that house prices were 30 per cent above their true value. Brigid O’Leary, of Capital Economics, said: “Today’s data seem to confirm that our forecast of 3 per cent house price falls is on track, and indeed that the downside risks to that view are growing.”
An even sharper downturn than that is now being forecast by some City traders. The TFS Brokers’ residential forward curve, a financial instrument where traders can bet on the direction of the market, is pointing to a 7 per cent drop in prices over the coming 12 months."
YEEESSSSSSSSSSSSSSSSSSSS!!!!!!!!!!!!!!
and looka the reader comments.... AHHAHAHHAHHAHH
BoE rate cut wont achieve nothing except a collapse of the currency
5. speculatorone said...
confused76 said 'BoE rate cut wont achieve nothing except a collapse of the currency'
confused, I had an agent call me yesterday trying again sell me a house. He is brian washed into thinking that come the new year a rate cut will be enough to kick start the market again. I just hope this time the credit crunch is enough to stop that happening.
All we need on this site is a repeat of what happened in 2005! Image how we would all feel if that happened?
6. tyrellcorporation said...
Brian washed? ... sounds nasty!!! ;)
7. tyrellcorporation said...
Hopefully Mervyn won't make the same mistake twice (as he's admitted on many previous occasions that the 0.25% cut in August 2005 was a big mistake).
8. Planning4acrash said...
Mervyn didn't make a mistake, he went against the majority and voted against the cut last time. The Guvnor was outvoted.
9. confused76 said...
"BoE rate cut wont achieve nothing except a collapse of the currency"
i just confirm what I said. Base rates are a yardstick for "riskless" lending. Two things have fundamentally changed versus 2005:
- the belief that mortgage lending is riskier than the 2005 "Goldman Sachs models" used to show
- the "price" attached to the lending risk (i.e. the spread between sovereign 'base rates' and the actual cost of borrowing)
has the market overreacted? yes, imho. risk price premia are too expensive now as they were abnormally cheap 1 or 2 years ago.
how long will it take for "normal" conditions to be restored? 1 or 2 years as a minimum
so tell your EA to dream on!!
10. x blogger said...
UK property is TOAST.... KING SIZE HASH BROWN'S AND HIPS DARLING!!!!!.lol
11. speculatorone said...
tyrellcorporation, ignore my dreadful grammer, it's trying to rush these blogs when at work without getting caught!
12. the reaper said...
'The West is getting exposed for what it is - a debt-junkie that can't stand on its own two feet without being pumped with imaginary money' the truth hurts