Monday, Apr 28, 2008
More gags
Assetz: Good news - Prices are falling
The news today appears to have been rather bad if one only considers good news to be increases in house prices. For those looking to sell or borrow against the value of their house it certainly is, but less so for those looking to buy. While some will groan at the news, not so buy-to-let investors. Lynsey Sweales, director of the buy-to-let centre, a specialist firm, told the Independent that existing landlords are keen on more property investment for precisely that reason. She said: "Our customers are not worried about falling house prices."
Posted by big bad wolf @ 07:15 PM (558 views) Add Comment
11 Comments
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1. becky said...
If we take this at face value then it’s actually good news because if hard-nosed investors are going into the market with their “enhanced negotiating power”, they are going to be looking to secure a very hefty discount to cushion themselves against a ‘worst case scenario’ decline in values over the next year or two which means they will be inadvertently contributing to a decline in average sale price.
2. new user 2007 said...
Yes, price FTB out so BTL can profit from them. Great service! Thank god they can no longer get the capital appreciation for it to be a sustainable “business” model!!
Even though the BTL, who form the majority, have only made money from capital appreciation, they will buy in a stagnating or falling market?
The biggest load of rubbish is about their ability to buy...more products have disappeared for them than for FTBs (or at least similar numbers) i.e. deposits have gone up for both...
FTBs get lower multiples but BTL need higher rental gaurantees i.e. a return to 125%of the monthly interest payments
The last story is about no REAL price falls and now BTL are in a good negotiating position because ASKING prices are falling a little?
Assuming they can get financing and at cheap mortgage rates, how will returns be positive if prices are still above even mid-2006 levels i.e. when it definitely became about capital gains not rent?
His rental price increase figures are from “selective” VIs, but even Vis in the FT said rents picked up but are now under pressure even in parts of London. Corporate clients are disappearing and Poles leaving.
3. titaniccaptain said...
Well put Becky I like it
4. Peter Anton said...
This man Stuart Law has become so paranoid about the market he does not know his fundamental orifice from his elbow. He is a clueless nut case.
5. Ski said...
I like the concept of the "buy-to-let industry" that is invoked in Stuart's prose. This conjures up images of Salt or Cadbury, building communities from their business acumen, instilling values in their workforce (whether they liked it or not, but that's a different point), rather than a bunch of utterly selfish greedy and ultimately economically naive b'stards, which is what they are.
6. gone-to-colombia said...
Seems to me as if this author is thrashing about like a chicken without its head. I wonder how safe his company is?
7. techieman said...
NU2007, i actually think this story has some credibility. BTLrs have made money over recent years, and if they havent geared up, they may THINK that now is a good time to add to their portflios. Since "in the long term" prices "always go up" shouldnt they be taking advantage of a dip? This is what makes a market, people getting sucked in because falls have (eg 2005) been perceived (well actually have as of late last year - depending on the area) to be good opportunities to add.
The BTL landlords may even say - look i thought (probably they will say KNEW - not the most humble bunch!) things were overpriced so i just waited for a pull back. This line of reasoning - i.e. by me - may be premature. Having said that i have no doubt that this mentality will fuel the Dead Cat Bounce or the B wave at some point in this cycle. The thing is when that happens they will all be saying - right you had your chance suckers and now the price will go away from you again. Lots of "we told you so". This cause some follow through and probably some large monthly increases as "the suckers" get sucked in. If this is how it pans out this site is gonna look like a war zone!!
However at this point the real economy comes into play and the plunge to much lower levels begins, wiping out many BTLrs who thought they had weathered the storm. "The king is in the all - together"
8. Davros said...
Smart move, with the IMF saying house prices are overvalued by 40%, best get in quick before they fall further!
9. mr_smith said...
well I have to say that the following argument has some merit to me
FTB can't get a mortgage and won't buy due to price drop worries
this drives increased rental demands
yield goes up for BTL landlord
BTL landlord doesn't lose money
BTL landlord doesn't need to sell. so far I think we are seeng no signs of the flood of exBTL properties on the market post CGT changes. this goes against predictions of sites such as market racle which has quitely switched its bear predictions away from the CGT trigger towards the mortgage famine....
the hopes for BTL crash seems to rest on the inabilitity to remortgage and the poles going home dropping demand. both these will take time to work their way through the system and depend on the as-yet unproven recession fears.
so basically I'm still hoping, not beleiving.....
10. new user 2007 said...
Techie/ Mr Smith
See my comments in the last story. The only way BTL is a sustainable model, in the South east for sure, is from capital appreciation. Even price stagnation implies losses for anyone who bought in 2006-07. In the previous story comments I suggest that this is now being driven by the mug money that he clearly aims his "analysis" at....after all, IQs have not risen since August, merely those with low IQs can no longer get the money to be a danger to themselves.
I question the rent increases because I have friends who do BTL and they started selling in the second half of 2006 (and they were not subsidising tenants as they bought in the 90s). Certainly in my area there are so many To Let signs that it is clear that even with people selling and renting there is a large stock of rental properties, and my rent is substantially below the cost of an interest only mortgage with a 25% deposit on the same flat.
There are over 1mn BTL mortgages and over 2mn BTL properties. There is therefore a surplus of such property. I am sure that rents have gone up in many areas BUT this has been limited by the surge in BTL supply (around half was bought since 2006..the popn has not gone up to match that so even if people now sell to rent there is a surplus). My suspicion of Mr ASSetz figures is based not on his alleged optimistic data but on his interpretation of data I can see…he is incredibly one-sided in his analysis.
The FT is a far more authoritative source than the VI ones used by Mr ASSetz, and according to it yields are incredibly low relative to 2005. They will turn negative even with 0% capital growth (the much quoted 20% returns from Mr ASSetz and ParaGONE are gross and include capital growth). Take away costs and add in 0% capital growth and those yields are negative. Yes, BTL who bought pre-2005 are ok and are optimistic and are no doubt buying (for now) BUT prices were driven by new money since then….
…I think that is now gone, either through fear of falling prices (both FTB and BTL who bought post 2005 and so cannot cross-subsidise) or though lack of funds (for both again). The rent rise is certainly below the rate increases most are about to face (fixed mortgages dominated from 2005 during low rates…as they come off these payments will rise by 20%+, much more than the most optimistic rental increases over the same period).
I think that Poles going home, as well as BTL slowly getting out because of CGT AND falling prices, which will accelerate the process, will be important. However, like any pyramid scheme it is not just a question of people leaving that causes it to collapse, it is merely no new money coming in i.e. no new Poles and no new BTL will have a similar effect to a decline (only more slowly). Market moves occur because of events at the margin (for example, SIVs), not because the whole market suddenly changes.
In terms of common sense…prices can rise by 20% in 12 months and no VI thinks that is off BUT say prices may fall by 10% over 18 months and that person is mad? How odd does that inconsistency sound? "We are different". Yes we are, but several countries were also different…even with different structures, the facts are that countries with lower interest rates and unemployment are now seeing large falls.
11. Bobby9983 said...
Have to agree. In the good years many BTL investors have left properties empty just because they were making so much in capital appreciation why would they want to have the hassle of looking after a tenant. Not so now, so expect a glut of to let signs wherever you look!