Tuesday, Jan 13, 2009
Hang on to your BTL for 20 years and all will be well claim ARLA
mortgagestrategy: Landlords hold firm despite house price falls
A study from the Association of Residential Letting Agents shows that buy-to-let investors expect to hold on to their properties for up to twenty years in spite of falling house prices. The latest quarterly ARLA Review and Index, published today, reveals that the proportion of investment landlords who do not expect to sell during the next year has shot up from 77% to 88%
Posted by jack c @ 06:09 PM (528 views) Add Comment
9 Comments
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1. str 2007 said...
Who expect to sell and who get forced to sell are 2 completly different things. I can well believe that 88% don't expect to sell now, they realised they've missed the boat.
Of those 88% though, how many are aware of their situation with regard to rents falling due to unsold properties being put up for rent.
Equity vanishing quickly meaning re-mortgaging portfolios may well be a non starter leaving them on SVR. Or worse still their lenders sending out margin calls requiring them to top up their portfolios.
I wonder if we'll see any notable 'rampers of the property market' get into trouble this year. Even more interesting if it exposes some MP's vested interests in policy making.
2. str 2007 said...
Wait a minute, this article clearly shows ARLA admitting house prices are falling.
I wonder if their members are aware of this.
Surely your house (sorry investment) hasn't actually fallen in value unless you sell up and realise that loss !
Yes that's right, if house prices fall people won't sell and hence house prices can't fall.
I'm sure that's one of the many arguements I've heard before.
3. crunchy said...
Deleveraging to the bulging BTL portfolio holder is like flatulence to the Obese, It's means survival coupled with a ominous odor.
4. inbreda said...
"the proportion of investment landlords who do not expect to sell during the next year "
Surely this implies that they are all desperately trying to stem their losses by selling their overpriced properties, but after months without any viewings they have all given up hope of there being a bigger mug than themselves willing to pay even more over the odds than they did.
Mwaha...
5. plato said...
Investor landlords are serious business people. However the recent BTLers are somewhat different in that they have much higher LTV commitments, apart from being novices. Indeed their rental income will not cover their costs in many cases.
Investor landlords would not be selling their portfolios without a good financial reason in any case. Long term investment is the basis of their business. They can afford to wait in general.
I doubt that many BTLers of recent years can afford to do this with property values plummeting, excessive LTVs and subsequent lower rents than had been planned.
The figures given suggest most will ride out the storm, but I would suggest most realise they simply cannot sell.
6. Bodmore said...
I tend to agree that BTL'ers are a different breed than professional investment property owners. They are operating on slim-to-no margins and in a downturn like we're experiencing they will be devastated. Highly leveraged BTL'ers like the "Robo Paddies" described in David McWilliams "The Pope's Children" will be the first to go (if they are even still around)
7. Chris said...
I own 4-BTL properties and have been collecting them since 1992. Two of them purchased in 2006 & 2007 will be worth less than I paid for them, but the two properties bought several years earlier are worth around 100% more than I paid for them.
They are all let and after calculating the rental income v the cost of repaying the monthly mortgages, I could still cover my costs if two were completely empty. This margine enables me to drop the rents and undercut most of the other BTL investors thus ensuring they are occupied at all times. It is unlikely that I will struggle in the immediate future and I never plan to sell them, ever.
In 15 years time they will be paid off and then I will use the rental income as my pension to top up my military pension and state pension.
The new BTL investors will struggle first. If they can't fill their properties, they will lose them to the bank. Less rental competition will help to maintain rental prices and the strongest will survive. :-)
8. new user 2007 said...
"The results, taken from 488 lettings offices and 328 investor landlords in November last year, show that on average landlords keep their investment properties for 16.3 years."
I thought 90% of BTL mortgages were taken out in the last 7 years, and that is when the bulk of the housing was bought? How then does that 16.3 years figure appear?
In addition to not believing the sampling company anyway, I suspect that this does not take into account what they will be saying when the economy actually dives properly and they finally start to believe that Eastern Europeans have left and unmeployment will rise!
9. new user 2007 said...
Chris.
There is a difference between long term "landlords" and BTL speculators. The latter dominate (most of BTL mortgages and BTL properties were bought from 2005 onwards and therefore there is no scope for subsidising. And when banks panic they tar everyone in that groups with the same brush i.e. even the solvent can become bankrupt when loans are no longer rolled over.