Saturday, May 09, 2009
Meet the new BTL landlords
Times: Should you gamble by investing in property?
Pension funds are seeking to become the new buy-to-let landlords amid growing signs that the residential property market is over the worst.
Legal & General, the insurer, is contemplating its first foray into residential property through a government scheme to develop new homes that it will let to private tenants.
Bill Hughes, head of property at L&G, said: “House prices have fallen 15%-20% since their peak, making residential property significantly more attractive to us. As capital values have fallen, the income we can make from investing has increased. Supply of new housing remains constricted, and this boosts the prospects for the sector.”
Hughes said he would hope to get a yield of 6% after costs.
Posted by little professor @ 11:45 PM (1449 views) Add Comment
14 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. lenny said...
William Hill, head of property, said: “If the pilot project looks like it’s going to work, we will set up a fund, potentially open to retail investors."
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
"William Hill", definitely sounds like you could lose your shirt on this one!
2. paul said...
This article is written anonymously by 'The Sunday Times'. I see now why it is becoming more and more like The Sun or The Sunday Sport.
3. charlie brooker said...
If you want to gamble p1ss off to casino and stop using other people's wealth as a means to get rich.
WTF is going on here? Since when was the tail allowed to wag the dog?
4. Kara Gee said...
OMG. I'm so annoyed at this article. You know the bit where it gives you mortgave payments V's rental yeilds, well the figures don't add up one bit.
5. tyrellcorporation said...
It seems nothing will change in the UK . We have the most F-up housing market going and you only have the look at the second home expense abuses within the Labour Party to understand why. Every sinew in their collective bodies are being strained to prevent any sort of correction - basically because they are so exposed to a downturn. ANY and I mean ANY amount of tax-payer money will be used to bail them out.
These large investment trusts targeting residential property should be banned immediately as there sole aim is to make sure housing is unaffordable to buy and so people are forced to rent. I can't stand Labour but am totally bemused as to why anybody, even the far left, would think this sort of housing market is a good idea.
6. happy mondays said...
Sounds like you are rooting for a riot tc, to force change, a revolution maybe, a little bit of levelling ...
7. confused76 said...
The point on rental yield is an interesting one
"Rental yields — the income from rent earned on a property as a proportion of the purchase price — are expected to average 6.3% during 2009, said Savills. Last year, yields averaged 5.6%.
Ian Fletcher of the British Property Federation said: “The fall in property prices during the current downturn has made the yields offered by residential property, which are typically modest, much more attractive.”
New-build properties, which have fallen by about 50% in price, are yielding as much as 10% in Liverpool and east London. At the March Allsop auction the average rental yield was 8.19%."
I guess they are quoting "gross yield" before service charges, maintenance etc. and of course before interests.
By historical standards, 5 or 6% are absolute low values. 8.19% sounds more in line with
Bar any uptake in rentals (high unemployment and wage deflation) house prices have further to fall before finding a bottom
at the end of the day, property investments are for yield, not long term capital appreciation (which can be underpinned only by rental growth and/or potential to invest in property upgrades) all the rest is bubbles
8. stillthinking said...
There is nothing wrong with the cost of housing rising, because that should create additional housing from additional demand. The problem with the UK, is the planning permission system, which routinely blocks development. Without these restrictions housing would become more available.
Look at London. Originally, near the tube stations there were normal family houses in the outer zones. Many of those houses are converted into flats, unsuitable flats because they are old houses and have wooden floor boards and plaster as the division between floors. However, if you were to try to build flats, you would be blocked by the council and the local nimbys.
I see the bubble itself as a product of the planning system, because the planning system legally enforces the shortage of appropriate properties. However, if, as so many are, you are prepared to bring up a family in an unsuitable flat then nothing to be done.
9. letthemfall said...
I think it's unclear how much the planning laws have to do with the price bubble. In some areas councils seem to okay just about everything, while in other areas, often populated by the large-house-owning wealthy , there is little new building (possibly changing - see Observer article on Cotswolds garden infilling). The obvious reason is the credit bubble, of course, but this leaves the question of the house-owning obsession and wealth inequalities. The apparent shortage of houses in rural areas, especially the west country, has much to do with second home ownership by the rich from the Home Counties. If there really is a shortage of housing then this problem should be addressed. Personally I would like to see 2nd home ownership banned, but recognising that this is unlikely to happen (and possibly impracticable) it should at least me made a lot more expensive.
10. stillthinking said...
Well, perhaps the extent isn't clear. However, property owners look at government to maintain increasing values of property, and GB has supported this in the past. There haven't really been any substantial initiatives in the UK to promote building.
I think the average property purchaser in the past has counted on this as supportive of their investment strategy. Who would choose to invest for gain in flats if there was an announcement of dramatic changes in the planning permission system. Consider a change that the onus would be on the planning authorities to block permission, rather than the developer seeking to obtain it. Would there be a speculative boom in that system? I don't think so.
The consequences that are all too clear now, is that funding goes entirely into a static resource, rather than being directed towards economic activity. We get poorer while living in smaller and smaller properties.
The UK's economic contraction is literally a physical one reflected in living space.
11. mark said...
Stillthinking you are right about our planning system, if you want an extension or build a house unless you pay off the right guy forget it and be ready for a long drawn out fight, yet when tescos or aldi want to build it is granted before they apply!!!! Why are these councils who work for us so corrupt, Cheshire is terrible, i actually had a friend who was told by a planning guy unless he was willing to donate some cash he would never get planning permission...shame he didnt record the conversation
12. mander said...
Buy to let (investment in general) only makes sense if new property is being build and so create something. I am affraid that buying the housing stock using banks money not even their own money is not exactly the economic activity that the country needs because no jobs are created, it does not help the country compete globally and there is a gambling risk because no own money is being used either.
13. Fedupwithhouseprices said...
How did the ugly Imax building in Bournemouth get planning permission granted which cuts off the most beautiful view of the sea as you approach the beach from the Eastcliff despite hundreds of protests and which now has proved to be an eyesore that is not even used by the public. Much of it is empty. It had to be a big back hander from the developers to the council. We all knew that but couldn't do anything. We live in a corrupt society and we need a revolution!!
14. Gulliver said...
Just moved to a new place and paying 40% less than previous tenant as Landlord wants to receive some income. Yield is roughly 3%.