Wednesday, Jun 10, 2009
I'd hit them even harder
BBC: Buy-to-let landlords 'hit harder'
Council of Mortgage Lenders figures show 1,700 buy-to-let properties were repossessed by lenders in the first three months of this year.
But landlords lost 4,100 properties when cases of lenders appointing a receiver of rent are included.
Posted by phdinbubbles @ 07:51 AM (793 views) Add Comment
12 Comments
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1. paul said...
"The situation has been made more difficult by lenders getting tougher over mortgages, with buy-to-let loans particularly badly affected."
Why is that situation more difficult? As the article points out, there's no need for crocodile tears for the poor loser tenants because the banks are increasingly appointing rent receivers, so I'll repeat the question, why is this situation difficult? Sounds like everyone's a winner apart from the buy to let "investor".
But that's who the BBC sides with in this argument. Shameless, partisan reporting.
2. uncle tom said...
This is only the beginning.
So far the BTL portfolio brigade are mostly scraping by, neglecting maintenance and benefitting from lower interest rates. Despite that, many will be getting nett rental income that falls well short of their outgoings, so it is inevitable that many are now raiding savings, and incurring debts.
The next fall in prices, coupled to the inevitable increase in interest rates and the continued fall in rents; will turn this trickle into a flood.
3. jack c said...
Good summary by UT (Wednesday, June 10, 2009 08:57AM) and to add pone further point when this becomes a "flood" the investor will find the stark reality of holding a very illiquid asset.
4. stillthinking said...
Perhaps because many BTL investors used a paid-off home as security for leveraging on properties, and so for a bank which wishes to shrink their loan book, they look like the only ones capable of generating funds.
Repossess from a stretched 2007 buyer, and as far as the banks are concerned, the property at auction won't cover the debt and the erstwhile mortgage holder becomes homeless, liable for rent and whatever debt is outstanding, and likely to seek bankruptcy protection.
On the other hand, waiting for a BTL to put a foot wrong allows the sale of a paid-off home -and- the loss making property.
Lets face it even -with- current falls, there is a lot of equity in housing bought prior to 2000.
BTLs represent a method for the banks to deleverage, boom-time home buyers don't.
5. uncle tom said...
stillthinking,
There is no major issue for the traditional landlords, who wholly owned their lets; only for those who borrowed to invest.
To get a take on the scale of the problem, you have to look up the numbers of BTL mortgages over the years from past press releases - from that you realise that the great majority were originated in the last five years, and many of those who were playing before that period re-mortgaged to extend their portfolios.
I stick with my prediction that of the million-odd BTL mortgages outstanding, 500,000 will eventually end in repo, with a further 250,000 properties sold by the borrowers, either to landlords with the cash to buy outright, or to owner-occupiers.
6. need-a-crash said...
Good to see these greedy swine suffer! Schadenfraude at its best.
Can you imagine the outcry if there was a popular investment which enabled the young to get rich at the expense of the elderly? So why is it acceptable for the middle aged middle classes to rip-off the young?
7. Matchmade said...
"need a crash" - the young are not being ripped off. Most tenants in this country get an absolute bargain. How else do you get to move anywhere you like in the country, live in someone's house with no responsibility for maintenance, benefit from someone else's capital, pay a rent that barely covered the mortgage in normal times, and rarely lift a finger to keep the house clean and tidy? The returns on rental investment have been falling for years and were less than cash deposit accounts until the recent slump.
Why do you think very few commercial operators offer rental property in this country? It's because the returns on capital are so poor, and companies don't want to be bothered with all the bureaucracy and feckless tenants who don't pay their rent and don't look after the propertes. The only people prepared to take on being a landlord are Joe Public, who sees property as one of the few areas where they can make some money with their surplus capital and through their own efforts. Stock market investment? It's done nothing for ten years. Ditto pensions, plus the charges are horrendous. Bonds and cash offer useless returns. Where else do you expect people to invest their money, if they have some surplus?
I agree some landlords are being repossessed because they misjudged the market and/or have lost their jobs, just as plenty of householders are also losing their houses. And there will be plenty of landlords who are being repossessed because their tenants refuse to pay their rent, either because they've lost their jobs or they're fraudsters, or they have the kind of attitude you seem to have, which is that you see no reason to pay rent because you've got a massive chip on your shoulder because you think it's your god-given right to own your own home. Of course people who are smug about their former capital gains on houses were sickening, but you shouldn't extend that to every landlord. Equally, plenty of older people are sick of first-time buyers who are too feeble to raise their own deposits, run large credit-card debts and expect to be given everything on a plate -- and then quickly change their tune once they're on the housing ladder and expect to keep all their capital gains taxfree.
Bring on full capital gains tax on principal private residences! That will shut everyone up and stop them viewing house ownership as some taxfree nirvana, whether you're a first time buyer, a landlord or a regular homeowner.
8. stillthinking said...
ut, I think repossessions (although tragic in many cases certainy) are probably a good way out for the banks and economy, because the house either goes to a cash buyer, in which case the bank coalesces outstanding debt, or to a buyer with a lower multiple of salary, two people then covering a debt compared with only one previously.
The problem is that these all reveal the housing bubble losses in the worst way, very direct and in your face as far as losses are concerned. No house and 12 years to pay back the difference, plus also collapsing prices by flooding the market. We definitely suffer in this country because the way forward is to admit and make clear the nature of the problem, i.e. identify losses, as long as we pretend nothing has happened and attempt to reflate or whatever who knows where we will end up. Which is where we are today, in absolute denial still.
The mechanism to maintain house prices is broken, but perhaps the government can succeed in moving the effects somewhere else such as cuts in public services or a fall in sterling.
Oh yeah, I wanted to make this point. When thinking about the cuts to the state sector, I have been guilty of thinking well they are so inefficient that you can cut 30% and not notice a difference.
BUT
actually there won't be -any- efficiency gains and there are unlikely to be any during a period of dramatic cuts, so what will happen is we end up with equally inefficient workers, just fewer of them, so we will get -real- and perhaps very noticeable cuts. Maybe the Tories can improve productivity over the next 5 years, but without market reforms I won't be holding my breath. Real service cuts basically.
Bit irrelevant there.
9. mander said...
"Many landlords got into trouble after paying too much for buy-to-let flats."
Here it is what I do not understand, rentable flats are not getting sold to buy to let but the family homes instead are.
Can you call this business or investment whatever?
10. peeping tom said...
How many of these properties are houses though? My guess is that most of the repossessed properties are flats which were purpose built for the buy-to-let brigade and are now to all intents and purposes unsellable?
11. uncle tom said...
mander,
The 'off-plan' flats scam, aided and abetted by some long defunct investment shysters, with their costly BTL seminars, and less than impartial surveyors; is the sharp end of the BTL bust.
Investment in houses was done mainly (but not entirely) by those who acted alone; convincing themselves that they were tycoons in the making.
However, they are all coming unstuck..
12. tenyearstogetmymoneyback said...
UT at 7:14pm
What went wrong was a simple question of supply and demand.
Say in 2000 there were 50 Flats in a city centre bringing in £700 a month rent each.
Build another 500 and what do you think will happen.
Something that really annoys me (which I have posted about before) is the ammount of property
which has been destroyed to do this. Someone I know lived in an Edwardian house which was
divided into four nice flats. Developers bought it and demolished it to build a block of ten flats.
A local pub is now in a very sorry state (frontage left only) after falling victim to another flats scheme.
The joke is that it is now being advertised again as a Publicans opportunity despite having no roof and only 1 wall
:- Duncan
:- Duncan