Thursday, Aug 12, 2010
Fear takes hold
Citywire: Landlords are scared as the future is on a startling downwards trajectory
When the dowturn hits, I look forward shaudenfraude for these exploitative landlord gits who profit off the back of a profound human right. Years ago there was a joke on the telly about Margaret Thatcher starting an Oxygen Tax. Perhaps that's the future. Perhaps people should try buying up all the air and water so as to enforce extreme "free market" (ahem!) rationing. "Buyers, fearful of buying (or unable to borrow), hasten the property price drops they fear. Instead, they rent. But – fearful of job losses and tax rises – they’re demanding break clauses, adding to the jitters experienced by landlords already nervous about third- and fourth-quarter rent arrears."
Posted by mick rupert @ 09:53 AM (1412 views) Add Comment
32 Comments
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1. mrflibble said...
We all need landlords, they are essential when one wants to short the property market, so please spare a thought for them.
2. Keith said...
Please could someone copy / paste the article? I do not have an account citywire.
3. mark said...
Manchester, Liverpool, Chester, all areas have been overbuilt with crappy apartments and there are huge numbers empty, this is not a good business to be in..
4. mark wadsworth said...
They would never introduce an Oxygen Tax!! That's a publicly collected tax - what the Home-Owner-Ists want, by analogy, is for the UK government to sell off UK oxygen to private owners at a massive discount, and these private owners can then live off privately collected taxes, i.e. by charging non-owners for using it.
Historically, what the oligarchs, politicians, Norman invaders, colonialists etc like to do is to simply declare that they 'own' land or oil wells or whatever. In the UK we have a variation on this called "Home-Owner-Ism", whereby the favoured classes (homeowners, landlords, banks, politicians, marginal voters) etc all get given massive bungs and subsidies, or allowed to buy council houses for undervalue, on the pretext that they "own" the land or the bank; that these are important to the economy and hence deserving of these bungs.
It's all the same thing really - give it a century and the descendants of the oligarchs will be seen as nobility in the same way as the descendants of the Normans expect us to to treat them as nobility, when they are nought but common thieves.
5. sj032 said...
I understand that this is a kind of landlord bashing site, but I can't agree. Landlords provide a service like any other business. They take a risk on their capital and those who did this before 2000 ish are probably doing ok, while those who bought to rent after 2000 to 2005ish are probably wondering what's around the corner. If you can't afford a house you need to rent, you may choose government housing (be my guest) or private housing. The 'issue' here is a political class that refuses to allow house prices to float to their market level. The business of buying houses to rent is a sound one as long as there is a level playing field, which currently is not the case.
6. mark said...
what a pleasure to post...
does anyone remember the last recession and how quick it came and went, this time it feels like it is going to be dragging for years, anyone any ideas why the last one came and went so fast, was it because of high rates?
7. khards said...
sj032 - "hey take a risk on their capital"
Most landlords since 2003 have been risking the banks capital mostly.
8. sj032 said...
I think that's it, Mark. Whereas prices were able to adjust relatively quickly in the previous recession, this is not the case this time. In our new high tech world no one is allowed to lose money anymore, and when they do, the government must compensate them for doing so. It called socialism, sorry, i meant to say a functioning modern democracy, silly me. This recession will continue for a very long time unless the idiots in whitehall stop trying to plan everything.
9. sj032 said...
Khards, a 30 to 50 grand deposit is serious money for most people. And remember, this is a leveraged bet. They are risking their capital
10. growler said...
mark: anyone any ideas why the last one came and went so fast
the interest rates crucified borrowers in a recession and reposession was the killer is the story. I wasn't a homeowner then, but had quite a few friends who were. The interest rate hike just hastened the end. In this recession we have a long, drawn out death. But they all end in the same way. In the end, if you are overstetched in a big way you snap and have to start again. If you're overstretched in a small way you'll eventually stop buying anything you don't need until you're living on scraps. Which is better: my view is the short, sharp shock.
11. mark wadsworth said...
As to the speed with which recessions pass, it is quite simple.
Credit bubbles pop and cause recessions.
But of course they don't pop overnight, they deflate at a certain speed (slowed down by politicians and central bankers).
So the bigger the credit bubble, the longer the recession until all debts are paid off or cancelled, and we can start again with a clean sheet.
The 1989 credit bubble was quite big in the UK, but pales into insignificance to the one that popped in 2007, which was two or three times as big in the UK and affected nearly every country in the world, it will take five years to get back to square one.
12. techieman said...
Mark the answer to your question is that we are now at a contraction of supercycle degree, not primary or cycle. [the early 90s was primary].
I know that dont make much sense does it :).
13. mark said...
yes i get that, the big cycles and liccle cycles..lol
SO the more the government fanny about the longer it will last.
14. str 2007 said...
sj032
Sorry I can't agree with you entirely.
I think we have a Cart and Horse situation.
From what you've written you believe Landlords provide a service. Which I agree they do.
However they have created that service by re-valuing property at approaching double what it was 10 years ago with the flawed Interest Only/ Capital Gain business model.
So their customers would have been able to afford a home if it wasn;'t for them.
The valuable service they do provide as mr fibble points out is to aid people to short the housing market.
Most landlords didn't think they were risking any capital when they got into the business and multi property portfolios have simply released equity from capital gains rather than injecting fresh equity.
Unfortunately they seem to have been strongly supported by Government, mainly due to the fact most in Government were playing the same or similar game.
Techieman
Was the thirties the last Super Cycle dip ?
15. growler said...
As for landlords. I hate the term, not the function.
It's a British anachronism that does a lot to stigmatise. It implies some superiority to the ownership of land and an inferiority to not being a freeholder. It's part of the home-ownerist dictionary.
I don't think present landowners are descendents of thieves - this implies a tad of jealousy which is surely paradoxical. Who cares if someone else owns the land?
It's a service people provide and as sj032 says, people need. It's not all roses - i used to let a house to people. Frankly, I personally would like to see many more house-letters. As a consumer of accommodation, you'd start to demand service since competition will mean a bad service sees falling customer levels.
I'm all for housing associations waiting for developers to go to the wall so that some hardware enters the market that can be let out. There has to be a market in a quality house-letter - just as there is on the European continent.
16. str 2007 said...
Alot more posting going on today without Re Captcha
17. Goldbug9999 said...
If I buy a car and rent it out I'm adding to consumer choice and generally benefitting the economy.
If I buy a house and rent it out I'm depleting the housing stock available to buy which counteracts any supposed "benefit" or "service" that I claim to be offering.
18. mrmickey said...
The last recession was bog standard and caused by an over heating economy the government panicked raised interest rates hard and fast stopping the economy in it's tracks and crashing the housing market, within a few years the housing market started to recover with the general economy. This time round the recession was caused by a near total collapse of the banking system not an over heating economy a very different beast all together.
19. mark said...
so you dont think a sharp shock would help the economy recover more quickly?
20. techieman said...
ok so in terms of getting back to the subject - can someone tell me what this says please - cause i cant read it!
21. sj032 said...
str2007
I think you are are confusing landlords with bankers when you say'
"However they have created that service by re-valuing property at approaching double what it was 10 years ago with the flawed Interest Only/ Capital Gain business model. So their customers would have been able to afford a home if it wasn;'t for them.
First, the landlord has not revalued anything, the maket has. The landlord also did not supply the interest rate that he paid on his loan, but, one would hope, chose the best offer that was available at the time, as any sensible man would do. Surely, str2007 your anger is at the bankers who printed so much money in the first place as to cause a drop in the interest rate which led directly to acredit boom and overvalued houseprices?? The landlord, as a normal market participant, is doing the best he can with the resources he has available.
22. str 2007 said...
sjo32
Yes cause and effect.
Of course there are bigger fish further up the chain. You could go higher than you have and blame politicians for introducing the 'short term tenancy agreement' which then gave bankers a free hand to lend against property on terms overly favourable to themselves.
That probably needs looking into and investigating who was scrathching who's back in the mid-late nineties when that was introduced.
Landlords themselves though in my experience are very self serving and do little to look after the property they're supposed to be investing in.
I can't blame them directly for cashing in, but they have been very smug about their effectively unearned capital gains based on business models most didn't understand. Other than 'house prices only go up' which for them, to date, luckily they have.
23. sibley's love child said...
techieman:
by Linton Chiswick on Aug 12, 2010 at 00:01
Rents and tenant demand are rising. Yet landlords' confidence in the future is on a startling downwards trajectory. Linton Chiswick considers whether they are right to be scared.
Rents are rising across the UK, tenant demand is growing faster than available rental property and at the fastest rate in years, and yet landlords’ confidence in the future is – according to a survey by a specialist buy-to-let lender – on a startlingly downward trajectory.
Far from being buoyed by what turned out to be relatively good news on Capital Gains Tax, the very fear of a 40% rate, combined with worries about FSA regulation and economic deterioration following the new Government’s austerity measures, has left landlords with anxiety issues. Six months ago, only 19% feared for their prospects as landlords. Now, it’s 38%.
First, the reasons for landlords to be cheerful:
Tenants up, arrears down
The latest figures by Countrywide – the UK’s largest lettings agency – show new tenant registrations up 16% in the second quarter, and 18,000 new tenants registering in June alone (the highest monthly figure since 2003, when they began keeping records). Supply, in the second quarter, dropped 6%.
There’s a reasonable expectancy that new Government planning policy will only exacerbate a generally accepted housing stock shortfall. And as the banks steady themselves for a second wave of arrears (reflecting a deteriorating employment situation), new mortgages don’t look as if they’re going to become any easier to find.
Rental arrears, conversely, are down. The National Landlords Association shows the number of landlords reporting tenants in arrears down in the second quarter of the year, with the average amount of outstanding arrears falling, too.
Some investors are even deciding its time to reconsider the much-maligned new-build. AIM-listed commercial property firm London & Stamford has been dipping a toe in the residential market, buying up blocks of apartments in Arsenal and Battersea, attracted by the short-term yield and (much, I’m guessing) longer-term capital growth potential.
London & Stamford chose carefully, negotiating significant discounts on large acquisitions to factor in short term house price falls, and also picking properties likely to benefit from the corporate and overseas market.
Students pay more
Another place potential investors might want to look is the student sector. Figures from accomodationforstudents.com suggest average UK student rents have risen 4.3% so far this year; that’s almost three times the figure taken across the previous two years. University applications are at a record high, and with employment prospects a concern, applications are expected to stay high.
Lending – interestingly – is both hampering and supporting the sector. Landlords with minimal debt and moderate portfolios built early in the boom have more access to credit than much of their competition, and simultaneously profit from the supply shortage-driven rent increases which many trace back to the lending conditions.
Landlords with cash in the bank might see the second half of the year, potentially characterized by desperate vendors and distressed sales, as an opportunity to cherry-pick the properties with the best possible yields.
Fear takes hold
Cheap houses, low interest rates, a surplus of tenants… how bad can winter 2010 really get for landlords? And yet… the gloom… the doubling in the number of frightened landlords between January and July.
The reality is that recent Government policy announcements, dressed as they were in apocalyptic rhetoric, make all current indices and data – no matter how encouraging they’d normally appear – seem empty. Landlords, tenants, buyers, vendors are all startled into indecision, a profound collective wait-and-see with the summer holidays as the dividing line between the optimistic start of 2010 and the year’s austere end. Buyers, fearful of buying (or unable to borrow), hasten the property price drops they fear. Instead, they rent. But – fearful of job losses and tax rises – they’re demanding break clauses, adding to the jitters experienced by landlords already nervous about third- and fourth-quarter rent arrears.
How bad can it get? Like everybody else, wait and see.
24. sj032 said...
From my perspective str2007, if the man has looked at the economic landscape and observed that he can make a few quid here and there; if he enters into legal & voluntary contracts with other market participants with no under the table wheelings and dealings, then this man deserves any reward he receives. This is exactly the same spirit which makes capitalism possible. The landlord who wins is allowed to be smug, the one who losses will cry all the way back to his cardboard box.
25. Notyethomeless said...
sj032 @8 "no one is allowed to lose money anymore, and when they do, the government must compensate them for doing so. It called socialism"
I would have thought it is called some sort of distortion of capitalism? Within a socialist model, surely you (theoretically) get a narrowing of social classes via a redistribution of wealth, whereas what we are seeing is the transfer of risk and wealth to the speculators and capitalists (which, if you leveraged up your capital, you did both - i.e. Buy To Let with a mortgage) from society, present and future.
What's the word for stealing from the future to pay off the bad bets of the greedy 'present'? (ok, taxes, pensions...LOL) Is there one?
26. str 2007 said...
sjo32
If it was a free mrket I'd agree, but t isn't.
In my viw landlords are effectively creating their own market place by taking homes off the market.
They have (or at least the business model has) undoubtedly increased the cost of homes.
I'm afriad I just don't agree with the practice.
What makes it worse is that that it's not even a free market once you get past the restrictive planning laws.
The market has failed and yet is now being artificially supported.
27. sj032 said...
str2007.
quote:
If it was a free mrket I'd agree, but t isn't.
The market has failed and yet is now being artificially supported.
In my experience, left to itself, the free market rarely fails. My point is this however, the landlord is using free market, text book economics. He is blameless. From a purely economc sense, which i try always to think in, he has done no wrong. He has observed a profitable area of the economy which has acted as an incentive to enter the market; he has taken action legally and contractually to enter it in a civilised way, and has profited from it. Doubtless, if the polititicians and bankers had not tinkered with the money supply so much, then those incentives would not be so strong, and less houses would have been bought by LL's. But LL's are reacting to the incentives given to them by this distored market; they are not making those incentives.
28. sj032 said...
sometimes i don't know if i come across as clear as i would like, but i hope you understand the perspective i am conveying.
Today was my first true day of blogging. I rather enjoyed it to be honest. It's rare to find anyone in your life who shares these interests. Here I have a whole community full. God bless the internet
J
29. str 2007 said...
I fully understand where you're coming from & agree with your points, but I general landlords are a greedy self centred bunch IMO.
Just as an example, if I had a customer who spent £10,000 or so a year with me I'd send them a Christmas card and check everything was ok once in a while. I bet not many here have had a Christmas card from their landlord. Further, you really do get treated like a second class citizen when you go to rent a house with more checks than if you were buying it.
In sharp contrast we've had bottles of wine, welcome hampers and phone calls from holiday letters who's financial gain from us is a few hundred pounds.
30. jonny parker said...
@ Mark Wadsworh @ 4 - speaking about home ownerism and the normans did you see the program on the original manifesto recently. Repeated on BBC last night - was about the domesday - it transpires that was all about land ownerism, transferring the rights of land and the collecting rents and not about taxes. I think home ownerism is all part of humanism. Did this influence your post ;-) ?
31. techieman said...
Couldnt get on here last night. SLC - thanks for that the key is "The reality is that recent Government policy announcements, dressed as they were in apocalyptic rhetoric, make all current indices and data – no matter how encouraging they’d normally appear – seem empty." In other words the albeit recent numbers on prices / arrears / repos - are exactly that historic.
STR2007 - http://danericselliottwaves.blogspot.com/2009/08/p2-massive-grand-supercycle-backtest.html [some nice pics]
That will explain it - infact we are one degree up from the 1929 - 32 bear.
"Elliott Wave theory, as laid out by Robert Prechter, proposes that the 2000 [year] market top was a Grand Supercycle wave III top (in orange on chart) that stretched some 220+ year. It virtually aligns with the birth and rise of the United States. Within that Grand Supercycle wave III, there exists 5 subwaves of Supercycle degree (in purple on the charts). 1929 was the top of Supercycle Wave (III). After the Supercycle wave (IV) price low in 1932, a final Supercycle wave (V) impulsed upward in 5 subwaves of Cycle degree (blue)."
The theory states we are in grand supercycle wave a of an a-b-c down at that degree which when complete will finish grand supercycle wave IV.
Of course this wont all take 5 minutes, and EW is based on fractals - so at the current time we are in a "c" wave of that "a" wave. and in that c wave we have had 1 and 2 and now LOOK to be working 3.
Probably its best to take a quick look at the beginnig of Lara's video : http://www.elliottwaveforex.com/2010/08/12/spx500-elliott-wave-analysis-%E2%80%93-11th-august-2010-video/ - i.e. the monthly - and then she hones in on the daily and hourly.
Sorry if my remark was a bit confusing above - the point is that i am fixated on the daily and hourly counts in a basic context that its a bear market and to sell the rallies :).
32. str 2007 said...
Wow thanks for all that techieman - alot to take in.
Having a hectic one today as away next week.