Saturday, Jul 22, 2017

Warning of the impending BTL bubble burst

Telegraph: The buy-to-let stampede begins:

Buy-to-let investors now face tougher conditions. A weakening housing market, tough new legislation and the tightening of affordability checks by lenders are but a few problems causing landlords to run for the hills

Posted by wdbeast @ 08:25 AM (6662 views) Add Comment


1. quiet guy said...

"After spending almost 30 years building his portfolio, Mr Cook is now prepared to have to spend almost as long performing an orderly sell-off"

Now that's what I call an illiquid asset.

I'm surprised they're publishing comments which are generally negative towards BTL. Politicians should take note; they may be able to tax BTL while gaining electoral approval.

That said, there's a pro-BTL gem from 'Ranty Ros' at 23 Jul 2017 9:39AM:
"If the buy-to-let properties have to be sold, they will no longer be available to rent; the tenants will all have to be evicted, and the properties will disappear just as surely as the BTL landlords created them in the first place."


Sunday, July 23, 2017 01:12PM Report Comment

2. icarus said...

Article is mainly about the guy spending a decade or more on his orderly sell-off. Hardly a stampede.

Sunday, July 23, 2017 02:50PM Report Comment

3. icarus said...

No mention here of Fergus and Judith. Haven't they spent a decade trying to sell the lot in one go? No stampede there either.

Sunday, July 23, 2017 07:15PM Report Comment

4. britishblue said...

All big tankers take time to turn around and the housing market has defied expectations for years. But the single biggest change for me is that both sale prices and rent prices are simultaneously dropping in London, rents by quite a significant amount and nobody really saw that coming. The propaganda that most believed was if BTL had costs increased they would simply pass these on. If we couple this with more onerous tax regime on buy to let, Brexit, huge increases on stamp duty,less Russian and Middle East buying and the youth having given up on home ownership, maybe we are in for a time where the tanker turns by fractions of an angle and many people don't see what is happening.

Sunday, July 23, 2017 07:35PM Report Comment

5. icarus said...

Hope you're right bb but it's worth a look at

It shows residential affordability in major cities around the world, measured as the ratio between median house price and median income (but not controlling for any other factor like house/flat size and quality). Most unaffordable is Hong Kong (ratio of 18.1) followed by Sydney and Vancouver around the 12 mark. Around the 9-10 mark are Melbourne, LA, San Francisco, San Diego and London (London is under 9, a bit less than the 8.9 of Bournemouth & Dorset. So the question is how high can the ratio go? (London is relatively expensive but has a relatively high median income too).

Cities where residential land availability is constrained (whether by lakes and mountains etc. or by zoning restrictions or green belts) are the generally the least affordable (see figure 4). One of the reasons for the affordability of housing in Germany and Switzerland is that city councillors and planners have incentives to release land for housing since city income depends more there than elsewhere on local taxation - more housing equals bigger city coffers. To what extent does a fall in London prices depend on the freeing up of land and overcoming the NIMBYs and other groups who want to keep prices high?

Sunday, July 23, 2017 08:32PM Report Comment

6. jack c said...

britishblue - Sunday, July 23, 2017 07:35PM

"All big tankers" - do I detect another reference to Furgus?

Monday, July 24, 2017 09:09AM Report Comment

7. nickb said...

Interesting report. Curiously it cites a UBS ranking putting London as city #2 globally in terms of property bubble risk. So I'm wondering why it is not ranked lower there. Also curiously, it blames unaffordability in the UK on land use planning restrictions, despite the fact that those have been in place since at least 1947! Whereas the multiple of median price to meadian earnings was was an affordable 3.0 until 2000. Not much mention of credit conditions.

Wednesday, July 26, 2017 05:54PM Report Comment

8. tenyearstogetmymoneyback said...

britishblue wrote

The propaganda that most believed was if BTL had costs increased they would simply pass these on.

About ten years ago I knew a BTL landlord who used to say it was very difficult to rent out a house for over £1000 a month.
Quite simply if people can't afford it they can't afford it and will have to move.

Bournemouth (just down the road from here) is a bit of a special case as it is full of Retirees who come from London
and are amazed that they can buy a Detached Bungalow for £500K.

Finally regarding NickBs comment there has been a surprising number of new starts near here. The latest proposal is for 940 houses on a Green Field site between Christchurch and the railway (presumably just outside of the Green Belt.

Friday, July 28, 2017 08:08PM Report Comment

9. icarus said...

nickb - the report compares big ('global') cities rather than countries (ref. your 'unaffordability of the UK'). And those planning restrictions are open to local interpretation and appeal - hence the argument that in Germany and Switzerland local councils and planners have incentives to be lenient with their zoning powers and that residential property is therefore affordable.. The report looks mainly at the big picture of cities around the world and purports to show a strong link between residential land availability and affordability.

Sunday, July 30, 2017 02:52PM Report Comment

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