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Dave Beans

The £200Bn Btl Timebomb

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In my opinion, that's a really solid piece. Drawn in primary colours, no doubt. City editor at the Daily Mail is the author. The Daily Mail's personal finance editor was the journalist behind the article speculating about buy-to-let investors (possibly) losing out if the tax treatment of the mortgage interest is changed. Basically the Hate Mail is putting the frighteners on BTL. Also, given the Mail's recent competition, the paper appears to also have a position on the appropriate price point at which BTLers will be hoping to exit - after all the Mail is literally giving it away, ;) .

Edited by bland unsight

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Anyone who has entered into BTL without considering the very basic caveats explained in this article, and taking appropriate precautions, deserves all that comes to them. End of.

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From the comments:

People scoffing at Greece need to be careful what they say - when you look at the Uk economy and the enormous amounts of debt and speculation it's built on, we may find ourselves in similar position within the next decade. Speculate and consume - using debt - has replaced design and manufacture. And the former is only sustainable as long as there's lots of cheap credit. Too many people in the UK have been spoiled by being able to borrow too much, too cheaply (this is known as usury) - and they think it will go on forever. It won't. And if you can't afford to cover any increase in your BTL mortgage, then it's a pretty good bet that your tenant can't afford any rent increase, isn't it? Maybe worth thinking about. LOL! What am I saying? Thinking rationally - this is the housing market!!!

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From the comments

As someone who worked PT has an estate agent during the boom-bust of the early 90's, I can assure you...BTL is a con-trick! Oh how the conservatives just love to jump on the property-owning bandwagon and "sell it" as some sort of No Fail Investment. It isn't. Owner occupied or BTL Landlords...should accept, it is an expensive millstone around the neck - insurance, maintenance, ups and downs of the economy: inflated prices and prices that drop through the floorboards. Overnight! When the fan becomes "afflicted"....the BTL Landlords will attempt to flood the market with UNWANTED albatross property, thereby bringing the rest down with them. It's happened before and will happen again. Never LEARN.

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Lots of noise around buy-to-let at the moment, and as the comments show plenty of people have not been taken in by the ridiculous bubble euphoria surrounding buy-to-let investment in retail property. The political risks for buy-to-let investors are evidently increasing. Game on.

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Just posted on the other BTL doom thread. I can't wait for it to happen ASAP.

What will trigger it though?

Reality.

More seriously, it could be a number of things and it needn't be anything.

It could be something straight out of the blue sky (e.g. Osborne could amend the tax treatment of the mortgage interest), it could be something technical (like the adjustment of the risk weightings applied under the Basel Committee on Banking Supervision), it could just be a Wylie Coyote moment (e.g. some indication from the most recent Nationwide data that prices have stalled, if some earlier entrants BTLers look to quit whilst they are ahead, we could be off to the races) or it could be a slow burn as the stock of people who could in principle buy-to-let is gradually exhausted with people discovering it's a money pit, my assumption would be that there is always churn through the BTL sector. The sector is basically a Ponzi scheme that hasn't blown up yet - when there aren't enough willing new entrants to cash out the people who want to leave, the scheme blows up.

The buy-to-let sector is a massive structural flaw in the crap, tottering pyramid that is UK property.

Edited by bland unsight

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I'm pretty certain something is in the works regarding clamping down on BTL. There has simply been too much in the media recently and BTL is so damaging and this is becoming more and more obvious and more and spoken about. Not sure if we will have an easter egg in the Budget or something in the Autumn Statement, but I do think something nasty lurks on the horizon for BTL.

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Hope so. Been a scourge on society for too long. I often think if much of it falls into the laws of unintended consequences. What was originally designed to make life easier for existing landlords has resulted in the masses getting in on the act.

The established (and establishment) rentiers do not normally like competition, or huge amounts of people being able to loaf around collecting money for doing nowt. After all, the rest of us might get the wrong idea about the value of working for them.

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Hmm....the problem is that if it's in the media it's probably wrong (for some reason which isn't especially obvious)

I'm not personally in favour of individual BTLs but am in favour of a professionally run private (as well as public) rented sector & would prefer the institutions played a much larger, long-term & ofc lower leveraged role in conjunction with much improved tenancy rights. An Englishman's rented home should be just as much a castle as his OO one.

Edited by R K

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Low interest rates have forced people to speculate and BTL appears an easy way to profit, buy a house, let it out take the rent and in about 10-20 years your capital has doubled. What could possible go wrong. Apart from the voids, the potential large maintenance costs etc.... BTL is full of leverage fools, and they are a sitting target for HMRC as the vast majority won't be declaring the income. The govt is getting desperate for money, taking these people to the cleaner will be relatively easy as you can't hide a house.

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More than two million people are now private landlords.

Can't wait to pick up one of those 2 million+ properties on the cheap TO LIVE IN.

Edited by Eddie_George

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Hmm....the problem is that if it's in the media it's probably wrong (for some reason which isn't especially obvious)

I'm not personally in favour of individual BTLs but am in favour of a professionally run private (as well as public) rented sector & would prefer the institutions played a much larger, long-term & ofc lower leveraged role in conjunction with much improved tenancy rights. An Englishman's rented home should be just as much a castle as his OO one.

The difference is that large institutional BTL tends to build rather than convert OO properties into BTL. This is what happens in Germany and why renting isn't a problem there. The problem in the UK is that the emphasis is on demand rather than supply. If you give tax breaks to companies that will build purpose built rental properties rather than giving tax breaks to all and sundry who can price FTBers out of previously OO properties then you have a part solution. The problem is "accidental" landlords and one man BTLers who aren't really running a business and probably aren't paying taxes. Ironically the big institutions could actually reform the whole PRS if the government allowed them to.

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Can't wait to pick up one of those 2 million+ properties on the cheap TO LIVE IN.

Oct 2014 (Telegraph) An army of two million private landlords now own and rent out five million properties, according to the report by mortgage lender Paragon. This means 18pc of households now rent from private landlords. And the proportion is growing, as investors continue to see property as a source of future income and profit. The Government's own figures suggest that by 2032, more than one in three properties will be owned by private landlords.

Then probably a stack more houses from inheritances owned-outright.. one HPC relocated a couple of years ago and reckoned something like 3 out of 5 of the houses he viewed were probate rentals.. inheritors going straight rental route rather than putting up for sale. Then second homes and holiday homes...

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Then probably a stack more houses from inheritances owned-outright.. one HPC relocated a couple of years ago and reckoned something like 3 out of 5 of the houses he viewed were probate rentals.. inheritors going straight rental route rather than putting up for sale. Then second homes and holiday homes...

More choice = lower prices! Even better. :)

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Lucy Roberts on HUTH this week

Property Investors can take advantage of a scheme called Housing Benefit

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Something from outside, is my guess. US Fed, China... maybe directly from the banks, but not from UK/Aussie politicians.

Hmm....the problem is that if it's in the media it's probably wrong (for some reason which isn't especially obvious)

I'm not personally in favour of individual BTLs but am in favour of a professionally run private (as well as public) rented sector & would prefer the institutions played a much larger, long-term & ofc lower leveraged role in conjunction with much improved tenancy rights. An Englishman's rented home should be just as much a castle as his OO one.

That's very nice of you.

I'm also in favour of creditors prevailing over debtors, when the market turn comes in, and values falling in line with the economy - and hpi hopers being found out.

The house of every one is to him as his castle and fortress, as well for his defence against injury and violence, as for his repose.

-Semayne’s case (1604)


The poorest man may in his cottage bid defiance to all the forces of the Crown. It may be frail – its roof may shake – the wind may blow through it – the storm may enter – the rain may enter – but the King of England cannot enter – all his force dares not cross the threshold of the ruined tenement.

1763
William Pitt, 1st Earl of Chatham

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The poorest man may in his cottage bid defiance to all the forces of the Crown. It may be frail – its roof may shake – the wind may blow through it – the storm may enter – the rain may enter – but the King of England cannot enter – all his force dares not cross the threshold of the ruined tenement.

Except landlord better pay for repairs / improvements.

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More choice = lower prices! Even better. :)

Something has to come along to break the stranglehold / complacency. 5m+ and even expectations for 1/3rd homes to be rented...

Reminds me of the early 70's when I had reason to drive onto the oil refinery down near the LA Harbor. At the guard gate the oil company had a poster that said “He who controls the supply controls the demand”. This was only a score or so months before the oil crises. And now here we are with crap shacks you could have bought in that day for low low five figures going for near or above a million. Go figure.

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The poorest man may in his cottage bid defiance to all the forces of the Crown. It may be frail – its roof may shake – the wind may blow through it – the storm may enter – the rain may enter – but the King of England cannot enter – all his force dares not cross the threshold of the ruined tenement.

Except landlord better pay for repairs / improvements.

I think you posted some historic (Edwardian, was it?) information awhile back on landlords selling-up en masse and the properties often being sold at a fraction of their earlier cost to the sitting tenants. History does not move in a straight line, but in circles...

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I think you posted some historic (Edwardian, was it?) information awhile back on landlords selling-up en masse and the properties often being sold at a fraction of their earlier cost to the sitting tenants. History does not move in a straight line, but in circles...

It was FreeTrader.. mix of Edwardian info 1901 to 1910(or 14) - and later 20s and 30s building boom.

There was a report that suggested a lot of Edwardian stock was built via investor/landlord money for rents, but I'm not too sure of the actual position.

FreeTrader recently stepped in (and his view is my view too) to counter a recent news-article suggesting the 1920s and 30s (post Edwardian) was mostly all an investor/landlord building boom.... when in my reading it was the growth of the private-buyer via the Building Societies. Backed up by tales passed down from my own family in North Manchester how they got opportunity to buy a home via mortgage from building societies (and bought their own terraces in 20s and 30s).

FT's suggestion/report suggesting landlords had to sell for low prices in 20s-30s too (maybe Edwardian/Victorian stock they owned too, in a market change, to owner occupiers via building society mortgages?)

Telegraph: The golden generation of home ownership - an exception not the rule.

By Danny Dorling

8:00PM BST 27 Apr 2015

From the article:

"Britain in the Twenties and Thirties was a country in which the population was still coming off the land. Most housebuilding in rapidly expanding cities was carried out by speculative investors for landlords, or by landlords themselves. In most cases, wages were too low to allow people to do anything but rent."

This conflicts with an academic paper I have on my hard drive:

George Speight: "Who bought the inter-war semi? The socio-economic characteristics of new house buyers in the 1930s".

University of Oxford: Discussion Papers in Economic and Social History, Number 38, December 2000.

From that paper (my emphasis):

"The interwar period saw very high levels of private house-building. Private enterprise built 2.88 million houses, compared to a stock of 7.9 million outstanding in 1919. This high level – which was concentrated in the years 1933 to 1938 – was an important episode in Britain’s economic and social development. During the 1930s, house-building accounted for a much higher proportion of GDP than it had during any previous period, and the sharp increase in house-building in 1933 and 1934 was central to the country’s recovery from recession. [...] And since the vast majority of the new privately-built houses were for owner-occupation rather than for letting (due to the decline of investment in property for letting and the readiness of building societies to supply finance on generous terms), the house-building boom led to a significant increase in the incidence of owner-occupation."

And from the conclusion (BTL investors beware):

"But if one is interested in the spread of owner-occupation per se, it is necessary to consider not only the two million plus houses built in the interwar period for owner-occupation, but also the large number of houses – estimated to be in excess of one million – transferred out of the privately-rented sector by sale to owner-occupiers. In a large proportion of these cases, landlords sold their properties in response to the low returns imposed on them by the rent restriction legislation. (Conversely, they were concentrated in the 1920s.) In many cases they could only realise low prices for their properties, and they often sold to the sitting tenants."

Source below for Edwardian: zoopla (page not available on net last time I looked - got a page-save of it.)

My confusion with what I've read about Edwardian is.... why would an investor/landlord backed building boom, and the Edwardian period was a huge building stock boom, produce so many lovely nice houses, with all the detail and character and charm, if it were "just for tenants" ?

Unless tenants were in a market position where landlords had to be good landlords.. offer nice housing via landlord competition for housing/rents/tenants in a growing economy... and maybe a bit more genuine goodwill to all-people in the air, rather than today's newbuild slaveboxes.

At a guess, I'd say Edwardian was a mix of OO buyers and landlords building boom. I've not read any paper which offers reliable guidance. Yet I do know finance was tighter in Edwardian period... before the introduction of the building societies, so it would make a certain sense if it were an investor led building boom (+ maybe then middle classes finding finance to be OO).

When Was The Edwardian Period? Edward VII reigned from 1901 to 1910, but the Edwardian period is generally extended to the outbreak of the First World War in 1914. Edward’s reign was short but influential. The atmosphere of the period was influenced by the king and his love of the good life, which contrasted sharply with the puritanical values of the Victorian ideal. This short era saw a huge housing boom as suburbs sprung up around every city and large town.

The new middle classes wanted affordable, manageable-sized homes within commuting distance of their work, and they flocked to the outskirts. But the suburbs did not ape the architecture of Victorian town centres. The new housing was modeled more on traditional country building, using local materials and skills, and simple designs. With a variety of designs on homes that ranged from small terraces to semis and large detached villas, the Edwardian suburbs were planned to suggest a naturally evolved village.

What Are Edwardian Houses Like? Edwardian architecture ranges from housing indistinguishable from the high Victorian ideal, to the romantic Queen Anne and the Arts and Crafts movement that led to the suburban cottage-style estates. But much of the architecture of the early 20th century was ground breaking and, according to Albert Jackson, author of the Collins Complete Period House, the Edwardians would have considered themselves to be relatively sophisticated, compared to the overly ornate fashions of the previous era.

[..]The Semis. An Englishman’s home is said to be his castle. And it was at this point that builders began to answer the demands for a bit more privacy and land from people who couldn’t afford a detached house. Each pair of Edwardian semis was, in some way unique, with different detailing in, for example, the half timbering, or the stained glass. The new semis appealed to architects who could produce houses in an English vernacular more easily with a broader frontage, and could move away from the dark layout of the Victorian terrace. And semis were popular with builders too, who realised that attached properties could be sold at a premium.

[..]Externally, even in modest homes, the influence of the Arts and Crafts movement is often noticeable, with some terraces faced with a more ‘cottagey’ red brick, and roofs tiled with the more rustic clay plain tiles. Plain sash windows were sometimes now relegated to back windows, and casement windows, or rural-style multi-paned sashes, were introduced at the front. And then there’s the painted woodwork. Increased mechanization and cheap labour had allowed even quite ordinary Edwardian terraces to benefit from an elaborate trim. Many modest homes particularly in coastal towns have a good deal of woodwork framing the porches and complex glazing bars on windows. Larger houses may have balconies or verandas screened with ornate wooden balustrades. And tiling was very popular, appearing in entrance halls, on front paths, and as external decoration on the walls of porches, again reflecting Art Nouveau or neo-Georgian designs.

..Alan Johnson says it is important to understand that majority of the Edwardian housing stock, even the grand villas, was built by speculators to be sold to investors and rented out. "To catch the eye the street elevation got the finest treatment, whether it’s in the wood detailing or the bricks that were used.” So, if you’re house hunting, take a look around the back. The beautiful brickwork or fine features are likely to be limited to the façade.

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I'm pretty certain something is in the works regarding clamping down on BTL. There has simply been too much in the media recently and BTL is so damaging and this is becoming more and more obvious and more and spoken about. Not sure if we will have an easter egg in the Budget or something in the Autumn Statement, but I do think something nasty lurks on the horizon for BTL.

Yup Agree

They always feed little bits of ideas out at a time so when the truth comes out it is not so much of a surprise.

One idea of only paying a percentage of the housing benefit to the claimant so it encourages them to shop around for a more better rent deal could be a runner, we will all see soon,

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