Jump to content
House Price Crash Forum
pipllman

All Is Well For Btl, Paragon Says So

Recommended Posts

Paragon PRS Trends Q3 2015

The full report has some charts etc. but I pasted the summary and the section about the response to the proposed budget changes here

http://www.paragon-group.co.uk/file_source/Files/MAIN/pdf/PRS%20Reports/PRS%20Trends%20Q3%202015.pdf

"Paragon Mortgages latest PRS (Private Rented Sector) trends data report paints a picture of a stable market. Yields have seen modest improvements and void periods, the average amount of time PRS properties spend unoccupied, are at historic lows.

More than half of those landlords surveyed report steady tenant demand over the quarter, while 40% said tenant demand was either ‘growing’ or ‘booming’. The percentage of respondents expecting tenant demand to remain stable over the coming 12 months, or grow, has also increased from 85% to 89%.

The latest data also shows that average yields have grown over the last three months from 6.3% to 6.4%. This improvement is in line with steady growth seen throughout 2015. In another key indicator of confidence that the PRS market will remain stable, landlords indicated that they expect yields to remain stable and maintain current levels over the coming 12 months.

On the direct question of whether or not landlords intend to purchase properties over the coming 12 months, the figures again show a steady market, and a slight increase in optimism. Those intending to buy are up from 16.8% to 18.4%. Reflecting the overall stability of the market, however, landlords on average expect the number of PRS properties in their portfolio to be the same as they are currently in 12 months’ time.

Void periods remain historically low at just below 2.6 weeks. This could be a reflection of the changing demographics of those choosing to live in the PRS. The most recent data shows an increase in the numbers of families with children moving into the PRS, and a corresponding decrease in young couples without children and single professionals.

But despite the changing makeup of the tenant population, demand for longer-term rental agreements remains relatively low. These demographic changes also appear to be reflected in the on-going buying intentions of landlords who are investing more in traditional family housing.

On the question of how landlords view their portfolios compared with three months ago, levels have remained stable throughout 2015 and continue to do so in the latest data. Those feeling a little more optimistic are up by 1.6% and a majority (58%) report that optimism levels are unchanged since the last quarter.

So, in all, this quarter’s results present a picture of a PRS sector that is neither booming nor contracting, but rather growing steadily. There is room for improvement and it will be interesting to see, in future reports, if macroeconomic concerns about the stock market and the Eurozone, and changes in tax and regulation such as those recently announced by the Chancellor, have an impact on sentiment. For the time being however, landlords are seeing steady growth and they expect to see this continue as demand for quality PRS accommodation remains buoyant. "

Specifically on the tax changes, the survey said

"INCOME TAX RELIEF CHANGES

In July the Chancellor announced that in future, tax relief on buy-to-let mortgages would only be available at the basic rate of 20%.

We asked landlords what impact this would have on their portfolio strategies. While more than half (47%) of landlords indicated that they wouldn’t be making any changes to their portfolios as a result of income tax changes, a significant 31% said they may buy fewer, or no further properties as a result of the changes. A further 18% indicated that they would consider selling some properties. In terms of managing the extra costs incurred as a result of the income tax changes, 71% of landlords indicated that they would increase rents to compensate for increased costs, while 14% said they would seek to recoup the full increase in costs through higher rents. "

Edited by pipllman

Share this post


Link to post
Share on other sites

>While more than half (47%) of landlords

Hmmm....

>71% of landlords indicated that they would increase rents to compensate for increased costs, while 14% said they would seek to recoup the full increase in costs through higher rents.

Hmmm....

Share this post


Link to post
Share on other sites

Am I on 118 or PropertyTribes with these topic titles and landlord positive spinning headlines?

Here's another you posted. Still going to hold on to all your rental properties Pipllman?

Nationwide Isn't Bothered By The Budget Changes
Started by pipllman, Sep 17 2015 10:09 PM

Here's one reply which sums it up. We're cynical on hpc and don't just lap it up. Especially not surveys from BTLers/Landlords, many who are so busy living-it-up that they don't even know about the changes ahead, and think tenants will shoulder it all. And when they do have less money to spend in economy if rents go up, it leads to weakness/job losses/ closures elsewhere. Note, it will be part of wider deleveraging. Who are so busy considering themselves 'fragrant' with all their BTLs, and laughing how their tenants are angry and bitter.

In other news, when the tw@ts at Nationwide openly turn their back on their BTL baby, then it will be too late to Sell Now, Sell Everything. Hence their willingness to suck in some more dumb money is basically an invitation to anyone with a whit of sense to sell everything now.

Share this post


Link to post
Share on other sites

>Venger

Strangely enough, the PT post on the same report (by dislexic_landlord) went like this

"I must live in a different world what do you think"

It is post 247 on this thread

http://www.propertytribes.com/landlord-tax-changes-join-share-our-action-plan-t-127621827-31.html

Anyway, I post these things merely as a matter of interest, not because I agree with them (or not). They are simply fuel for the debate. It doesn't take much working out that a Paragon press release is probably only slightly less biased than a Richard Dyson article.

And, yes, I am still going to hold onto all of my rental properties for the reasons I have already outlined here numerous times.

Share this post


Link to post
Share on other sites

Obviously the good people at Paragon are fine upstanding members of the business community and as an isolated atom, which is the only reasonable analysis of their actions, are operating a business in good faith and within the law. They borrow money from banks, lend it to an investor market and then package those loans and sell them to other investors. If there are investors who want to buy, then meeting that demand must be a good thing, for sure.

However, if you were to make your fee income by directing naive investors into a potential risky investment and not take any material equity in that same investment yourself...

The open question is whether or not UK housing in 2015 is investment history's first ever one-way proposition or not.

Share this post


Link to post
Share on other sites

Didn't see this posted here. Apologies if it's old news to HPC. Sounds like those good people at Paragon are starting to squeal. The data is all wrong, BTL is being misrepresented by dodgy numbers. It's all fine, just fix the figures and let us get on with it.

Paragon has asserted that the government and the Bank of England is using fallible data to justify its multi-pronged lending limits on landlords.

According to a Times report, Nigel Terrington, the chief executive of Paragon, challenged assertions made by the government over the danger to the economy posed by buy-to-let lending. He also called for better data to be used as to direct impending policy changes that could choke further growth of the sector.

He said a key point in the Bank’s financial stability report last month, that buy-to-let losses have been about twice the level of owner-occupier losses, was flawed. He said the data it used mixed second-charge mortgages, which have a far higher arrears rate, with buy-to-let, skewing the data.

For an industry publication the comments (all two of them) are interesting. Sentiment.

http://www.mortgagesolutions.co.uk/news/2016-01-11-boe-enlisting-faulty-data-to-demonise-landlords-says-paragon/

Share this post


Link to post
Share on other sites

Paragon are the financial equivalent of Inside Track, the BTL training company that went pop in the crisis.

Paragon is has a doomed business model and will probably wither and die as soon as there is a downturn.

Share this post


Link to post
Share on other sites

Paragon are the financial equivalent of Inside Track, the BTL training company that went pop in the crisis.

Paragon is has a doomed business model and will probably wither and die as soon as there is a downturn.

I know Paragon will die.

I don't know *how* Paragon will die or how dramatic and messy it'll be.

My gut feeling is, like all business built on securtisation (PubCos, etc), the finance model does not work like they think it works.

I'd guess that some sort of bottomless financial void will open up and suck all their BTLers asset into it.

Share this post


Link to post
Share on other sites

Circa 2007: Man from the Northern Rock says there is nothing to worry about :lol:

When a lender comes out and tells you everything is fine, IMHO, it's time to worry

Edited by TheCountOfNowhere

Share this post


Link to post
Share on other sites

Didn't see this posted here. Apologies if it's old news to HPC. Sounds like those good people at Paragon are starting to squeal. The data is all wrong, BTL is being misrepresented by dodgy numbers. It's all fine, just fix the figures and let us get on with it.

For an industry publication the comments (all two of them) are interesting. Sentiment.

http://www.mortgagesolutions.co.uk/news/2016-01-11-boe-enlisting-faulty-data-to-demonise-landlords-says-paragon/

The data really is 'wrong', since all historical data is contaminated by the bailouts.

If we use historical data to estimate the risk of BTL, then all we have calculated is the risk of BTL given that it'll be saved by the government should anything go wrong.

Obviously, that's a much lower risk. Moral hazard is built into the data.

Share this post


Link to post
Share on other sites

And in other news, turkeys are reported to be looking forward to next Christmas.......

Share this post


Link to post
Share on other sites

Didn't see this posted here. Apologies if it's old news to HPC. Sounds like those good people at Paragon are starting to squeal. The data is all wrong, BTL is being misrepresented by dodgy numbers. It's all fine, just fix the figures and let us get on with it.

For an industry publication the comments (all two of them) are interesting. Sentiment.

http://www.mortgagesolutions.co.uk/news/2016-01-11-boe-enlisting-faulty-data-to-demonise-landlords-says-paragon/

Both comments are good, although both commentators have posted on here in the past.

Share this post


Link to post
Share on other sites

The problem is no distinction appears to be being made between the PRS and BtL

The PRS is probably OK (global events may disagree !). Certainly the government has zero intention of crashing it. On the other hand they do seem pretty keen to throw amateur BTL (i.e. Paragon members?) overboard to stay afloat.

Share this post


Link to post
Share on other sites

Question is can BTL escape these new taxes osbourne is bringing by setting up as a company?

Probably...but then you have a whole lot of other taxation/accounting issues.

I'd have already sold by now and cashed in from the QE magic reoovery.

Share this post


Link to post
Share on other sites

Didn't see this posted here. Apologies if it's old news to HPC. Sounds like those good people at Paragon are starting to squeal. The data is all wrong, BTL is being misrepresented by dodgy numbers. It's all fine, just fix the figures and let us get on with it.

I'm actually developing a begrudging respect for John Heron at Paragon, as he appears to have worked through denial, anger and bargaining in short order and moved onto acceptance, (at least with regard to his customers' futures he is moving on at a clip, he remains perhaps a little too optimistic about his bank's future, a matter to which the stock market continues to speak with admirable clarity).

The below quotes are from John Heron and are taken from the a Mortgage Strategy cover story appearing today, Die-to-let: Will the Chancellor’s B2L policies have unintended consequences?

On the effect of the changes to the taxation of mortgage interest, (emphasis added).

I think it is inevitable that there will be more investment through limited companies – particularly for landlords with larger holdings. I can’t foresee the medium-scale landlord persisting in investing in their own name.

And on FPC concerns about the buy-to-let sector, (emphasis added).

Broadly, the Bank of England argues that buy-to-let could be a threat to financial stability because of credit standards in the sector – although they have been clear that they haven’t seen evidence that credit standards are particularly weak in the sector and, not so long ago, they said they saw no reason for intervention in the short term.

The second strand of their argument is a little more difficult. It is about landlords being a threat to financial stability because they will aggressively buy properties in an upswing and aggressively sell in a downswing. As a result of that, they would magnify movements and volatility in the housing market.
Now, while I can understand the argument, there was no evidence in previous economic cycles that that had been the case. In fact, what you see is that landlords have maintained their portfolios rather than sold to a weak market. Although you can see where the concern comes from, it is not supported by strong evidence.

That's big talk from a man who's employer lent to that sector before 2008 and then stopped lending altogether for four years shortly thereafter. :D (£375bn of QE and SLS measures backing borrowings by banks of nigh on £200bn have not ordinarily formed part of "previous economic cycles". Despite these interventions a shitty BTL book killed Bradford & Bingley and Britannia's BTL book gives every appearance of treating the Co-op bank to a near death experience. Hence, Heron's assessment may be judged as unduly sanguine. Mind you, given what 2008 would have done to any share options or Paragon stock Heron held, it is a testament to his character that he can get out of bed in the morning at all, much less keep ardently pimping tawdry buy-to-let mortgages to mug investors.)

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • Next General Election   91 members have voted

    1. 1. When do you predict the next general election will be held?


      • 2019
      • 2020
      • 2021
      • 2022

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.