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frederico

CML landlord survey

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So the CML are using some research by LSE to come to the conclusion that BTL is fine, nothing to see.

https://www.cml.org.uk/news/press-releases/cml-research-survey-of-uk-landlords/

The directors comments were interesting.

Quote

While the overall findings are encouraging and offer a reassuring picture of relative stability, there is a certain irony in the researchers' conclusions that the landlords who will be most affected by the government's tax changes are those at the most professional end of the sector - those with large, leveraged portfolios.

These landlords will be particularly hard hit by the changes in the treatment of mortgage interest and may choose to divest or moderate their property holdings. Given the government's longstanding interest in professionalising the sector, policymakers will need to be closely attuned to the risk of unintended consequences and, indeed, own goals

I had a quick look at the actual research paper they have plucked their nuggets from.

Now the author's do their best to confuse the whole thing, however I drew some key points.

Note there is a not too subtle difference between the terms 'landlord' 'BTL' and 'dwelling' 

So:

60% of landlords own a single property.

7% own 5 or more, these own 40% of all rental dwellings.

50% of all properties use a BTL mortgage.

36% of landlords concerned about tax changes. Slightly more intend to sell than buy.

Majority of dwellings backed by a loan.

Most landlords have no loan.

So most landlords will not care too much about tax changes but this will encompass only about a half of all rental properties.

So I see a massive change as at least 40% of the market will probably struggle to break even.

What the landlords with no loans feel about depreciation remains to be seen.

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What they feel about depreciation will depend on why they bought it and what happens to interest rates. 

I know of 2 who bought for cash - one small property each - for income, rather than capital appreciation.  One of them (pushing 80 now) never had any kids so he doesn't much care about capital appreciation, just the extra income.  He has had the same tenant from the beginning, over 10 years now. 

Unless IRs rise enough that they would get more from sticking the money in a deposit account, I can't see either of these selling up. 

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33 minutes ago, Mrs Bear said:

What they feel about depreciation will depend on why they bought it and what happens to interest rates. 

I know of 2 who bought for cash - one small property each - for income, rather than capital appreciation.  One of them (pushing 80 now) never had any kids so he doesn't much care about capital appreciation, just the extra income.  He has had the same tenant from the beginning, over 10 years now. 

Unless IRs rise enough that they would get more from sticking the money in a deposit account, I can't see either of these selling up. 

No they won't, but rents will drop and so will prices, they probably won't care or even admit it to themselves.

It's the 7% that own 40% of property that matter.

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43 minutes ago, Mrs Bear said:

What they feel about depreciation will depend on why they bought it and what happens to interest rates. 

I know of 2 who bought for cash - one small property each - for income, rather than capital appreciation.  One of them (pushing 80 now) never had any kids so he doesn't much care about capital appreciation, just the extra income.  He has had the same tenant from the beginning, over 10 years now. 

Unless IRs rise enough that they would get more from sticking the money in a deposit account, I can't see either of these selling up. 

Because of course there are only two possible investable assets ON EARTH.

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1 hour ago, Mrs Bear said:

What they feel about depreciation will depend on why they bought it and what happens to interest rates. 

I know of 2 who bought for cash - one small property each - for income, rather than capital appreciation.  One of them (pushing 80 now) never had any kids so he doesn't much care about capital appreciation, just the extra income.  He has had the same tenant from the beginning, over 10 years now. 

Unless IRs rise enough that they would get more from sticking the money in a deposit account, I can't see either of these selling up. 

I can.

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23 minutes ago, frederico said:

It's the 7% that own 40% of property that matter.

“Shifting investor sentiment about future gains in the housing market has contributed to the fall in cash buyers... Investors make up more than a quarter of cash buyers and their activity is far more erratic as it is driven by commercial returns,”

http://www.mansionglobal.com/articles/49179-cash-is-no-longer-king-in-u-k-housing-market

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1 hour ago, wish I could afford one said:

So to be a professional these days you need to be heavily leveraged with large amounts of debt.  If that's the case I'm glad I'm an amateur.

These plucky entrepreneurs really do put the DEBT into DEBT Britain.

 

And they're going to lose everything, and more.

 

 

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53 minutes ago, TheCountOfNowhere said:

I can.

That's what booms and busts are made of. People chasing last year's returns and then running away.

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2 hours ago, wish I could afford one said:

So to be a professional these days you need to be heavily leveraged with large amounts of debt.  If that's the case I'm glad I'm an amateur.

"Professional" LL with high leverage is practically an oxymoron:D

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1 hour ago, hi5lo5 said:

50% of all properties use a BTL mortgage.

that figure is certainly wrong. Does it include the properties that are let using Consent to let ? 

From the report:

Quote

The survey covered 2,517 private landlords across the UK, who owned a total of 5,627 rented dwellings. Some 34% of landlords had at least one Buy-to-Let mortgage (hereafter called BTL landlords); in terms of dwellings, 47% of the rented properties in the survey were backed by a BTL mortgage, and a further 16% by some other type of loan (commercial mortgage or ‘consent to let’). This is fairly consistent with the findings of the 2010 Private Landlords Survey, which found that landlords had used a mortgage (though not necessarily a BTL mortgage) to acquire 56% of PRS dwellings.

(Emphasis added.)

Note that the rented properties in the survey are not representative of the PRS as the PRS includes both individual private landlords (who would be registered on the on-line panels that were surveyed and who were the 'target population' of the survey) and companies (who wouldn't be on the on-line panels and were not intended to be captured by the survey).

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  Quote

"While the overall findings are encouraging and offer a reassuring picture of relative stability, there is a certain irony in the researchers' conclusions that the landlords who will be most affected by the government's tax changes are those at the most professional end of the sector - those with large, leveraged portfolios.

These landlords will be particularly hard hit by the changes in the treatment of mortgage interest and may choose to divest or moderate their property holdings. Given the government's longstanding interest in professionalising the sector, policymakers will need to be closely attuned to the risk of unintended consequences and, indeed, own goals"

This quote at the end is priceless and exposes the authors as idiots.

The assumption that those with 'large, leveraged portfolios' are in any way professional businesspeople and not actually debt-junkie chancers.

Their own data undermines their conclusion.  From recall in that report, about a third of BTLers don't know what their current yield is.  Another third I suspect have calculated it wrongly.  Two thirds have little, weak, or no knowledge of forthcoming tax changes.  A third have their properties FULLY managed by an agent.  They never ever see the tenants.  They might never even have seen the properties!

This is not a professional industry.  Just hundreds of thousands of mug punters signing forms they don't understand.

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IMO the first BTL distress will trickle in in Jan when one or two with greater than 75% LTV have to remortgage. They will find they have to pay a higher rate of interest.

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2 hours ago, Bland Unsight said:

From the report:

(Emphasis added.)

Note that the rented properties in the survey are not representative of the PRS as the PRS includes both individual private landlords (who would be registered on the on-line panels that were surveyed and who were the 'target population' of the survey) and companies (who wouldn't be on the on-line panels and were not intended to be captured by the survey).

So thats 63% of properties with commercial mortgage/ consent to let. According to the LL's valuation(unlike the below market rental valuation) over 4% of the properties are having a LTV of 80% and above. I assume this figure is much higher in reality. Even by their own valuations 24% of the BTL properties are having  > 60% LTV.  Sums doesn't add up. Why?

The people who produced this report were cited in Telegraph in may.

http://www.telegraph.co.uk/investing/buy-to-let/buy-to-let-tax-will-push-up-the-rents-of-sitting-tenants-says-lo/

 

Edited by hi5lo5

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6 hours ago, TheCountOfNowhere said:

I can.

Well yes.

Im not sure about the stats but you expect 50% of the over 60 to be dead in ~10 years time.

I guess the numbers will be ~80% of the 80+ group.

I keep saying this, but its true.

'Im not giving it away' they say in Scarborough. Right up til they are carried out in a box.

 

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2 hours ago, lastlaugh said:

From recall in that report, about a third of BTLers don't know what their current yield is.  Another third I suspect have calculated it wrongly. 

The CML apparently doesn't understand the capacities of their lenders' customers well enough to design / commission a survey that they're actually capable of answering accurately, which in and of itself severely undermines the credibility of any assertions the CML wants to make over said customers quality or likely behaviour in any given scenario.

CMLselfreporting.jpg

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52 minutes ago, spyguy said:

Well yes.

Im not sure about the stats but you expect 50% of the over 60 to be dead in ~10 years time.

I guess the numbers will be ~80% of the 80+ group.

I keep saying this, but its true.

'Im not giving it away' they say in Scarborough. Right up til they are carried out in a box.

 

I am also not sure about the stats but it's closer to 5% of over-60s dead in ~10y time.  Certainly not 50%

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1 minute ago, Bear Hug said:

I am also not sure about the stats but it's closer to 5% of over-60s dead in ~10y time.  Certainly not 50%

No. The over 60s covers people from 60 to the day they are dead.

Average life expectancy is 85ish.

10 years on, that 60 yo will be 70. The 70 yo 90. The 80 yo - probably dead.

 

 

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5 minutes ago, Bear Hug said:

I am also not sure about the stats but it's closer to 5% of over-60s dead in ~10y time.  Certainly not 50%

5% of 60 yo dead in 10 years time, yes. 50% of people over 60 dead in 10 years time.

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