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dryrot

The Economist: Britain’s buy-to-let boom is coming to an end

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Hi

Good article. I'm a subscriber (for the 12-week- £1 a week offer, which they seem to renew immediately!) But anyone is allowed up to 3 articles a week

https://www.economist.com/news/britain/21732481-new-regulations-and-cooler-market-are-causing-landlords-sell-up-britains-buy-let-boom?cid1=cust/ddnew/email/n/n/20171212n/owned/n/n/ddnew/n/n/n/nUK/Daily_Dispatch/email&etear=dailydispatch

NICKNAMED “God” by his fans, Robbie Fowler scored 183 goals for Liverpool Football Club. But his career as a property magnate may have been even more successful. As he banged in the goals, fans chanted, to the tune of “Yellow Submarine”, “We all live in a Robbie Fowler house.” Mr Fowler has since hung up his boots and is now the face of the Robbie Fowler Property Academy, which offers seminars on how to make it big in the housing business. With what is believed to be a portfolio of over 50 houses, his fortune may run into the tens of millions of pounds.  Plenty of Britons want to emulate Mr Fowler. In the past two decades they have piled into the “buy-to-let” market, acquiring homes in order to rent them out. These days around one in every 30 adult Britons—and one in four members of Parliament—is a landlord. Roughly a third of them are retired, many having turned to the property market as the returns on their savings dwindled. The rent from buy-to-let properties, which we estimate at £55bn-65bn ($73bn-87bn) a year, is roughly equivalent to the annual salary bill for the financial and insurance industries, in which over 1m people work.

The buy-to-let phenomenon got going in 1996, with the introduction of mortgages which no longer required the borrower to live in the house they were buying, says Lawrence Bowles of Savills, a property firm. The years since then have seen frenzied growth (see chart). Investing in the housing market has seemed like a one-way bet, with prices trending upwards in real terms for four decades, mainly because government after government has failed to loosen planning restrictions on building new houses. Now, however, there are signs that regulatory changes have begun to send the buy-to-let boom into reverse. That is bad news for Mr Fowler’s disciples, but there could be benefits, too.

[..]

At a recent seminar of the Robbie Fowler Property Academy, held in a nondescript hotel in London, the mood remained upbeat. Mr Fowler claims in a promotional video that, “It doesn’t matter what state the market’s in—there’s always money to be made.” Yet few are so optimistic. In the third quarter of 2017 new buy-to-let lending for house purchases was around 15% below the average of the past five years. Research from Savills suggests that, for the first time, landlords may be selling up in large numbers.

[..]

It might also cheer up would-be homeowners. Buy-to-letters sometimes compete with first-time buyers for property—and they often win that contest, since they tend to have bigger incomes. Lately the buy-to-let boom has been correlated with galloping house prices, which have made it harder for youngsters to get a foot on the housing ladder. One official study suggested that more than ten percentage points of the 150% rise in real house prices between 1996 and 2007 was accounted for by increased lending to landlords. As the buy-to-let market has turned, house-price growth has weakened. Reduced competition from landlords may have made life easier for first-time buyers: in July to September the number of mortgages granted to them hit its highest level since 2007.

The future for buy-to-letters will not get much brighter. In January a tweak to the rules on capital-gains tax will increase the liabilities of landlords who register as businesses. Large institutional investors are moving on to buy-to-letters’ turf, hoping to benefit from their economies of scale to offer better-quality housing to tenants. It was good while it lasted, but the golden age for the amateur landlord may be over.

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Thanks for posting this up.  It had come into my inbox as I used to be an Economist subscriber.  I like the Economist despite its appalling Right wing stance on some topics.  However I have one caveat about this article and that is The Economist is often bearish on global property prices, which of course I love.  The Economist and Money Week are both consistently bearish on property and yet so far, like so many of us, they seem to not quite get it right which is a great shame. I still hang on and hope for a substantial correction in price but as each year passes I become less optimistic and more angry.

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24 minutes ago, dryrot said:

[..]

At a recent seminar of the Robbie Fowler Property Academy, held in a nondescript hotel in London, the mood remained upbeat. Mr Fowler claims in a promotional video that, “It doesn’t matter what state the market’s in—there’s always money to be made.” Yet few are so optimistic. In the third quarter of 2017 new buy-to-let lending for house purchases was around 15% below the average of the past five years. Research from Savills suggests that, for the first time, landlords may be selling up in large numbers.

[

 

Why would anyone who has worked out how to make lots of money share the secret?

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Isn't that what people sometimes do, say something is not worth investigating in, the price will be going down, keep out of that market, whilst at the same time holding and buying for themselves?;)

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47 minutes ago, Northern Welsh Midlander said:

They are a bit behind the curve are they not? We knew this the day the SDLT change/S24 was announced.

He holds existing assets and is encouraging others to go all in to help push up his own existing assets up? That bit maybe left out of the lecture, due to time constraints of course!

I think these types of courses are funny, because a dead rotting monkey in hindsight could have made money from property due to the governments idiotic destructive policies. Just shows how thick the BTL landlord is that they think there is some skill or thought behind their scummy practice. 

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2 hours ago, iamnumerate said:

Why would anyone who has worked out how to make lots of money share the secret?

Because there is more money in that than the activity being advised.

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5 minutes ago, Fromage Frais said:

Because there is more money in that than the activity being advised.

Which implies that their advice is not worth following, the best way to make money in a gold rush is to sell shovels.

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3 hours ago, iamnumerate said:

Why would anyone who has worked out how to make lots of money share the secret?

He needs loads of new BTL wannabees otherwise how is he going to offload all his "portfolio" now it's time to get out?

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"Buy-to-letters sometimes compete with first-time buyers for property—and they often win that contest, since they tend to have bigger incomes."

This shows something of a misunderstanding. LLs have been able to outbid FTBs because of their access to interest only mortgages and not being constrained by MR stress rates.

This approximately doubled their purchasing power. 

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4 minutes ago, Funn3r said:

He needs loads of new BTL wannabees otherwise how is he going to offload all his "portfolio" now it's time to get out?

My thoughts exactly.  Perhaps if you go, you get a "discount" on a Robbie Fowler home.

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4 minutes ago, Ah-so said:

"Buy-to-letters sometimes compete with first-time buyers for property—and they often win that contest, since they tend to have bigger incomes."

This shows something of a misunderstanding. LLs have been able to outbid FTBs because of their access to interest only mortgages and not being constrained by MR stress rates.

This approximately doubled their purchasing power. 

Also in the past they could rent out to people on benefits and charge what they like - fortunately the benefit cap has reduced that ability.

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1 minute ago, iamnumerate said:

Also in the past they could rent out to people on benefits and charge what they like - fortunately the benefit cap has reduced that ability.

And of course they can raise the deposit by remortgaging the primary residence.

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In fairness to Robbie Fowler, he may not have that big a role in this, apart from selling his image and name.  And if anyone would offer me a cash sum for something I usually inflict on the world at large for free, I'm sure I'd do the same.

https://www.theguardian.com/business/2017/dec/08/just-the-keeper-to-beat-property-academy-for-wannabe-robbie-fowlers
 

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1 minute ago, Giordano Bruno said:

That is the classic unanswerable rebuttal to all get-rich-quick schemes.

Thank you, although it was hardly an original thought.  I know someone who earns money doing a multi level marketing scheme and always advises others to do the same - of course if everyone took his advice, it would not work.

(It is a not a con in that he believes the stuff he is selling works).

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7 hours ago, iamnumerate said:

Why would anyone who has worked out how to make lots of money share the secret?

Got an advert for those seminars pop up on my fakebook. They deleted my comment within minutes.

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6 hours ago, iamnumerate said:

Thank you, although it was hardly an original thought.  I know someone who earns money doing a multi level marketing scheme and always advises others to do the same - of course if everyone took his advice, it would not work.

(It is a not a con in that he believes the stuff he is selling works).

{off-topic} MLM is a con. All MLMs exploit the sales-force (aka "Independent business owners). MLMs make money of the IBOs doing training and seminars; they pretend there is money at the end of the rainbow but are taking cash off those on the journey. http://www.cs.cmu.edu/~dst/Amway/AUS/ and, many, many others...

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  • 406 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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