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Hopeful FTB

Ftb'ers At 7.9%

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correct - the thing is most people agree that it's mad, those same people still think it's a good idea to buy if you can borrow the money.

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Guest Winners and Losers

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What would happen if there were no first time buyers?

The BTL's are covering it.

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What would happen if there were no first time buyers?

You end up with a stacked market, in one sense it could grow even crazier as the only players are those using monopoly money, with no basis in reality.

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What would happen if there were no first time buyers?

With no FTBs people looking to move up can't sell so stay put, meaning the people on the next rung up looking to move up can't sell so stay put etc. etc. So the only way to shift things is to drop the price to encourage new buyers. Market reverses, same thing happens as has happened for the last 9 years but in the opposite direction.

The OECD said that BTLs have complicated the issue in the UK (they are not as prevalent in other Western economies) but they still make up only a small share of the market. Sure it is mainly them that are propping up the market at the bottom end. A report said the other week that 55% of BTLs have been purchased in the last 5 years. It's the highly leveraged ones that are most at risk. I reckon without them we'd be at the same stages as the USA and Australia now.

Edited by SCUMBAG

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"NAEA agents also reported a slight drop in first time buyer sales in April, which fell in line with the overall sales decrease, as first timers’ share of the market went from 8.9% to 7.9%."

Surely that's c0ck isn't it? If the sales decline in absolute terms, that has nothing to do with the proportion of ftbs. It's a separate indicator. The proportion of FTBs has dropped by 10% from an already low level. Sheesh. That means I need not feel like I'm missing out. How long can this go on for?

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Surely that's c0ck isn't it? If the sales decline in absolute terms, that has nothing to do with the proportion of ftbs. It's a separate indicator. The proportion of FTBs has dropped by 10% from an already low level. Sheesh. That means I need not feel like I'm missing out. How long can this go on for?

That's the first thing I thought. A 10% drop is not "slight". And if that's a decreased proportion of a decreased number of sales, which it appears to be, that's an even bigger drop in numbers of FTBs

I remember all the predictions of doom and gloom when FTB numbers dropped down below 20%. That was considered astonishing and definitive evidence that a correction was going to happen. Now it's 7.9%. Anyone want to predict if it's going to go down under 5%?

Billy Shears

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With no FTBs people looking to move up can't sell so stay put, meaning the people on the next rung up looking to move up can't sell so stay put etc. etc. So the only way to shift things is to drop the price to encourage new buyers.

Also, if you build thousands of part-ownership rabbit hutches you have the same effect, such people are then dropped onto the first half rung of the ladder through new supply, existing first rung properties become out of reach and the market ceases up... especially so if they cannot rope in BTL'ers at 3% yields.

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How long can this go on for?

How long can BTL replace FTB? Depends how the media decide to present the pensions crisis to us. A lot of people have lost trust in the govt and traditional pensions funds, and a cashflow negative BTL is just like a normal pension really - the yield goes positive somewhere towards retirement.

I'm a bear by nature, but imagine if all the Locationx3 type TV shows started to slant their message to get people to think about pensions, and combine that with a few more pensions tax U-turns and govt scandals.

Who knows.

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All this is identical to 1989. FTBs dried up, BTLs took their place, the market slowed right down and became static as it reached saturation, etc. I normally switch off when people try to argue that what is happening now is the same as last time because it obviously isn't. The economic conditions are entirely different. You can drudge up as many clever calculations as you like to try and show how things are different from last time, how things are actually affordable and what will happen if interest rates rise but you can't forsee the unforseen. There are parallels though and these symptoms are the same. We shall just have to wait and see how it all pans out.

I often wonder if the effect of BTL is given too much weight here anyway. How much impact on the market do they really have? Is it not more of a symptom than a cause? Have they just become a symbol to project frustrations onto?

Homework: Write an essay on how BTLs have distorted the UK housing market. Extra marks will be awarded for presentation. You may use coloured pencils.

Edited by SCUMBAG

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How long can BTL replace FTB? Depends how the media decide to present the pensions crisis to us. A lot of people have lost trust in the govt and traditional pensions funds, and a cashflow negative BTL is just like a normal pension really - the yield goes positive somewhere towards retirement.

Does it though, what happens if your timing is out when it comes to selling the asset? Can everyone out there sell up at the right time without mishaps or penalties occuring? Additionally, where's the diversification? Traditional pension funds gradually switch from equities into bonds as retirement or maturation approaches, thus locking in gains. With property you have all the eggs in one basket to be all sold at once at some arbitrary date, regardless of the underlying market.

Edited by BuyingBear

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All this is identical to 1989. FTBs dried up, BTLs took their place, the market slowed right down and became static as it reached saturation, etc.

There was nothing like the level of BTL in 1989 as there is now. Sure, there may have been a few landlords buying property, and a few hopeful flippers and speculators left in the market as it slowed, but I don't think there's any real parallel with the full-blown BTL craze we've seen this time.

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A thought on the BTL vs FTB debate

What is interesting to my mind is that BTLs are competing for essentially the same asset - small low end of the rung properties - but with a whole new range of financial products (particularly IO) and a much more devil may care approach to risk, aided by gearing from existing portfolios.

I think this is a permanent 'head start' for BTLs against FTBs - the only way in which it will change is when the over exposure to risk catches up with them. The problem is of course, how many FTBs who have been forced to compete on the same terms - in use of IO and exposure to too much debt - will this devil may care approach drag down with them?

With a market such as housing - with both supply side constraints and huge social implications -Government should have intervened a long time ago to make sure that BTLs simply didn't have this head start. They haven't and we're all now going to suffer the consequences.

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A thought on the BTL vs FTB debate

What is interesting to my mind is that BTLs are competing for essentially the same asset - small low end of the rung properties - but with a whole new range of financial products (particularly IO) and a much more devil may care approach to risk, aided by gearing from existing portfolios.

I think this is a permanent 'head start' for BTLs against FTBs - the only way in which it will change is when the over exposure to risk catches up with them. The problem is of course, how many FTBs who have been forced to compete on the same terms - in use of IO and exposure to too much debt - will this devil may care approach drag down with them?

Indeed, the BTL has a head start and tax advantages but at the end of the day their 'customers' are the self same FTB'er, if the latter cannot comfortably support a mortgage there is little longterm ability for him to support a BTL'ers mortgage and associated costs or expectant profit.

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If FTBs are just 7.9% - the rest is made up of BTL, second buyers and - don't forget, very important: foreign investors. These people are looking for a safe place to put their money where they can make a good return. Like BTL, they should sell up when prices fall (or the pound falls), accellerating the crash.

B)

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If FTBs are just 7.9% - the rest is made up of BTL, second buyers and - don't forget, very important: foreign investors. These people are looking for a safe place to put their money where they can make a good return.

... not with the yield below the (increasing) cost of borrowing, the potential capital gains and risk v. reward is looking a bit sorry too.

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  • 301 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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