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The Btl Mentality

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Just back from a trip to the Isle of Wight. Looked at some new apartments overlooking the water at Cowes (called ‘Marinus’). All are shrouded in scaffolding and sheeting, except the show apartment, which peers out through all of this. :ph34r:

So we went up the stairs (sign saying that it wasn’t yet finished to company standards) and into the apartment. Beautiful sunny morning + river entrance + boats + Solent beyond = gobsmacking view from the lounge, no doubt about it. B) Balcony above had been left off to make it feel more open and sunny (NE facing), but you get the picture. Smartly presented 3 bed (well 2 bed + small study) apartment, under offer at somewhere in excess of £450k. (She wouldn’t tell us the actual offer price - data protection..)

Of the total of 48 apartments, there are 6 with such views (wouldn’t give you tuppence for the rest, which are staggered back from the waterfront, with great views of the car park..), plus the two 3 bed penthouses (not yet released, but prices in the region of £600k - £700k).

But then came the interesting bit (thank God for that, I hear you say..). She told us that one of these 6 had become available again during the last week, due to someone dropping out (maybe on the Thursday afternoon?). She said she had called her financial advisor and her hubby to see if they could buy it as a BTL, but the lenders would not lend enough – “The sums just didn’t add up,” she explained, “the rental income meant that we would need to put up £140,000 deposit and we’ve only got £80,000.” She went on to say that, as they would still have their mortgage to pay etc. it was a lot to go through, “just to sell it on after a year or so”.

Now, she may have £80k in the building society just waiting to be invested in BTL, but all things considered, I think that this is extremely unlikely. I would be 99% sure that she was referring to the equity in their own home.

So point #1 is that BTL buyers are re-mortgaging to get what they see as ‘their’ money out of their homes to put down as deposit. :huh:

Point #2 is that she was thinking really quite short-term about this – a year or so. <_<

Point #3 is that the lenders recognised that the sums just didn’t add up, but the buyers (someone else stepped in and reserved it) still do not :lol: . Now, it may be that it sold to someone prepared to pay close on £½ million for a flat to live in, or someone with more money than sense who wanted to be near to Cowes Week once a year, but I would bet that most, if not all, of the apartments that have been ‘snapped up’ are being bought by people who think it’s a good investment. So whilst the lenders know that the value of the properties as homes are only about 2/3 of the asking price, buyers still pile in anyway. Lots of people have £140k of equity in their homes and could get what’s ‘theirs’ by MEWing. As presumably, our helpful (mature) sales assistant would have done if her home had gone up in value enough.

All in all a very interesting encounter. The post-script is yet to come, though, as the ‘sales’ are reservations only (many taken during Cowes Week) and could fall through as people go home and review their finances. She said that completion of the project is expected in February, at which point people will be asked to exchange contracts. It may well be that the thought of a small apartment with one outside parking space on the north coast of a little island off the south coast of England might not be quite so attractive in February. Especially if interest rates rise again in the meantime. So I shall be watching the Land Registry reports with interest. And, having said that we really wouldn’t be able to fit into anything smaller than one of the penthouses and our budget was somewhat smaller than the asking price, I shall cherish the moment if we get that call – the answer to which will be a polite but satisfied, “No thank you…” ;)

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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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