Btl Lemmings Go Bonkers

[Mags]

I guess if you repeat that often enough you hope to convince people.

It is not a cycle. It is not a cycle. It is not a cycle.

It is not coffee or aluminium. It is not an economy.

It is housing. What has happened to housing over the last 5 to 7 years is not part of the upswing of a cycle. It is a structural shift in the way the market works.

People used to aspire to own one 3 bed semi by the time they were 50. Now many people aspire to own 50 properties by the time they are 50.

Big difference and it is not a cycle.

Lol!

I disagree. That's like saying everyone wants to be a doctor! Why do you think that suddenly everyone wants to be a landlord owning 50 properties, subsidising the rents on them all every month and taking full responsibility for all the repairs and upkeep? They don't!

Just think a little!

[adibrown]

I am not the person throwing away dead money.

It makes no financial sense and so I will avoid it and let the foolish rush in.

I actually quite like BTL. Its making my short play tremendously enjoyable and easy. Its the biggest proof of a bubble there can be.

I owned and still own Bookam Technology shares, they peaked at 54quid each in 2000. After the first big fall I bought more at 11 pounds, thinking when they recover I will make a 5 fold increase. Now they have transfered to the US and are worth the equivalent of about 50pence each.

I never sold on the way down, instead bought more. Didnt stop them falling through the floor did it?

Bookham were the DARLING of the dot con. Just like Victorian houses in good areas are today.

So you're giving out financial advice and talking of foolish people throwing away dead money saying it makes no financial sense and then you tell us about your investment history............mmmm so I am expected to take financial advice from somebody who bought a load of Bookam shares didnt sell at the peak and then continued to buy even more even though as an investment it was dead in the water.....OK

You sound like enworb! I'm guessing by your names you're linked.

It's a cycle. Depends entirely when in the cycle you bought as to whether or not you made a good, mediocre or just plain stupid investment.

Never heard of Enworb, no relation. I can assure you there are a lot of Browns out there.

If you are admitting there is an historical long term rise in prices then no matter where you buy in the cycle there is never a plain stupid investment, you will always make money on the investment

[Mags]

Never heard of Enworb, no relation. I can assure you there are a lot of Browns out there.

If you are admitting there is an historical long term rise in prices then no matter where you buy in the cycle there is never a plain stupid investment, you will always make money on the investment

And yet there are such similarities between you! Lol! I'm not convinced yet.

It is foolish to say you will always make money on property. This is simply not the case. House prices rise and fall. If you buy at the peak you may be looking at a very long wait before you make anything at all. Buy at the bottom of the cycle and the picture looks different.

That said, the fact is houses are, or at least should be, homes, not investments.

[Marina]

Lol!

I disagree. That's like saying everyone wants to be a doctor! Why do you think that suddenly everyone wants to be a landlord owning 50 properties, subsidising the rents on them all every month and taking full responsibility for all the repairs and upkeep? They don't!

Just think a little!

This is like arguing with a child. And you have the front to patronise me! I didn't say 'everyone' wants to be a landord. I said 'now many people aspire to owning 50 properties'.

It's not the same thing is it?

Why don't you read what people are saying and respond to it, instead of responding to something you think they said. I didn't say 'everyone' wants to be a BTL landlord - but your riposte to something I didn't say is 'that's like saying everyone wants to be a doctor'.

You try to discredit my argument by extrapolating it so it is meaningless.

I think it is a fairly simple thing to grasp. FTBs in the marketplace have been displaced by a considerable number of new entrants to BTL over the last 5 to 7 years. This has had the effect of pricing out FTBs. The trend looks set to continue with 150,000 new BTL mortgages in the first half of this year. I say there has been a structural shift in the structure of the housing market. You say 'lol'.

I guess you are just a fool.

[Mags]

This is like arguing with a child. And you have the front to patronise me! I didn't say 'everyone' wants to be a landord. I said 'now many people aspire to owning 50 properties'.

It's not the same thing is it?

Why don't you read what people are saying and respond to it, instead of responding to something you think they said. I didn't say 'everyone' wants to be a BTL landlord - but your riposte to something I didn't say is 'that's like saying everyone wants to be a doctor'.

You try to discredit my argument by extrapolating it so it is meaningless.

I think it is a fairly simple thing to grasp. FTBs in the marketplace have been displaced by a considerable number of new entrants to BTL over the last 5 to 7 years. This has had the effect of pricing out FTBs. The trend looks set to continue with 150,000 new BTL mortgages in the first half of this year. I say there has been a structural shift in the structure of the housing market. You say 'lol'.

I guess you are just a fool.

Grow up Marina!

I don't agree with you when you say that many people aspire to owning 50 properties. I do not believe that is the case. BTL is an issue, more of an issue this time than during the last crash, but your view that it will continue to be an issue at the current rates way into the future is not something I can agree with. What I actually see is prices falling and so-called investors seeking to get out of BTL even though there may be some who think it is a way to free money.

Not everyone wants to get into BTL. Not even most or many. And of those who have that as an 'aspiration' (God knows why) a fair few would soon drop the idea when they do the sums and see what the reality is.

Don't be insulting Marina. Not everyone shares your views.

[Impartial]

Didn't think of it like that, how true indeed.

Come on Marina answer this important question. An STR with loads of cash and and absolute belief that the BTL investment boom will go on and strive forever, taken as an axiom in your opinion. Why don't you just buy a few BTL's and join this orgy instead of wasting your time trying to get us to protest?

If you can't beat 'em join 'em, act on your stubborn opinion and take advantage if that's what you think.

Marina you haven't answered this important question or are you avoiding it?

[sun n sea]

I am wondering if the property "industry" hasn't noticed that BTL is boyant and an easy sell- could they not be building a lot of flats specifically to serve this market? Once the flats are sold it's not their problem anymore. Just because they've persuaded BTL investors to take these new builds at inflated prices doesn't mean that someone looking for a permanent home is prepared to pay more- or even prepared to buy.

Some of the BTL developments I've seen will only ever get sold on to other BTL'ers as they are badly build, badly designed and not desirable. Won't this make it hard to realise the end game profit of the BTL investor?

I read the papers and the articles on budding BTLers usually describe someone with huge debts and practically no disposable income- ie real money.

I think buy to let is a daft way of taking on huge debt for an uncertain, yet to be proved concept. The proof of the pudding will come when BTLers get to the stage where they want to sell- until then the huge gains bandied about are just wishful thinking.

[winkie]

I am wondering if the property "industry" hasn't noticed that BTL is boyant and an easy sell- could they not be building a lot of flats specifically to serve this market? Once the flats are sold it's not their problem anymore. Just because they've persuaded BTL investors to take these new builds at inflated prices doesn't mean that someone looking for a permanent home is prepared to pay more- or even prepared to buy.

Some of the BTL developments I've seen will only ever get sold on to other BTL'ers as they are badly build, badly designed and not desirable. Won't this make it hard to realise the end game profit of the BTL investor?

I read the papers and the articles on budding BTLers usually describe someone with huge debts and practically no disposable income- ie real money.

I think buy to let is a daft way of taking on huge debt for an uncertain, yet to be proved concept. The proof of the pudding will come when BTLers get to the stage where they want to sell- until then the huge gains bandied about are just wishful thinking.

Maybe it might be a good idea to check out the standing of your potential landlord and their ability to pay their mortgage...better to rent from the old fashioned professional who does not rely on your rent to stay solvent.

[Mags]

Maybe it might be a good idea to check out the standing of your potential landlord and their ability to pay their mortgage...better to rent from the old fashioned professional who does not rely on your rent to stay solvent.

Absolutely - good rule of thumb, never rent from someone who bought as an 'investor' within the last 5 years. There are plenty of decent LLs out there who don't see property as free money.

[papyrus]

if your landlord goes bankrupt you cannot be evicted since your rights of

tenancy come before financial charge to property. how sweet that would

be - being paid by your desperate landlord to move out as he tries to

sell into a falling market.

marina,

also worth remembering that the so called 'crash' won't really be a crash.

it'll be a slow and an incredibly painful grinding deflationary spiral...

you won't see much higher inflation and much higher interest rates. the

bond markets expect deflation - as the max'd out debt ridden consumer

reaches a point of no return.

there has been much written on the mechanics of markets explaining why

all markets fall faster than they rise. the great crash of 1929 wasn't really

a crash at all - it was a series of legs down in prices interspersed with just

enough of a pause to suck back in the speculators who thought they were

at the bottom. this happened many times until all speculatory sentiment was

sucked out from the market.

of the mistakes made - the biggest one is to dismiss the lessons of history.

[winkie]

if your landlord goes bankrupt you cannot be evicted since your rights of

tenancy come before financial charge to property. how sweet that would

be - being paid by your desperate landlord to move out as he tries to

sell into a falling market.

If they go bankrupt will they still want to fix the boiler?

On the up side you might want to make an offer to buy at a knock down price...no agents involved.

[sun n sea]

if your landlord goes bankrupt you cannot be evicted since your rights of

tenancy come before financial charge to property

So, if I was say 2 months into a 12 month letting and my landlords sums didn't add up anymore they wouldn't be able to dump the flat and get out quick- they wouldn't be able to sell the flat until the rental period ended- is that right?

If it is that is the case it's a very interesting point I hadn't though of- in effect you being in the flat could push the landlord over the edge if they couldn't afford to make up any difference in mortage payment v rent for the full life of the letting agreement. And if you were renting off a wannabee BTL mogul with loads of flats they could have this shortfall across the board couldn't they?

I don't think the bankruptcy thing is right- I know a county court baliff who says he's been tossing tenants out irrespective of what the rental agreement says- from what I can gather the property when repossed belongs to the banks so the agreement with the previous owner is null and void. I might be wrong but I do remember the guy telling me that he's done a hell of a lot of repos lately with sitting tenants who've had to leave- even with the Police attending the tenant has no legal option but to vacate- they were all paying rent but the BTL landlord wasn't passing the money on to the mortgage company.

[papyrus]

yes an interesting point indeed. my earlier comment was a bit wide of the mark

i think..

in real terms the bank owns the house - but actually the landlord owns the

house - with a charge secured against it.

up until the reposession occurs you could not be evicted since the landlord

would be unable to terminate your lease, hence the nice thought of him

having to offer you cash to move out.

however, since a bankruptcy/reposession order comes from the court, then

you could be evicted. a house changing ownership through the normal process

wouldn't enjoy the same .. the sitting tenants' rights would continue from one

owner to the next.

so from the tenants point of view, catching the landlord in a desperate attempt

to sell, prior to bankruptcy, would the best scenario if moving didn't bother you.

if your home becomes subject to a bankruptcy order it would be too late.

Edited August 19, 2006 by papyrus

[Marina]

Marina you haven't answered this important question or are you avoiding it?

I have answered it.

[Marina]

I thought the new breed of BTL landlord wouldn't sell? I thought they were only supposed to acquire further property?

If they did sell, who would buy it from them? Surely only another BTLer, in which case you're effectively a sitting tenant - hey, everyone's a winner!

Come on Marina, you need to think your new world order through a little more carefully. It seems to contain a few holes.

Who would buy it from them ... yes, another BTLetter. You have got it in one. Because owning property has now become a business and/or a long term 'pension' investment. And it is simply a question of one investor selling an asset to another. As I have pointed out elsewhere ... if you hold a property and it grows at 3% a year for 25 years you will double your money. When you add in that it is a leveraged investment requiring only 15% investment - it stacks up as a great return - even allowing for subsidising the rent for say 10 or 15 years.

No holes at all.

The fact that the market has carried on fine since about 2001/2002 (which is when FTBs got priced out in my area) is all the evidence I need that the market no longer needs FTBs to function.

I think you need to 'think the new world order' through yourself - and wake up to what is actually happening. The structure of the UK property market is changing before your eyes - helped by favourable tax treatment - and you just sit here whistling while you are turned into a renting underclass.

Your choice.

[Mags]

renting underclass.

You underestimate the need that the new breed of LLs have for people to pay the rent. Who holds the power in that little scenario? Not the LL. With excess supply of rental property on the market it will be a case of 'this is the rent I will pay' rather than 'how much is the rent', as is already happening in some areas. 'Underclass' is not the word I would use.

[Keith.G]

That's a further point - How many of the ficticious 300,000 are BTLers who bought from BTLers so they aren't actually new BTLers?

At the same time you now have 16% of new FTB's buying on interest only mortgages (compared to 9% at the start of 2004) - Perhaps you should campaign for prospective FTB's to hold off from purchasing

Unfortunately the current housing market situation seems to be caused by increased demand and ease of obtaining a large mortgage

I recognise there are some localised problems in small holiday towns for example where a large number of second homes / holiday homes have been purchased and the locals are priced out

However, on a national scale the figures are readily available to anyone who wants to track them down which show that each year the number of new properties built is far outweighed by the number of new potential households

You need to campaign for more FTB homes to be built to cope with the number of new households

BTL is helping to meet some of the demand

[DabHand]

If this is such an obvious no brainer investment, how come it didnt happen 20, 30, 40 , 50 years ago? As you begin to explain why it didnt you will realise these reasons are why it also wont happen in the future.

Oh and l do like the 5 yr sample to justify why it "will always be like this" (paraphrased)

[Keith.G]

If this is such an obvious no brainer investment, how come it didnt happen 20, 30, 40 , 50 years ago? As you begin to explain why it didnt you will realise these reasons are why it also wont happen in the future.

Oh and l do like the 5 yr sample to justify why it "will always be like this" (paraphrased)

Reasons/points which spring to mind:

1) Demise of Council housing - People used to rent from the council but now replaced by BTL

2) Catalyst was Thatcher

3) Introduction of BTL lending

4) Huge growth in demand for housing - explosion in numbers of 1 person households & 1 parent families and immigration

5) Decline in number of new properties per year being built

6) Relative ease of obtaining a loan

7) Low interest rates

8) More information readily available on subject of BTL

9) Properties can be found more easily than in the past due to the internet

[DabHand]

Reasons/points which spring to mind:

1) Demise of Council housing - People used to rent from the council but now replaced by BTL

2) Catalyst was Thatcher

3) Introduction of BTL lending

4) Huge growth in demand for housing - explosion in numbers of 1 person households & 1 parent families and immigration

5) Decline in number of new properties per year being built

6) Relative ease of obtaining a loan

7) Low interest rates

8) More information readily available on subject of BTL

9) Properties can be found more easily than in the past due to the internet

1) Now local authorities pay direct to private landlords. Almost all agree that this rate sets the local rental rate. No relevance other than BTL speculation has likely helped us reach the current bubble.

2) No relevance. "Thatcher" is not a reason in itself, even if you add the word 'catalyst'. Sorry doesnt fly.

3) BTL lending is symptomatic of easy credit/laxer lending. You havent indicated why you think this will continue.

4) My mother and family lived in a prefab until the early seventies. Left over from when the war had demolished a great deal of housing. Prices werent high then despite massive housing shortages.

There is a increase in low occupancy house demand but why does this explain the across the board increases in house prices. Last time l looked single people, esp single parents don't look for 4 bedroom detached properties by default. Immigrants may help demand for HMO BTL allowing BTL to charge over market rate for turning a blind eye to the "6 to a room" anecdote. I doubt this alone underpins the 'its different this time' standpoint. What it does do is allow more credit into the system for those going up the ladder, as suddenly their bedsit can command 4 time the price they bought it for 5 yrs ago. This does explain the across the board increases BUT follow the logic to the root of the phenomena = EASY CREDIT (and unsustainable easy credit at that)

5) I concede this point. I have tried to look for actual demand growth vs housebuilding. I understand the idea that new builds are not keeping up with demand, but then last time l looked there is an increasing number of people living together, living with parents and having far fewer children (1.4 per couple?) I wonder if the situation regardless of immigration will switch back to oversupply as the declining birthrate bites in the next decade but l cannot argue this with any factual info so its merely opinion.

6) Again this is symptomatic of easy credit/laxer lending. You havent indicated why you think this will continue.

7) Ah! Low IRs are part of the cause for easy credit and lax lending. However we are at a historic and transient low point. Even the most ardent bull would tend towards rates going up from here, unless you are arguing that exponentially increasing rates of borrowing at low IR's will see us through indefinitely.

8) I would agree that there is a greater awareness of BTL. I would argue more that its not awareness but near mania-esque ramping by VI and media alike that has led to such widespread interest. Ultimately only easy credit/lax lending has allowed BTL on this scale to even show its face.

9) I dont think this has any relevance. Your are decribing perfect market conditions, where knowledge is more uniform and widespread amongst market operators. This will have the effect of smoothing volatility wher ignorance by seller or buyer might give greater variation in transaction prices. I dont think it has any application to overall averages. You could argue however that improved mobility and transport links have allowed marginally located housing to gain value as commuting becomes easier. But you didnt. Actually (whilst lm arguing with myself) it occurs to me that bringing in marginal housing in this fashion should reduce the price pressure on more optimally located properties as there is more substitution possible (and thus increased effective supply). In the current bubble conditions ../panto Oh yes it is! /panto... its hard to do any meaningful investigation of this concept.

Cheers

[Marina]

Because the BTL gene only evolved in the late 20th century.

You stated that tenants could look forward to a life of disruption due to the AST laws. My point was that since property (in your theory) would be owned by BTLers, tenants would not actually suffer any disruption - properties would simply change hands between landlords periodically as they queued up for the ever diminishing yields that were on offer. After all, one landlords capital gain is the next landlords reduced yield.

It doesn't alter the fact that at any moment any landlord can decide to realise his asset and sell. Unless BTL becomes completely dominant the house will be easier to sell without tenants. Even if there are tenants you would need a new tenancy agreement - which would make the house sale even more complicated than they are at the moment.

One landlords capital gain is the next landlords reduced yield - very true - yet still the market stutters on. Because, I guess, the new landlord figures the house will go up again in the next 25 years. Historically, he would be right.

[Keith.G]

1) Now local authorities pay direct to private landlords. Almost all agree that this rate sets the local rental rate. No relevance other than BTL speculation has likely helped us reach the current bubble.

2) No relevance. "Thatcher" is not a reason in itself, even if you add the word 'catalyst'. Sorry doesnt fly.

3) BTL lending is symptomatic of easy credit/laxer lending. You havent indicated why you think this will continue.

4) My mother and family lived in a prefab until the early seventies. Left over from when the war had demolished a great deal of housing. Prices werent high then despite massive housing shortages.

There is a increase in low occupancy house demand but why does this explain the across the board increases in house prices. Last time l looked single people, esp single parents don't look for 4 bedroom detached properties by default. Immigrants may help demand for HMO BTL allowing BTL to charge over market rate for turning a blind eye to the "6 to a room" anecdote. I doubt this alone underpins the 'its different this time' standpoint. What it does do is allow more credit into the system for those going up the ladder, as suddenly their bedsit can command 4 time the price they bought it for 5 yrs ago. This does explain the across the board increases BUT follow the logic to the root of the phenomena = EASY CREDIT (and unsustainable easy credit at that)

5) I concede this point. I have tried to look for actual demand growth vs housebuilding. I understand the idea that new builds are not keeping up with demand, but then last time l looked there is an increasing number of people living together, living with parents and having far fewer children (1.4 per couple?) I wonder if the situation regardless of immigration will switch back to oversupply as the declining birthrate bites in the next decade but l cannot argue this with any factual info so its merely opinion.

6) Again this is symptomatic of easy credit/laxer lending. You havent indicated why you think this will continue.

7) Ah! Low IRs are part of the cause for easy credit and lax lending. However we are at a historic and transient low point. Even the most ardent bull would tend towards rates going up from here, unless you are arguing that exponentially increasing rates of borrowing at low IR's will see us through indefinitely.

8) I would agree that there is a greater awareness of BTL. I would argue more that its not awareness but near mania-esque ramping by VI and media alike that has led to such widespread interest. Ultimately only easy credit/lax lending has allowed BTL on this scale to even show its face.

9) I dont think this has any relevance. Your are decribing perfect market conditions, where knowledge is more uniform and widespread amongst market operators. This will have the effect of smoothing volatility wher ignorance by seller or buyer might give greater variation in transaction prices. I dont think it has any application to overall averages. You could argue however that improved mobility and transport links have allowed marginally located housing to gain value as commuting becomes easier. But you didnt. Actually (whilst lm arguing with myself) it occurs to me that bringing in marginal housing in this fashion should reduce the price pressure on more optimally located properties as there is more substitution possible (and thus increased effective supply). In the current bubble conditions ../panto Oh yes it is! /panto... its hard to do any meaningful investigation of this concept.

Cheers

Perhaps I didn't explain: I agree with you and the points I raised are in support of your argument!

These are the points which spring to mind as coming together to make the current situation different to the 30's, 40's 50's

So I pretty much agree with your point also

(I said reasons/points as I just wanted to remind people as a point that it was Thatcher who sold off the council houses to occupiers so this led to a decrease in the amount of rentable property)

[Keith.G]

I have answered it.

The points are not answered properly in turn only the ones Marina can have a stab at.

The harder ones ar ignored

BTL are helping meet the demand which exists - maybe Marina needs to kill off the massive demand for renting?

Sensible BTLers only buy a property if the demand is there as informed by people who know the area and levels of demand - So the demand has to be there in the first place!

People only need one home it's true and I guess that most BTLers have one home they live in whilst also providing accommodation for others who want it

As I said before Marina would have more of a result campaigning for extra homes to be built

[adibrown]

You underestimate the need that the new breed of LLs have for people to pay the rent. Who holds the power in that little scenario? Not the LL. With excess supply of rental property on the market it will be a case of 'this is the rent I will pay' rather than 'how much is the rent', as is already happening in some areas. 'Underclass' is not the word I would use.

Where is this happening? I was always able to negotiate on rent but that was always because the LL was always cheeky and added £100 on the actual monthly rent. If somebody has a crap property in a dodgy area and they are trying to overcharge for rent then I can see you being in a negotiating position. If the property is in a good area and good quality then you will never have problems renting it out for full price.In this situation the LL has full power and tells you how much rent you pay. If you want cheap rent you go for properties nobody wants and saythis is the rent i pay butyou end up renting somehwere nobody wants to live.

[Mags]

Where is this happening? I was always able to negotiate on rent but that was always because the LL was always cheeky and added £100 on the actual monthly rent. If somebody has a crap property in a dodgy area and they are trying to overcharge for rent then I can see you being in a negotiating position. If the property is in a good area and good quality then you will never have problems renting it out for full price.In this situation the LL has full power and tells you how much rent you pay. If you want cheap rent you go for properties nobody wants and saythis is the rent i pay butyou end up renting somehwere nobody wants to live.

You are able to negotiate on rent because supply outstrips demand in some areas.

LL's at the very best have half the power. Never full power. They always need someone to pay the rent. The balance of power is shared at best. At worst for the LL, the renter states the rent. At worst for the renter there is competition for the property and they are only able to negotiate a minimum drop in rent, or they decide to pay the full asking rate.

Rents are falling, yields are down... in some, maybe many, areas.

If you're not enworb you've been taking lessons in how to pretend to be him!