B T L: "some Talking About Selling Up" As Yields Crash

[Realistbear]

http://business.guardian.co.uk/story/0,,2018230,00.html

Buy-to-let investors are still smiling - but for how long?

So far the market has defied the doomsayers, but interest rate rises could be the final straw

Rupert Jones and Patrick Collinson

Thursday February 22, 2007

The Guardian

The newspaper headlines made grim reading....../

But could we now be seeing a change in sentiment? On Monday, property website Rightmove said a smaller than expected monthly rise in asking prices following January's surprise interest rate increase had triggered the sharpest drop in the annual rate of house price growth for 18 months. Last week, when buy-to-let specialist Bradford & Bingley announced its results to the City, some banking analysts were less than upbeat about the prospects for the sector.

While the market is underpinned by growing employment, driven largely by foreign workers flocking to Britain, Alex Potter at stockbroker Collins Stewart warned: "Once immigration slows (post new EU accession) and the effect of now higher interest rates feeds through, we believe the appetite for buy-to-let could slow materially."

.../

Falling yields

Rents are indeed going up but are

failing to keep pace

with property prices. As a result, rental yields - the annual income you get from renting out the house or flat expressed as a percentage of the property's price -

are falling

. Landlord Mortgages, a specialist buy-to-let loans broker, said yields hit a

five-year low in 2006

. For England they had fallen from 7.1% in 2002 to 5.74% last year, while for London they were down to 5.8%. The firm added that while falling rental yields in themselves "are not great news for investors", the

decline

resulted from the healthy capital appreciation investors have enjoyed over that period. Others quote

even lower yields

: Birmingham Midshires says the figure for central London is 4.7%.

..../

'

Toppy'

As with the wider housing market, a lot hinges on what happens to interest rates. Alex Potter said that if the Bank of England does continue to raise interest rates, "it will at least

blow the froth off the buy-to-let market"

. In cash flow terms, buy-to-let landlords are "just about washing their face", he added. Many may take the view that they can live with that, as long as they have got the promise of long-term capital appreciation - but it may not take much for the picture to change dramatically.

"In cyclical terms, the housing market is looking pretty toppy at the moment,"

said Mr Potter. Nevertheless, he believes that 2007 is likely to be "another good year for buy-to-let". While he certainly doesn't envisage a crash in the sector in the next few years,

"I can see growth really tailing off quite a lot".

One thing no one knows is how the new army of buy-to-let investors will behave if or when the property

market takes a nosedive.

Will they offload their properties en masse, and prompt a market collapse,

or will they hold their nerve when the going gets tough? The doomsters have,

so far

, been proved wrong, and it is a brave commentator who will predict the demise of this new class of property owners.

A landlord's ups and downs

Case study:

Key lessons budding rentiers learn are that the location and a flow of tenants are crucial and rent may not always cover their mortgage.

If you want your life to become a nightmare...............

".....she has "no regrets" about buying - despite the fact that the rent from this flat fails to cover the mortgage."

"But her other buy-to-let property, in a village outside Oxford, has been less successful, with long "voids" when she could not find a tenant. "The heating packed up in December, I lost the tenant, and at the time I was out of the country. It was a

nightmare."

BTL anyone?

IMO, Gordon has played all his lifelines now. The miraculous IR cut in August 2005 to re-stimulate inflation and mass immigration following. As the downward cycle approaches unemployment will spread more rapidly and the millions of immigrants will see that life is better in the land of their fathers.

Edited February 22, 2007 by Realistbear

[millionaire]

As a serious BTLer I am not concerned at all with this news. I have heard doomsayers since 2001 when I kicked off. Just over a million pounds worth of property and plenty of liquid cash in the bank.

Not to mention LLoyd TSB bending over backwards for me at my local branch to give me whatever I want.

100% occupany for well over 1000 days now and everyone seems happy.

I look at reports like this ( and thank for relist bear for taking the time), I feel that some scare mongering is employed to panic buy to letters to dump a lot of proprty on the market to engineer a crash. Sorry but its not going to happen.

Most savvy buy to lets businessman/women didnt buy their house at a premium and then get a tenant in and now grabbing their ankles in case of a crash. We bought the roughest property in town for practically nothing, brought it into the 21st century with rewiring, replumbing, cosmetic work and new kitchen bathroom suite (takes about 3 weeks) and then we get tennants in and we have serious increased the price of the property in the meantime. If the market went sour, that just means with load up our portfolios with as many properties as we can handle, not dump them on the market.

[Realistbear]

As a serious BTLer I am not concerned at all with this news. I have heard doomsayers since 2001 when I kicked off. Just over a million pounds worth of property and plenty of liquid cash in the bank.

Not to mention LLoyd TSB bending over backwards for me at my local branch to give me whatever I want.

100% occupany for well over 1000 days now and everyone seems happy.

I look at reports like this ( and thank for relist bear for taking the time), I feel that some scare mongering is employed to panic buy to letters to dump a lot of proprty on the market to engineer a crash. Sorry but its not going to happen.

Most savvy buy to lets businessman/women didnt buy their house at a premium and then get a tenant in and now grabbing their ankles in case of a crash. We bought the roughest property in town for practically nothing, brought it into the 21st century with rewiring, replumbing, cosmetic work and new kitchen bathroom suite (takes about 3 weeks) and then we get tennants in and we have serious increased the price of the property in the meantime. If the market went sour, that just means with load up our portfolios with as many properties as we can handle, not dump them on the market.

Ever heard of an economic cycle?

[Buddleia]

"The lesson she has learnt is to invest only in new-build flats with low maintenance."

Hmm ... that would be those new-build flats that are priced O-so competitively by developers, and which fall apart after a few years?

[Assurbanipal]

We bought the roughest property in town for practically nothing, brought it into the 21st century with rewiring, replumbing, cosmetic work and new kitchen bathroom suite (takes about 3 weeks) and then we get tennants in and we have serious increased the price of the property in the meantime. If the market went sour, that just means with load up our portfolios with as many properties as we can handle, not dump them on the market.

Interesting. You seem to be reasonable man, but how much BTL investors are reasonable? People buy expensive properties nad than let it. Those people have really low return yields and they will suffer when interest rates will go up or there will be lack of tenants for some time. Some have problems now...(repossesion is the most frequent among BTL).

Only small minority buys cheap crap in promising areas and than rapair it.

[bubbleturbo]

As a serious BTLer I am not concerned at all with this news. I have heard doomsayers since 2001 when I kicked off. Just over a million pounds worth of property and plenty of liquid cash in the bank.

Not to mention LLoyd TSB bending over backwards for me at my local branch to give me whatever I want.

100% occupany for well over 1000 days now and everyone seems happy.

I look at reports like this ( and thank for relist bear for taking the time), I feel that some scare mongering is employed to panic buy to letters to dump a lot of proprty on the market to engineer a crash. Sorry but its not going to happen.

Most savvy buy to lets businessman/women didnt buy their house at a premium and then get a tenant in and now grabbing their ankles in case of a crash. We bought the roughest property in town for practically nothing, brought it into the 21st century with rewiring, replumbing, cosmetic work and new kitchen bathroom suite (takes about 3 weeks) and then we get tennants in and we have serious increased the price of the property in the meantime. If the market went sour, that just means with load up our portfolios with as many properties as we can handle, not dump them on the market.

Oh look, another BTLer who seems to be unable to construct a paragraph, let alone think outside the box.

Interesting times. Some of us have been lucky enough to have seen it all before. Want to know who will be left carrying the can?

Its you.

[abaxas]

"The lesson she has learnt is to invest only in new-build flats with low maintenance."

Hmm ... that would be those new-build flats that are priced O-so competitively by developers, and which fall apart after a few years?

I have to both disagree and agree.

I've lived in lots of new builds due to contract work. Some are good, some are terrible. For examples my last place dropped to bits within 6 months. Kitchen build was terrible, velux window leaked, cracks appears in walls etc.

My current one is much better put together, kitchen has (some) quality, and no leaks yet

I guess it just depends on the builder.

[tenroom]

Buy-to-let investors are still smiling - but for how long?

Really ??!!

If one had taken notice of ANYTHING you posted lasted year, BTLers spent most of it crying into their miso soup. How long can you keep being wrong ?

[millionaire]

Oh look, another BTLer who seems to be unable to construct a paragraph, let alone think outside the box.

Interesting times. Some of us have been lucky enough to have seen it all before. Want to know who will be left carrying the can?

Its you.

No need to be rude about my English. OK so I cant spell or construct a sentence properly let alone a paragraph, leave it there please.

Back to issues:

Do you know why I have done so well and sleep soundly at nights ?

The cheapest property I ever bought was in 2004, it cost £18,000 I fixed the roof (not me personally), rewired & replumbed, put in fire & smoke saftey equipment and redecorated. i got valued for my books price now worth £45,000

I can rent that property out at £65 per week which I often do forever in Manchester as to get a whole house for that is very good price, so I pick and choose tennants, i always go for single mums on benefits as Housing Benefit comes directly to me, they dont have to worry about it. She is also unlikely to move as it disrupts the child.

In return I give her a clean, warm safe place for her to bring that child up. the rest is up to her and the society.

Now remember I bought the property for £18,000 and its value back in 2004 after renovation was £45,000 if I sold then. I have income from the rent paying off the miniscle mortgage on the property and a happy tenants.

So I ask again, why should BTLers like me worry about economic cycles.

I dont.

[Realistbear]

No need to be rude about my English. OK so I cant spell or construct a sentence properly let alone a paragraph, leave it there please.

Back to issues:

Do you know why I have done so well and sleep soundly at nights ?

The cheapest property I ever bought was in 2004, it cost £18,000 I fixed the roof (not me personally), rewired & replumbed, put in fire & smoke saftey equipment and redecorated. i got valued for my books price now worth £45,000

I can rent that property out at £65 per week which I often do forever in Manchester as to get a whole house for that is very good price, so I pick and choose tennants, i always go for single mums on benefits as Housing Benefit comes directly to me, they dont have to worry about it. She is also unlikely to move as it disrupts the child.

In return I give her a clean, warm safe place for her to bring that child up. the rest is up to her and the society.

Now remember I bought the property for £18,000 and its value back in 2004 after renovation was £45,000 if I sold then. I have income from the rent paying off the miniscle mortgage on the property and a happy tenants.

So I ask again, why should BTLers like me worry about economic cycles.

I dont.

Okay, you may have got it right. But in the real world most people are mugs. And the crowd drive the market.

[millionaire]

Okay, you may have got it right. But in the real world most people are mugs. And the crowd drive the market.

True enough, but are they just playing at what is a serious business to prop up their retirement as i cant see many investors making catastrophic mistakes if they do then should and probably have to find a new line of work.

Edited February 22, 2007 by millionaire

[bubbleturbo]

So I ask again, why should BTLers like me worry about economic cycles.

I dont.

Simply because you are too ill informed and ill educated to understand them. Go and do some research, perhaps read some information. Look up the Miles report on google.

Then you will see that the ones ramping the market and predicting great times forever and ever have a vested interest in doing so. They will be doing this while they are modifying their own positions to suit what is coming, effectively taking money from people at the lower end of the property food chain, such as yourself.

I like your username by the way. If you have debt though, surely this has to be deducted. Also, until you sell, you simply have an illiquid asset with a paper value.

House prices are a matter of opinion, debt is real.

Edited February 22, 2007 by BubbleTurbo

[Warwick]

I can rent that property out at £65 per week which I often do forever in Manchester as to get a whole house for that is very good price, so I pick and choose tennants, i always go for single mums on benefits as Housing Benefit comes directly to me, they dont have to worry about it. She is also unlikely to move as it disrupts the child.

IIRC, the main downside to that is if the HB is reclaimed by the Local Authority - it will be you who has to pay it back.

[Converted Lurker]

As a serious BTLer I am not concerned at all with this news. I have heard doomsayers since 2001 when I kicked off. Just over a million pounds worth of property and plenty of liquid cash in the bank.

Not to mention LLoyd TSB bending over backwards for me at my local branch to give me whatever I want.

100% occupany for well over 1000 days now and everyone seems happy.

I look at reports like this ( and thank for relist bear for taking the time), I feel that some scare mongering is employed to panic buy to letters to dump a lot of proprty on the market to engineer a crash. Sorry but its not going to happen.

Most savvy buy to lets businessman/women didnt buy their house at a premium and then get a tenant in and now grabbing their ankles in case of a crash. We bought the roughest property in town for practically nothing, brought it into the 21st century with rewiring, replumbing, cosmetic work and new kitchen bathroom suite (takes about 3 weeks) and then we get tennants in and we have serious increased the price of the property in the meantime. If the market went sour, that just means with load up our portfolios with as many properties as we can handle, not dump them on the market.

You must divorce your own experiences from that of the majority of the buy to let investment crowd who hit the pavements in 2003-2004. Paragon, the largest (by some distance) independent direct lender, increased their lending by 80% last year and the CML suggest borrowing for BTL exclusively increased some 40%+ in 2006. These are huge dangerous numbers.

If you captured your units as early as 2001 and more importantly stopped buying shortly thereafter you were indeed a very wise man. The problems for the many far outweigh the wise investment strategies you and early adopters made. There's an article floating around somewhere suggesting a 20% correction in prices would see 40-50%% of BTL purchases in negative territory. That was last year, with the growth since last year this situation could be even worse.

How these investors will cope if rates reach 5.75%, causing their I.O. BTL mortgages to be approaching 8% remains to be seen.

[Casual Observer]

Really ??!!

If one had taken notice of ANYTHING you posted lasted year, BTLers spent most of it crying into their miso soup. How long can you keep being wrong ?

RB has become a parody of himself I'm afraid. More and more posters are pointing out contradictions like this.

Edited February 22, 2007 by Casual Observer

[Realistbear]

RB has become a parody of himself I'm afraid. More and more posters are pointing out contradictions like this.

QUOTE:

Buy-to-let investors are still smiling - but for how long? ohmy.gif

Have you read what this thread is about??????????????????

Just because the Guardian go bear on BTL is not a contradiction of anything. Perhaps you didn't notice that the article was not authored by me? The above quote is a cut and paste from the article!! I didn't write it.

I have always regarded BTL as irrational exuberance. At least, since 2001 which is where prices will be headed as Great Crash 2 does its work.

Edited February 22, 2007 by Realistbear

[millionaire]

IIRC, the main downside to that is if the HB is reclaimed by the Local Authority - it will be you who has to pay it back.

Can I just correct you on that point. That is definitly not the case. The claimant is asked to pay the money back to DWP not me.

That would be like asking Tescos to pay back the DWP for money spent in their stores.

[bigsmelly]

Guys.... give "millionaire" a break.

seems like he's got his head screwed on.

Seems like the uber bears can't accept that someone could continue to make money from BTL.

Remember, even in a falling market there is still money to be made.

good luck to him. Seems like he'll be one of the few able to increase his portfolio in the coming correction.

[Realistbear]

Where did CO go?

[Realistbear]

Guys.... give "millionaire" a break.

seems like he's got his head screwed on.

Seems like the uber bears can't accept that someone could continue to make money from BTL.

Remember, even in a falling market there is still money to be made.

good luck to him. Seems like he'll be one of the few able to increase his portfolio in the coming correction.

He may have obeyed the golden rule of investing. Bought low. But---------there is a time to sell high. Buy low-sell high cannot be beaten. Most lose because they hang on too long. Read my quote from Buffett below. He is the world's 2nd richest man because he follows the golden rule.

The mugs who got in late bought high and will be forced to sell low.

[pod]

Yields of 4.7%...!

In Belfast and surrounding areas yields can be 2.5%, though of course a 50% drop in prices would soon increase the yield figure.

[millionaire]

Simply because you are too ill informed and ill educated to understand them. Go and do some research, perhaps read some information. Look up the Miles report on google.

Then you will see that the ones ramping the market and predicting great times forever and ever have a vested interest in doing so. They will be doing this while they are modifying their own positions to suit what is coming, effectively taking money from people at the lower end of the property food chain, such as yourself.

I like your username by the way. If you have debt though, surely this has to be deducted. Also, until you sell, you simply have an illiquid asset with a paper value.

House prices are a matter of opinion, debt is real.

If I am ill educated and ill informed to understand things and I making serious money, then you must be a billionaire looking down your spectacles throught Miles report at us all.

As for debt, it doesnt worry me as long as I can afford to pay it off, which I can.

As for selling, why would I want to do that.

If you want to play with the big boys, leave your school books behind, watch and learn on the job.

[bazzzzzzz]

QUOTE:

Buy-to-let investors are still smiling - but for how long? ohmy.gif

Just because the Guardian go bear on BTL is not a contradiction of anything.

The Guardian have not gone bear on BTL at all and nothing in the article suggests they have and, in any event, the piece is not an editorial. This appears to be the writers' position on BTL which is not bearish in the slightest:

One thing no one knows is how the new army of buy-to-let investors will behave if or when the property market takes a nosedive. Will they offload their properties en masse, and prompt a market collapse, or will they hold their nerve when the going gets tough? The doomsters have, so far, been proved wrong, and it is a brave commentator who will predict the demise of this new class of property owners.

[Gone baby gone]

If you want to play with the big boys, leave your school books behind, watch and learn on the job.

It's too late for that - the big boys sold their BTL last year and have moved onto other things...

[Casual Observer]

which is where prices will be headed as Great Crash 2 does its work.

You've been telling us that "Great Crash 2" `has started for over 15 months, now.

You should get the moderators to amend those blue arrows on the home page's table. Shouldn't they be red? And isn't that graph upside down?

Edited February 22, 2007 by Casual Observer