Ft: Buy-to-let Investors Rush To Sell Amid Rate Rises

[crashtastic]

The quality of the journalism in the FT is usually very good and way above the curve. Why? Well, whilst the masses can fume over pictures of Diana's corpse or the latest picture of Paris Hilton's nipple the people that run our lives need to be in the know.

Anyway: looks like the smarter BTLers are starting to smell the bacon and are pulling their noses out of the trough. Of course, there will still be the johny-cum-latelys who think they are a property developer and will make 'miwions' because they've watched Sarah Beeney's show a couple of times....

-----------------

http://www.ft.com/cms/s/49830462-0e4a-11dc...000e2511c8.html

Buy-to-let investors rush to sell amid rate rises

By Jim Pickard, Property Correspondent

Published: May 30 2007 03:00 | Last updated: May 30 2007 03:00

Landlords are selling off properties in growing numbers as rising interest rates and falling rental returns take their toll.

The proportion of buy-to-let investors selling their property at the end of their tenant lease jumped to 5.2 per cent in the first quarter of the year, according to a survey by the Royal Institution of Chartered Surveyors (Rics). This was much higher than the 4.1 per cent figure in the final quarter of 2006. The level of selling is now at its highest in two years, according to the group.

David Underwood, an estate agent based in Stanmore, Middlesex, told Rics: "Many smaller portfolio buy-to-let investors are selling, some to cash in on capital gains."

In Dorking, Surrey, James Turnbull of White & Sons, said there was an oversupply of new flats.

"Due to the buoyant sales market, some private investors are now taking capital profits," he said.

Interest rates have leapt four times since last summer and many analysts are predicting a further jump in the cost of borrowing later this year as the Bank of England's monetary policy committee seeks to combat inflationary pressures.

But the unstoppable rise in house prices - in contrast to only modest growth in rents - has left yields (rents as a proportion of house prices) at record lows. Typically, a residential property may have a gross yield of 5 per cent.

After costs and allowing for vacancies, the figure may be closer to 3.5 per cent, far below the 6 per cent or so needed to service many buy-to-let mortgages.

In spite of this, tens of thousands of investors are still buying residential -property with a record 330,000 buy-to-let mortgages taken out last year, according to the Council of -Mortgage Lenders, a rise of 57 per cent on the previous year.

Rics predicted that many more landlords may bail out of the market while prices remained strong.

"Many landlords are -selling into the still tight housing market in light of falling gross yields and -rising borrowing costs," said Rics.

"May's interest rate rise combined with the -prospect of another rate rise in the coming months may yet lead to further landlord sales as they come under greater financial strain."

The survey found that tenant demand was slowing with landlord instructions remaining "weak". Overall tenant demand increased at its slowest pace since the start of 2005.

Copyright The Financial Times Limited 2007

[sossij]

The quality of the journalism in the FT is usually very good and way above the curve. Why? Well, whilst the masses can fume over pictures of Diana's corpse or the latest picture of Paris Hilton's nipple the people that run our lives need to be in the know.

Anyway: looks like the smarter BTLers are starting to smell the bacon and are pulling their noses out of the trough. Of course, there will still be the johny-cum-latelys who think they are a property developer and will make 'miwions' because they've watched Sarah Beeney's show a couple of times....

-----------------

http://www.ft.com/cms/s/49830462-0e4a-11dc...000e2511c8.html

Buy-to-let investors rush to sell amid rate rises

By Jim Pickard, Property Correspondent

Published: May 30 2007 03:00 | Last updated: May 30 2007 03:00

Landlords are selling off properties in growing numbers as rising interest rates and falling rental returns take their toll.

The proportion of buy-to-let investors selling their property at the end of their tenant lease jumped to 5.2 per cent in the first quarter of the year, according to a survey by the Royal Institution of Chartered Surveyors (Rics). This was much higher than the 4.1 per cent figure in the final quarter of 2006. The level of selling is now at its highest in two years, according to the group.

David Underwood, an estate agent based in Stanmore, Middlesex, told Rics: "Many smaller portfolio buy-to-let investors are selling, some to cash in on capital gains."

In Dorking, Surrey, James Turnbull of White & Sons, said there was an oversupply of new flats.

"Due to the buoyant sales market, some private investors are now taking capital profits," he said.

Interest rates have leapt four times since last summer and many analysts are predicting a further jump in the cost of borrowing later this year as the Bank of England's monetary policy committee seeks to combat inflationary pressures.

But the unstoppable rise in house prices - in contrast to only modest growth in rents - has left yields (rents as a proportion of house prices) at record lows. Typically, a residential property may have a gross yield of 5 per cent.

After costs and allowing for vacancies, the figure may be closer to 3.5 per cent, far below the 6 per cent or so needed to service many buy-to-let mortgages.

In spite of this, tens of thousands of investors are still buying residential -property with a record 330,000 buy-to-let mortgages taken out last year, according to the Council of -Mortgage Lenders, a rise of 57 per cent on the previous year.

Rics predicted that many more landlords may bail out of the market while prices remained strong.

"Many landlords are -selling into the still tight housing market in light of falling gross yields and -rising borrowing costs," said Rics.

"May's interest rate rise combined with the -prospect of another rate rise in the coming months may yet lead to further landlord sales as they come under greater financial strain."

The survey found that tenant demand was slowing with landlord instructions remaining "weak". Overall tenant demand increased at its slowest pace since the start of 2005.

Copyright The Financial Times Limited 2007

Don't forget to inform the Inland Revenue of your "capital profits", guys

[munimula]

But the unstoppable rise in house prices - in contrast to only modest growth in rents - has left yields (rents as a proportion of house prices) at record lows. Typically, a residential property may have a gross yield of 5 per cent.

After costs and allowing for vacancies, the figure may be closer to 3.5 per cent, far below the 6 per cent or so needed to service many buy-to-let mortgages.

In spite of this, tens of thousands of investors are still buying residential -property with a record 330,000 buy-to-let mortgages taken out last year, according to the Council of -Mortgage Lenders, a rise of 57 per cent on the previous year.

This is why the crash is going to be big

When these absolute economically and finacially illiterate muppets have to sell their 1-bed BTL flats they will quickly realise that there aren't any FTBs left to buy the properties from them because they priced them out of the market with their stupidity.

I wish bankruptcy and homelessness on every single one of them

[dog]

I wonder if the people who got in 'for the long term' are selling?

[dirge]

But I bet there are loads and loads of FTB's waiting for the crash, so while lots of them will be happy to rent till the bottom of the market some people that don't read this site, will jump in during the falls and save some of the BTL'ers from total ruin.

[ae589]

But I bet there are loads and loads of FTB's waiting for the crash, so while lots of them will be happy to rent till the bottom of the market some people that don't read this site, will jump in during the falls and save some of the BTL'ers from total ruin.

poor sods

[Selling up]

But I bet there are loads and loads of FTB's waiting for the crash, so while lots of them will be happy to rent till the bottom of the market some people that don't read this site, will jump in during the falls and save some of the BTL'ers from total ruin.

If they can, dirge. The problem for them is that if prices are seen to be falling, banks will be less willing to lend such extravagant mortgage multiples. So more people may want to buy, considering value to be better, but fewer of them will be able to get the cash.

[sossij]

If they can, dirge. The problem for them is that if prices are seen to be falling, banks will be less willing to lend such extravagant mortgage multiples. So more people may want to buy, considering value to be better, but fewer of them will be able to get the cash.

Yup... kind of like financial positive feedback.

[crashtastic]

I wonder if the people who got in 'for the long term' are selling?

It's been said before a number of times on here but there's a major disconnect between the 'desire' to be in for the long-term and the reality of low yields, flattening HPs, increased competition and the inevitable correction. One can have any desire one wishes, however reality usually has a very nasty habit of introducing the 'gravity principle'© to even the most loftiest of dreams.

These JCLatelys will soon learn the gravity principle when they land flat on their ****-s. 'but i thought sarah beeney and phil and kirsty said that i could be a miwionaire...sob...it's not fair'.

Edited May 30, 2007 by crashtastic

[thedebtisreal]

It's been said before a number of times on here but there's a major disconnect between the 'desire' to be in for the long-term and the reality of low yields, flattening HPs, increased competition and the inevitable correction. One can have any desire one wishes, however reality usually has a very nasty habit of introducing the 'gravity principle'© to even the most loftiest of dreams.

Indeed. Hence the reason for my signature.

[Rakno]

But I bet there are loads and loads of FTB's waiting for the crash, so while lots of them will be happy to rent till the bottom of the market some people that don't read this site, will jump in during the falls and save some of the BTL'ers from total ruin.

The problem with you hypothesis is that the banks won’t be willing to lend them the money to jump in. The banks will see negative equity problems long before most of the poor desperate FTBers will. It won't be easy getting a 7 times or 6 times or…… even 3.5 times income mortgage when prices started going south.

[House of Lords]

...Paris Hilton's nipple...

Have you got a link?

Edit: don't worry, I forgot she's a mule

Edited May 30, 2007 by House of Lords

[crashtastic]

Have you got a link?

Edit: don't worry, I forgot she's a mule

Sod that...ive got a video!

http://www.metacafe.com/watch/154274/paris...on_nipple_slip/

[The Ayatollah Buggeri]

When these absolute economically and finacially illiterate muppets have to sell their 1-bed BTL flats they will quickly realise that there aren't any FTBs left to buy the properties from them because they priced them out of the market with their stupidity.

I wish bankruptcy and homelessness on every single one of them

I'm not quite as callous. Reducing them to one home will do just fine.

[munimula]

I'm not quite as callous. Reducing them to one home will do just fine.

I could go with that...as long as it's just a 1-bed flat.

[House of Lords]

Sod that...ive got a video!

http://www.metacafe.com/watch/154274/paris...on_nipple_slip/

Is it me or is she nipple-less?

Sorry, I recognise this isn't house crash related but then they'd probably delete a whole topic on Paris Hilton's missing nipples

Edit: If anyone has the full-nipple version, please post :-)

Edited May 30, 2007 by House of Lords

[patprimer74]

The proportion of buy-to-let investors selling their property at the end of their tenant lease jumped to 5.2 per cent in the first quarter of the year

That doesn't sound a lot until you work out that, at this rate, in about 19 quarters ALL BTLs will have been put on the market. By my calculation that's takes us to somewhere around 2012.

p

[Objective Developer]

The problem with you hypothesis is that the banks won’t be willing to lend them the money to jump in. The banks will see negative equity problems long before most of the poor desperate FTBers will. It won't be easy getting a 7 times or 6 times or…… even 3.5 times income mortgage when prices started going south.

…which means that prices will have to adjust accordingly – remember, a house is only worth what someone can borrow to pay for it. If, as you suggest, banks are unwilling to lend more than say, 3.5x salary (very likely to be less), then prices will have to bottom out that much lower.

This is the problem. Housing demand and house prices are, IMHO, separate issues that have very different components. On the price side, the banks hold the reins, so when lending becomes more strict, prices will drop.

[red]

But I bet there are loads and loads of FTB's waiting for the crash, so while lots of them will be happy to rent till the bottom of the market some people that don't read this site, will jump in during the falls and save some of the BTL'ers from total ruin.

That old chestnut. When sentiment gets a grip, only fools will be buying at anything near asking price. That's why I think we'll see dramatic falls in the first stages of the crash - after the 'stand-off' phase.

[Crashman Begins]

But I bet there are loads and loads of FTB's waiting for the crash, so while lots of them will be happy to rent till the bottom of the market some people that don't read this site, will jump in during the falls and save some of the BTL'ers from total ruin.

Dont worry,

Since January sentiment in the public eye has nearly spun around.

So many articles picking up on the approaching "great crash 2"

A few BTLETERS will be lucky enough to sell in time ... but it wont be long before headlines of houseprice crash are the talk of the town & all the FTBers will be clued up....

Also with the net around young FTBers will be doing lots of research so shouldnt be as gullable

but then again.

Was the net around to help with research in the previous big crash ?

[It is different this time]

Ahhh?

If so many plan to sell "taking advantage of bouyant prices", who are they going to sell to??

to me when they accept 35% price cut, it is called "summer sale"

[Jimmy2Times]

That doesn't sound a lot until you work out that, at this rate, in about 19 quarters ALL BTLs will have been put on the market. By my calculation that's takes us to somewhere around 2012.

p

You calculation is incorrect, if the market drops 5.2% every month, then you need to compound to get the figure after N quarters;

Proportion of BTL after N quarters = ((100 - 5.2)/100)^N.

Using this formula, it will take infinate years to decrease to nothing, after 19 quarters there will be 36% of the market left.

[jonpo]

time to hold and time to fold. smart landlords exit right....

le jeu d'extrémité commence

[Ash4781]

What's the phase now ?

Bulls and bears in a valuation standoff ?

Edited May 30, 2007 by Ash4781