canny man Posted September 11, 2007 Share Posted September 11, 2007 The, if property falls then people will rush in argument comes up a lot and supposes that this will limit falls. I doubt it. Just suppose the market has been falling at 2% a month for 4 months. Will potential purchasers rush in at this point and say, 'right now's the time, I can cover a mortgage with rent again'. or will they hold out for just another month or two which could mean saving another £4-£8k? and then why not hold out longer? Quote Link to comment Share on other sites More sharing options...
Guest tbatst2000 Posted September 11, 2007 Share Posted September 11, 2007 Bye Bye-to let? Not according to this: http://business.guardian.co.uk/story/0,,2166309,00.html Quote Link to comment Share on other sites More sharing options...
Mr. Gruff Posted September 11, 2007 Share Posted September 11, 2007 (edited) If you have a flat worth £200k with a mortgage of £150K you have £50k equity. If prices fall by 10% to £180k you have £30k equity. ie a fall of 40% because of a 10% slide in prices. Yes they will be running to the doors !! You're forgetting one thing. BTL investors may have had a flat worth 200k with a 150k mortgage, but there's a good chance that the 50k would then be withdrawn to buy another flat at 200k with 50k deposit and 150k mortgage. Continue the process and you end up with huge leverage. And from the first 2 you have 350k debt on assets worth 400k, never mind any MEW for X5s or anything like that. A drop of 10% value wipes out 80% of value, a drop of 15% puts the investor in 10k of negative equity. Add another property, say total asset value 600k, debt 550k, and suddenly it takes less than 10% to drop people into negative equity. Add solicitors fees and CGT/stamp duty and suddenly you are looking at equity wiped out in a stroke. A lot of BTL investors won't be in this position, but many will. I know quite a few who buy as soon as their portfolio has enough equity to allow it. The problem is that many don't think prices will drop and are putting themselves at huge risk by expanding their portfolio to take on more risk. I actually don't think they will race to get out, but I think that many will hold on to their properties until they are forced to sell or they are repossessed by the bank. Edited September 11, 2007 by Mr. Gruff Quote Link to comment Share on other sites More sharing options...
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