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Buy-to-let Alive And Well

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A mixed article here, but the central message is clear.

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http://business.guardian.co.uk/story/0,,2166309,00.html

Buy-to-let alive and well

Ashley Seager, economics correspondent

Tuesday September 11, 2007

Guardian Unlimited

Buy-to-let investors are continuing to pile into the property market in spite of rising interest rates, lured by strong rises in rents, the Royal Institution of Chartered Surveyors said today.

Demand for rental property is being supported by the inability of many would-be first-time buyers to afford anything. It is also being fuelled by predictions that the housing market may slow down next year, which encourages potential buyers to hold off.

The RICS said that new landlord instructions (an indicator of buy-to-let activity) picked up sharply in the second quarter of the year, with 20% more surveyors reported a rise rather than a fall in landlord instructions, up from 8% in the previous quarter. This is the first time in 15 months that the figure has moved above the long run average of 16%.

Article continues

Moreover, 29% more surveyors reported a rise than a fall in tenant lettings, up from 15% in the last quarter. "Deteriorating accessibility, tight supply and a slowing housing market has kept would-be home buyers in the rental sector, with many adopting a wait and see approach," said RICS spokesman Jeremy Leaf.

RICS said rents are now rising at the fastest pace in the survey's history and would hit record levels in the current quarter.

"Rising rents are offering some compensation for landlords that are experiencing higher borrowing costs although buy-to-let investment will struggle for funding in 2008 as lenders become more discriminating, especially for 'sub-prime' properties," it said.

RICS also noted an increase in sales of rented property in London and the south east, where rising interest rates have in some cases pushed mortgage costs well above rental income, encouraging some landlords to sell up.

Across the country as a whole, the number of surveyors offloading properties also rose at its fastest pace for two years, although with just 6% of surveyors reporting a rise it stayed well below the peak of 10% reached during the second quarter of 2004.

Separate figures from the Association of Residential Letting Agents said tenant demand outstripped supply in all areas of the market.

The level of rents also rose in all areas to an all-time high, continuing a trend which started at the beginning of the year.

The group said more than half of landlords had reported an increase in rents during the three months to the end of August, also a new high.

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Guest wrongmove

Buy-to-let alive and well

"Buy-to-let investors are continuing to pile into the property market in spite of rising interest rates, lured by strong rises in rents, the Royal Institution of Chartered Surveyors said today.

Demand for rental property is being supported by the inability of many would-be first-time buyers to afford anything. It is also being fuelled by predictions that the housing market may slow down next year, which encourages potential buyers to hold off.

The RICS said that new landlord instructions (an indicator of buy-to-let activity) picked up sharply in the second quarter of the year, with 20% more surveyors reported a rise rather than a fall in landlord instructions, up from 8% in the previous quarter. This is the first time in 15 months that the figure has moved above the long run average of 16%.

Moreover, 29% more surveyors reported a rise than a fall in tenant lettings, up from 15% in the last quarter. "Deteriorating accessibility, tight supply and a slowing housing market has kept would-be home buyers in the rental sector, with many adopting a wait and see approach," said RICS spokesman Jeremy Leaf.

RICS said rents are now rising at the fastest pace in the survey's history and would hit record levels in the current quarter.

"Rising rents are offering some compensation for landlords that are experiencing higher borrowing costs although buy-to-let investment will struggle for funding in 2008 as lenders become more discriminating, especially for 'sub-prime' properties," it said.

RICS also noted an increase in sales of rented property in London and the south east, where rising interest rates have in some cases pushed mortgage costs well above rental income, encouraging some landlords to sell up.

Across the country as a whole, the number of surveyors offloading properties also rose at its fastest pace for two years, although with just 6% of surveyors reporting a rise it stayed well below the peak of 10% reached during the second quarter of 2004.

Separate figures from the Association of Residential Letting Agents said tenant demand outstripped supply in all areas of the market.

The level of rents also rose in all areas to an all-time high, continuing a trend which started at the beginning of the year.

The group said more than half of landlords had reported an increase in rents during the three months to the end of August, also a new high."

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Demand for rental property is being supported by the inability of many would-be first-time buyers to afford anything. It is also being fuelled by predictions that the housing market may slow down next year, which encourages potential buyers to hold off.

So the BTL market is being fuelled by a growth in negative sentiment on capital gains?

Interesting logic.

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We will get these bullish articles popping up all the way to the bottom.

Just like last time around ;). http://www.housepricecrash.co.uk/wiki/Read...ast_time_around

It's quite possible Buy to let is genuinely stepping in to take up the market slack, and that this will prevent short term price reductions. There's a massive amaetur over-optimisim for taking hugely leveraged investments in a parabolic real estate market that's clearly past value and quite frankly offers the potential for far smaller gains than it does losses.

Of course, governments manipulate real estate markets, so I wouldn't want to be actively short - but you'd be a fool to think there is no risk of serious economic collapse in the next couple of years, or at least a mild recession. As traders, the people who ignore increasing risk on leveraged bets are always top of the total return boards because they always buy on dips - which works well until there's some sort of market volatility where the dips keep going and then almost all of them get wiped out. I really hope I don't have to wind up paying their pentions ... this market needs the idiots regulated out of it; that capital could be soooo much better allocated.

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The RICS said that new landlord instructions (an indicator of buy-to-let activity) picked up sharply in the second quarter of the year, with 20% more surveyors reported a rise rather than a fall in landlord instructions, up from 8% in the previous quarter.

So April to June showed an increase - which just happens to be before all the current credit troubles started rearing its head and before the BOE raised interest rates in July.

All this article says to me is that there is more BTL properties bought at the top. I expect these to cause there owners problems in 2 years time when they find that they cant remortgage at decent deals as LTV has been eroded.

I also found the "RICS said rents are now rising at the fastest pace in the survey's history " interesting as it doesnt say by how much and so without being quantifiable doesnt mean much in itself.

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Similar article on sky news

Buy-To-Let Take-Ups At Record Level

Updated: 08:40, Tuesday September 11, 2007

Buy-to-let investors seem to be pouring back into the property market as rents rise because people cannot afford to buy their own home.

Demand for rented property is being boosted by recent house price rises which have left many would-be first-time buyers struggling to get on to the property ladder.

And rising uncertainty about house prices and a slowing property market are causing many would-be buyers to adopt a "wait and see" approach, says the Royal Institution of Chartered Surveyors.

During the second quarter of the year 29% more surveyors reported a rise in the number of people renting, than those who saw a fall, up from 15% during the previous three months, the group said.

At the same time, 20% more surveyors saw an increase in investment landlords buying properties than those who saw a fall.

This was up from just 8% during the previous quarter and was the first time the figure moved above its long-term average of 16% for 15 months.

Rents are now rising at their fastest pace in the surveyors' history, and they are expected to reach record levels during the coming quarter, the group said.

But RICS said there was also evidence that some highly geared landlords may be feeling the pinch from higher interest rates.

In London and the South East, where investment landlords tend to be more sensitive to interest rate changes, the number of people selling properties rose above the survey's average.

"Current economic uncertainty has created an ideal platform for buy-to-let investors to cash in on rising rental levels," RICS spokesperson Jeremy Leaf said.

"Many would-be buyers have decided to wait and see how the interest rate cycle will affect the market.

Average rents now ranged from £819 a week for a house in top areas of London to £345 a week in the South East and £230 a week in the rest of the country.

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Guest wrongmove
Do you consider STRing as being actively short?

I'm not Kinky :unsure: but I would say that STR and FTB are both "short housing", though not both by choice.

Every needs a house, and most of us aspire to own it, so no house is short, one house is neutral, two or more houses is long, IMHO.

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If the article is correct, then I read it as follows:

:that the tenants holding off now will come back to the housing market in some future time period, therefore, they will not need their rental properties, so the between the lines meaning for BTL landlords is that they will be Stuffed THEN with A: already fallen houseprices, and B: no tenants who will be themselves buying cheap, affordable, homes.

Am I right or is there another explanation

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Guest DissipatedYouthIsValuable
If the article is correct, then I read it as follows:

:that the tenants holding off now will come back to the housing market in some future time period, therefore, they will not need their rental properties, so the between the lines meaning for BTL landlords is that they will be Stuffed THEN with A: already fallen houseprices, and B: no tenants who will be themselves buying cheap, affordable, homes.

Am I right or is there another explanation

The whole article is just *****y Lysenkoist claptrap from an organisation which thrives on swallowing the salty cum of the building industry.

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This is such horseshit. I read the article in the FT this morning. The surge is 39% of landlords reporting a rise. Which means 61% didn't. And half of them, 29%, saw a fall.

After this and the Iraq 'surge', has surge taken on a new meaning I am unaware of?

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Being a bit young to remember, was BTL such a big factor "last time"? Were there numerous property reality TV shows drumming home the message that BTL is "easy money"? etc. I'm guessing not.

I think that many people are so pro BTL that they will continue to pour money in. Im talking about the wealthier members of our divided society who will still be able to afford to. So even if prices do drop, Id be afraid that when that nice FTB house comes up at 40% discount Im gonna get outbid by a wealthier invester. I stretch my offer a bit. But its easily beaten because the asking price is a bit of a joke now to the rich end of society.

I still have a nagging feeling that a crash could come but the big winners will still be BTLs who will always be able to out compete struggling FTBs to provide their pensions. Especially when at these prices rent will look good and people will be thinking about a recovery.

Is my worry missplaced?

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This is such horseshit. I read the article in the FT this morning. The surge is 39% of landlords reporting a rise. Which means 61% didn't. And half of them, 29%, saw a fall.

After this and the Iraq 'surge', has surge taken on a new meaning I am unaware of?

I'd expect landlords to raise rents once every three years - hence the 39%. Hold on what happened to annual increases.....

As I pointed out above these figures are from the SECOND QUARTER of the year - times have changed since then. :lol::lol:

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If there is a housing shortage and there are less properties for rent, then rental values will increase.

OO (Owner Occupiers) and tenants will both be paying more for their housing needs.

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I sincerely hope you are right my friend....

the Guardian has become a cheerleader for many things including more prisons, tougher laws, less personal freedom, support for the neo-con stance on the middle east and property ramping/BTL.

so no surprise it should appear in that rag of a newspaper.

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Being a bit young to remember, was BTL such a big factor "last time"? Were there numerous property reality TV shows drumming home the message that BTL is "easy money"? etc. I'm guessing not.

I think that many people are so pro BTL that they will continue to pour money in. Im talking about the wealthier members of our divided society who will still be able to afford to. So even if prices do drop, Id be afraid that when that nice FTB house comes up at 40% discount Im gonna get outbid by a wealthier invester. I stretch my offer a bit. But its easily beaten because the asking price is a bit of a joke now to the rich end of society.

I still have a nagging feeling that a crash could come but the big winners will still be BTLs who will always be able to out compete struggling FTBs to provide their pensions. Especially when at these prices rent will look good and people will be thinking about a recovery.

Is my worry missplaced?

To a certain extent yes. A lot of small buy to let investors use equity in existing properties to provide the deposit for the next (most BTL mortgages are 75%/80% LTV). As prices stagnate/fall/dont go anywhere then there isnt the opportunity to release the equity to fund the next purchase. Even a £140,000 house needs a £28k deposit plus stamp duty/legal fees so say £30k. Thats an awful lot of equity to withdraw in a flat/falling market.

now your 40% discout happens so the £140k house is now £84k the BTL investor still needs a 20% deposit which he wont have because his other BTL properties are 40% lower.

Of course there will always be the professional property investors but these only count for a smaller percentage of the BTL market.

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So the Guardian are saying oil and metals are on the down and Rents are on the up? Rents should offset the oil/metal coming down. Inflation is on the up with food costs increasing then :P

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Being a bit young to remember, was BTL such a big factor "last time"? Were there numerous property reality TV shows drumming home the message that BTL is "easy money"? etc. I'm guessing not.

No people did not think that. Last time the boom and bust was caused by Midas changes http://news.bbc.co.uk/1/hi/uk/141485.stm

Of course after the deadline no one wanted to buy - with obvious results added to higher interest rates and you had the perfect storm.

It is different this time. I believe it is partly caused by immigration but even if we never have a crash on 1988/9 levels

some people will not believe it.

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I suspect that Interest rates rising to 15% might have had something to do with the last bust, plus the number of middle management that were laid off high inflation and large amounts of debt, to name a few. Miras was a drop in the ocean

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Whether the figures are thee months out of date or not, it is depressing reading. The figures indicate that:

1) Prices are STILL rising.

2) Rents are probably still rising.

Despite the armageddon theories banded around by RB etc, I am finding it difficult to imagine falling prices, never mind a drop bigger than 10% 12 months from now (or 24 months). Hell, even a 10% drop only puts prices back to last year sometime which is no solution.

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http://newsvote.bbc.co.uk/1/hi/business/6988664.stm

Sorry if already posted.

Just taking an extract....

"The average weekly rent for a flat in London is now £525 a week, with £215 a week being charged in the South East and £150 in the rest of the UK"

So the average rent for a flat in London is around £500 a week, meaning over £25,000 a year? Seems a little high for me, esp as this is meant to be the "average".

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