Landlord.uk: Uk House Price Crash: When Will The Press Stop Crying Wolf?

[BTLlivingthedream]

Landlords. Do not panic. HPI will continue forever. Rents are going up to cover falling yields. Do not sell. We are in control. Interests rates are coming down. The debt balloon can sail on forever. Move along, move along.

http://www.landlordexpert.co.uk/index.php?news=1220

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PM, Fri 28th Sept - UK House price crash: When will the press stop crying wolf

The buy to let market in the UK looks set to continue to enjoy prolific success in spite of recent interest rate rises, as a result of persistently high house prices and unsettled market conditions...

Posted: 10:41 pm, 28th September 2007

The buy to let market in the UK looks set to continue to enjoy prolific success in spite of recent interest rate rises, as a result of persistently high house prices and unsettled market conditions.

Additionally with rental income rising at the fastest rate ever recorded, there is no sign of any slowdown in investment in rental property for the foreseeable future as interest rates continue to suppress new home buys and consumer mortgage applications.

“National press have been jumping on the house price crash band wagon far too easily” said The Landlord Association Director, Mr. Daniel Francis.

“The currently higher UK interest rates have put the price of borrowing beyond many at the lower end of the market, with house prices continuing to grow year on year beyond the reach of those looking to get on the first rung of the property ladder.

“As a result, more and more people are turning towards rental property for financial reasons, combined with an upsurge in investment in property, seeing growth in the sector remain strong over the last few years. Furthermore, with the popularisation of the buy to let model in the media, it is proving continually stable in terms of growth from investors” said Mr. Francis.

“There now appears to be clear evidence that this is happening” he continued. “New figures from property agents Hamptons International show that the value of UK lettings has soared by 40 per cent between August and September this year, with many cases of landlords asking for more than 20 per cent higher rent in renewals”.

Kate Whotton, the regional lettings director Hampton’s said the research showed that the recent housing trends had "exacerbated" the situation in what was normally a busy month to start with. "The lettings market becomes more robust if the sales market suffers and this is certainly the case at the moment,"

The economy looks bright too. This month's consumer confidence figures from Lloyds TSB, showing the best interest rate expectations for over a year and the greatest optimism about employment prospects in over two years and indicates that the gloomiest views about the economy are not so widely shared.

Describing the current rental market as "incredibly strong at the moment", Hamptons Whotton added that “this was a time of year when people were moving to various cities, particularly as the start of the academic year approached or last year's graduates start new jobs.

"Landlords are taking advantage of these conditions and realising the investment opportunities available to them," she stated.

The latest research of it’s members by The Landlord Association adds testiment to the growing evidence.

Mr Francis stated that “thus far from being a doom-and-gloom situation, it appears there is a very good reason for the buy-to-let market to view the slowdown in the housing market with optimism. Of course, it may not last, but that doesn't necessarily mean a housing crash - if interest rates are cut the reverse may be true. But for now buy to let landlords should not be panicked into selling-up.

“There are some so called industry “spokesmen” advising landlords to sell-up amid bleak forecasts for the buy to let market. But, with government figures confirming an ever growing shortfall in housing stock and the probability of interest rate cuts by the new year, sensibly geared investments are quite literally as safe as houses” he added.

“I have always recommended that landlords and homeowners alike should buy sooner rather than later if affordability allows for that individual to do so. This is because no matter at what point you consider entering the market properties will always be more expensive at some stage in the future no matter how much short-term ‘instability’ threatens.

“As for a house price crash, well apparently the UK housing market is due for a massive correction in market value. This is according to some limited 'property experts' and financial advisers. Some even suggest it has started already and this has sparked the rumour that many buy-to-let investors are pulling out of the market and selling up.

“As a Director of The Landlord Association - the largest, free nationwide association for all residential landlords - and aide to thousands of buy to let investors, I can tell you that this simply isn't true, asserted Mr. Francis. This is not my opinion, it's simple fact.

"Newspapers are simply trying to use controversy to sell papers. Big headlines with the word 'crash' in it is bound to grab attention, said Mr. Francis. "If the title read 'everything normal with house prices' you wouldn't expect a shelf emptying stampede.

“Some 'experts' are predicting that a major slump has began and that with the introduction of HIPS (Home Information Packs) around the corner on all UK properties, they are suggesting that if any landlords and homeowners were thinking of selling, to do it now before the market drops and HIP’s and another possible interest rate rise puts the dampeners on the market in a big way.

“HIPS are going to become a fact of life. People will not now simply just stay in unwanted homes for life just because of a 500 pound HIP” Francis continued. “Confidence will return once the dust settles and the panic is replaced with suitable calm and a positive outlook.

“What we have briefly witnessed of late is a temporary settling of the market. Buyers and sellers both waiting for a torrent of interest rate rises to come to an end and the credit crunch to show its scars (if not minor scratches). Interest rates could fall as low as 4.5% by the end of 2008 and as long as our economy remains robust, the property market and landlords alike should benefit from long term gains and prolonged stability.

Daniel Francis, The Landlord Association

For the hottest House Price Debate, visit www.HousePriceDebate.co.uk and join your chosen group as a 'boomer', 'gloomer' or a 'neutral'.

[Paddles]

A spokesman for the Landlord's Association said "there are no American tanks in Bagdhad. The Iraqi army is winning the war".

[Jimmy2Times]

I like this quote from a supposedly VI bull on Landlordexpert.

http://www.landlordexpert.co.uk/index.php?news=1218

Property investors in the UK have been advised not to expect short-term gains on rental accommodation.

But thats exactly what 90% of recent BTL have been doing, with this statement they have scared off the very buyers that have been driving HPI over the last 3 years in particular. Sometimes its best to say nowt in situations like these.

He goes on further.

He commented: "We are in a situation where property prices are set to flat-line for a year or so."

Err, markets don't do that, exuberance driving it up, exuberance driving it down.

I just couldn't make this one up.

According to a recent report by the Association of Residential Letting Agents, only 2.5 per cent of buy-to-let landlords are looking to make a profit in the short-term.

Words fail me

[Wad]

According to a recent report by the Association of Residential Letting Agents, only 2.5 per cent of buy-to-let landlords are looking to make a profit in the short-term.

This has been the almost constant mantra of BTL investment over the last five years. The arguement went that BTL investors would not cut and run because it was 'a long term investment', it was 'their pension', they were people looking to an 'alternative to working for someone else', etc.

Unfortunately, funding a long term illiquid asset by borrowing short term variable rate money is likely to lead to very serious liquidity problems as the BTL investor will not be able to fund the cashflow shortfall between mortgage and rental income in most cases and will eventually be forced to sell out at a discount to fair market value. This is why portfolios of mortgages are being sold off at a discount by distressed lenders - they cannot refinance the long term asset they are holding (i.e the mortgage loan book). The same position will be encountered by the BTL market - they are facing fast rising mortgage rates with rents falling far short and the only way the cashflow deficit can be covered is by sales of the underlying assets.

Sounds familiar - happens in every bursting of every bubble. Credit dries up, most buyers disappear because they cannot afford to uy or they fear capital losses, many sellers then have to sell at whatever price they can get. Prices slump.

[Paddles]

If you want to have a bit of fun scaring the landlords even more, I've just noticed that they have a house price forum on their website www.landlordexpert.co.uk. You need to register (free) and then you can post away to your heart's content. I've done just that.

Spread the fear!

[chichi]

I don't think the one round here is scared. He's having a second look at the house that came up for sale this week.

Its on for 128k. rent on this street on his houses is £600 a month.

How's he doing it? Are mortgages available that mean he can make a profit?

[madasafrog]

This could be a good time to buy. I am considering it.

With the uncertainty thats in the market, you can low ball offers and may bet a good response if the vendor is in a panic sell situation. The EA may be of same sentiments and will push the vendor to accept.

The credit crunch may all blow over soon and interest rates look as if they will be cut, HPI will then resume (albeit it a sensible rate).

Its not an unlikely scenario.

[Guest pioneer31]

"Newspapers are simply trying to use controversy to sell papers. Big headlines with the word 'crash' in it is bound to grab attention, said Mr. Francis. "If the title read 'everything normal with house prices' you wouldn't expect a shelf emptying stampede.

quite unlike headlines such as 'Prices to soar' 'Price to increase by xxx% by 2010'. etc

[Guest pioneer31]

This could be a good time to buy. I am considering it.

With the uncertainty thats in the market, you can low ball offers and may bet a good response if the vendor is in a panic sell situation. The EA may be of same sentiments and will push the vendor to accept.

The credit crunch may all blow over soon and interest rates look as if they will be cut, HPI will then resume (albeit it a sensible rate).

Its not an unlikely scenario.

An IR cut will not restart it. Sentiment has already turned.

[Darkman]

Additionally with rental income rising at the fastest rate ever recorded

But when will a rental income ceiling be reached? People who can't afford to buy end up renting. Their finances won't allow spending over a certain amount. Surely they're not expected to take out a loan to pay off their rent?? haha

[chichi]

But when will a rental income ceiling be reached? People who can't afford to buy end up renting. Their finances won't allow spending over a certain amount. Surely they're not expected to take out a loan to pay off their rent?? haha

Rent officer says fair rent round here is 85 a week. Landlords charge 150

Where do you find the rest?

[South Lorne]

..

When will the press stop crying wolf

The buy to let market in the UK looks set to continue to enjoy prolific success in spite of recent interest rate rises, as a result of persistently high house prices and unsettled market conditions...

...surely this is a case of misselling.... .

[Darkman]

Rent officer says fair rent round here is 85 a week. Landlords charge 150

Where do you find the rest?

The tenant must move out. If tenants agree to pay ridiculous rents then bubble will never stop.

Frightening really.

[VacantPossession]

"Landlords Association".... another ostrich hides in the sand.

This is rich coming from yet another vested interest whose entire last decade was spent floating on the top of VI spin and press hype.

VP

Edited September 29, 2007 by VacantPossession

[JohnG]

Rent officer says fair rent round here is 85 a week. Landlords charge 150

Where do you find the rest?

Cash in hand jobs/ other fiddling.

Same as it has always been.

'Fair Rent' is a nonsense anyway.

'Market Rent' is what matters.

[chichi]

Cash in hand jobs/ other fiddling.

Same as it has always been.

'Fair Rent' is a nonsense anyway.

'Market Rent' is what matters.

Why shouldn't fair rent be set as the maximum a landlord can charge?

Ignore the fact house prices are so enormous that it'd drop loads of them in the cack.

A healthy economy needs sensible rents.

[A.steve]

Why shouldn't fair rent be set as the maximum a landlord can charge?

Ignore the fact house prices are so enormous that it'd drop loads of them in the cack.

A healthy economy needs sensible rents.

That's an interesting idea... very "Old Labour" - and, actually, it would be a spectacularly good way to resolve a public sector strike.

Put an absolute cap on rent relative to the pay scale for public sector workers... simultaneously empower tenets to demand maintenance is kept up to date, and require landlords (at their expense) to engage a government approved escrow; security of tenure and dispute resolution service... the penalty for not so doing would be confiscation of property. You'd see quite a few happy nurses and hospital porters, I bet. :-)

The genius is that it can be spun to be entirely fair; it resolves a potentially explosive situation; resolves a huge problem in the public sector; encourages young people to want to work (hence having people compete for the jobs improves standards) and all without spending a penny, so to speak. All it needs is one act of parliament.

Possible, I suppose. :-) It would scare the hell out of me if I were a landlord.