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200,000 Buy-to-let Investors Lose

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Around 200,000 buy-to-let investors have lost up to 90 per cent of the cash they put into their properties, new research shows.

With house prices falling at their fastest rate since records began in 1973, these losses are set to get even bigger in the coming months.

The findings signal that Britain's buy-to-let bubble has burst - a disaster for those who had counted on property to be their pension.

There are about one million buy-to-let loans in the UK but, worryingly, around 200,000 were taken out last year at the height of the boom.

Many of those were amateur investors acquiring their first buy-to-let property with no professional property experience.

After a decade of booming house prices it must have looked like a one-way route to riches.

But a report by financial advisers Hargreaves Lansdown reveals that they now face negative equity, which means their mortgage is larger than the value of their property.

The research examined those who made a buy-to-let investment just before prices peaked last October.

This group is most at risk as their property started to fall in value almost instantly and has been going down ever since.

The report gave the example of a £200,000 home bought in September with a ten per cent deposit, which has lost 9 per cent of its value since October and it is now worth £182,000. The unfortunate buyer has lost £18,000 of his or her £20,000 deposit - a 90 per cent loss.

Laith Khalaf, pensions analyst at Hargreaves Lansdown, said: 'If you are in this worst- case scenario, you are staring over the cliff edge of negative equity. Just a further one per cent fall in house prices will push you over.'

Even if the investor put down a 50 per cent deposit they would have lost 18 per cent of their investment.

If they put down the average buy-to-let investor's deposit of 15 per cent, they would have lost 60 per cent of their money.

Around one in five buy-to-let investors could be in negative equity within a year, according to the ratings agency Standard & Poor's.

This prediction is based on its forecast that house prices will fall a further 17 per cent.

Yesterday the accountants Baker Tilly said its insolvency division is getting an increasing number of enquiries from professional buy-to-let landlords.

A recent survey of 8,000 landlords by Britain's biggest buy-to-let lender, Bradford & Bingley, found 46 per cent said their reason was to 'provide a pension.'

But Hargreaves Lansdown said its research highlights the danger of this approach.

Mr Khalaf said: 'For the vast majority of the population, buy-to-let should not be seen as an alternative to making regular savings into a pension.'

Before the housing boom a decade ago, there were less than 30,000 buy-to-let mortgages.

:lol::lol::lol:http://www.mailonsunday.co.uk/news/article...se-90-cash.html :lol::lol::lol:

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Maybe if the Labour Government had taken action in relation to Equitable Life, Allied Steel & Wire pension fund collapse etc, there would not have been so many people anxious to seek a "safe" way of guarding against the risks of old age.

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Losing the equity is bad enough, but how many of these BTL muppets realise that the bank is perfectly entitled to come back to them for a chunk of cash in order to restore the original loan-to-value ratio.

Whether the banks actually will make margin calls on BTL mortgages remains to be seen. We are in uncharted territory. But they certainly can!

And if they do, and the borrower can't pay, they will start repossession proceedings.

Happy days!

:lol:

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Maybe if the Labour Government had taken action in relation to Equitable Life, Allied Steel & Wire pension fund collapse etc, there would not have been so many people anxious to seek a "safe" way of guarding against the risks of old age.

And:

Not removing the tax credit (last estimate I read was £100bn take so far)

Hastening the death of private sector final salary schemes

At my last company only about 1 in 5 of people in their 20s / early 30s were in the company scheme. I asked a few down the pub why not and the general view was they'd had a good look at the scheme and decided it wasn't very good so were making alternative arrangements. Not, in fact, private pensions but ISAs and... BTL.

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Around 200,000 buy-to-let investors have lost up to 90 per cent of the cash they put into their properties, new research shows.

With house prices falling at their fastest rate since records began in 1973, these losses are set to get even bigger in the coming months.

The findings signal that Britain's buy-to-let bubble has burst - a disaster for those who had counted on property to be their pension.

There are about one million buy-to-let loans in the UK but, worryingly, around 200,000 were taken out last year at the height of the boom.

Many of those were amateur investors acquiring their first buy-to-let property with no professional property experience.

After a decade of booming house prices it must have looked like a one-way route to riches.

But a report by financial advisers Hargreaves Lansdown reveals that they now face negative equity, which means their mortgage is larger than the value of their property.

The research examined those who made a buy-to-let investment just before prices peaked last October.

This group is most at risk as their property started to fall in value almost instantly and has been going down ever since.

The report gave the example of a £200,000 home bought in September with a ten per cent deposit, which has lost 9 per cent of its value since October and it is now worth £182,000. The unfortunate buyer has lost £18,000 of his or her £20,000 deposit - a 90 per cent loss.

Laith Khalaf, pensions analyst at Hargreaves Lansdown, said: 'If you are in this worst- case scenario, you are staring over the cliff edge of negative equity. Just a further one per cent fall in house prices will push you over.'

Even if the investor put down a 50 per cent deposit they would have lost 18 per cent of their investment.

If they put down the average buy-to-let investor's deposit of 15 per cent, they would have lost 60 per cent of their money.

Around one in five buy-to-let investors could be in negative equity within a year, according to the ratings agency Standard & Poor's.

This prediction is based on its forecast that house prices will fall a further 17 per cent.

Yesterday the accountants Baker Tilly said its insolvency division is getting an increasing number of enquiries from professional buy-to-let landlords.

A recent survey of 8,000 landlords by Britain's biggest buy-to-let lender, Bradford & Bingley, found 46 per cent said their reason was to 'provide a pension.'

But Hargreaves Lansdown said its research highlights the danger of this approach.

Mr Khalaf said: 'For the vast majority of the population, buy-to-let should not be seen as an alternative to making regular savings into a pension.'

Before the housing boom a decade ago, there were less than 30,000 buy-to-let mortgages.

:lol::lol::lol:http://www.mailonsunday.co.uk/news/article...se-90-cash.html :lol::lol::lol:

Great post.

I hope the banks are even more mean and ruthless than normal, and afterall, they have their jobs to think of. Getting their property deeds back off some soon-to-be-chavs would make me for one very happy.

Wait until the losses go into REAL 90% of the total value of the property.

Edited by renterbob

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Around 200,000 buy-to-let investors have lost up to 90 per cent of the cash they put into their properties, new research shows.

I wonder how much of that cash lost was leveraged from another BTL property, their owner occupied property or some other loan of some sort?

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These figures only include losses based on official VI house price losses, while EA provided anecdotals show that to sell a house you are looking at 20% + off current asking to secure interest and a sale.

This means that most likely, in actualitee, they 200,000 have lost ALL their money and are in serious negative equity.

No wonder BB and AL are in deepest Doo doo.

and with only 20% of the transactions taking place that there were a year ago, a forced seller is going to be taking the fast track to bankruptcy court.

Margin calls? these amateurs cant afford to post a letter of reply to a demand.

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These figures only include losses based on official VI house price losses, while EA provided anecdotals show that to sell a house you are looking at 20% + off current asking to secure interest and a sale.

This means that most likely, in actualitee, they 200,000 have lost ALL their money and are in serious negative equity.

No wonder BB and AL are in deepest Doo doo.

and with only 20% of the transactions taking place that there were a year ago, a forced seller is going to be taking the fast track to bankruptcy court.

Margin calls? these amateurs cant afford to post a letter of reply to a demand.

House of cards. :o

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And:

Not removing the tax credit (last estimate I read was £100bn take so far)

Hastening the death of private sector final salary schemes

At my last company only about 1 in 5 of people in their 20s / early 30s were in the company scheme. I asked a few down the pub why not and the general view was they'd had a good look at the scheme and decided it wasn't very good so were making alternative arrangements. Not, in fact, private pensions but ISAs and... BTL.

This is my experience too. I've lost count of the number of colleagues I've heard say "property is my pension" who aren't saving anything anywhere else.

It wouldn't be so bad if they'd actually run the numbers with a qualified advisor to see how the model plays out through various scenarios, but actually what they've done instead is "invested" without knowing what the likely outcomes are.

Kerry Packer once said that anyone who thinks they aren't paying enough tax needs their head examining. These BTL "pensioners" are missing out on the tax relief on their income, so the portfolio needs to really perform to get anywhere near a decent comparitive return.

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This is my experience too. I've lost count of the number of colleagues I've heard say "property is my pension" who aren't saving anything anywhere else.

It wouldn't be so bad if they'd actually run the numbers with a qualified advisor to see how the model plays out through various scenarios, but actually what they've done instead is "invested" without knowing what the likely outcomes are.

Kerry Packer once said that anyone who thinks they aren't paying enough tax needs their head examining. These BTL "pensioners" are missing out on the tax relief on their income, so the portfolio needs to really perform to get anywhere near a decent comparitive return.

well, whomever says this guvmint is out of touch needs to rethink.

Was it not about 4 years ago, that our then chancellor proposed and just about enacted a change to the pension rules where you cold INCLUDE BTL in your pension package of investments?

Just imagine WHERE the bursting point of this bubble would have been if this stupid stupid idea had actually gone through.

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I wonder how much of that cash lost was leveraged from another BTL property, their owner occupied property or some other loan of some sort?

I know a gentleman in Ealing who bought a 750K flat for his son in Kensington doing just that, every penny was secured on the fathers house. I spoke to him a few weeks ago and he asked me what I thought was going to happen in the housing market 'total chaos for years to come, stock up on food' I said. His face dropped, and as I was in the house of my brother-in-law at the time (also in deep doo doo if HPC goes forth) I toned it down.

The fathers house is worth maybe 3 million peek (so max 2 mill now) and the sons now down to 1 mill, or less. In a year they will be in neg equity.

This must be rife and the most unsuspecting 'homeowner' may get dragged into this mess we call 'home ownership'.

As a low life scummy renter I am laughing my bo***** off.

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Like winning in the casino of life, you either chance your luck to double your money with the risk you could lose it all...or you can recognise your luck, and take the money and run. ;)

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There are about one million buy-to-let loans in the UK but, worryingly, around 200,000 were taken out last year at the height of the boom.

And I know a couple of them. I've only spoken to one about it since the crash gathered momentum who became an 'accidental' BTL last year when she married a bloke who had just bought a flat. When they moved into her house together, they ummed and aaahed about keeping the flat. They were within a whisker of selling it last year (I strongly advised them to) when a muppet EA suggested they hold onto it as it'd go up in value next year (2008) because of the Olympics effect (it's in a cr@ppy part of East London)! They believed him - they got greedy. It's tanked in value since and I know for a fact that the rent wasn't even covering the mortgage last year - they were relying on capital gain.

The only mention of it was 2 weeks ago when she said: 'Weren't you clever getting out of the market when you did - we're stuck with this flat now and we're buggered...'

The other bloke I know simply hasn't mentioned the BTL he bought in 2007 as he knows my thoughts on the market. It's the elephant in the room whenever we meet...but I know he's leveraged to the nuts and fecked.

How many of these 200,000 (not to mention the previous 3 years' worth of BTLers) are going to jump before they get pushed, I wonder? ;)

Edited by red

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Like winning in the casino of life, you either chance your luck to double your money with the risk you could lose it all...or you can recognise your luck, and take the money and run. ;)

Trouble is, these muppets aren't going to have a decent pension come retirement age. There's some significant social consequences to that;

- More people having to work past 65, so excluding younger folk from jobs

- Bigger state benefit bills, higher taxes for those of us left paying tax

- Less disposable income, driving down the economy

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Trouble is, these muppets aren't going to have a decent pension come retirement age. There's some significant social consequences to that;

- More people having to work past 65, so excluding younger folk from jobs

- Bigger state benefit bills, higher taxes for those of us left paying tax

- Less disposable income, driving down the economy

How we are are all going to provide for ourselves in our old age is a very big problem that is about to unfold...the future is not looking too bright at the moment, our economy will be driven down to more sustainable levels...we have never had it so good, and a reality shock is overdue. ;)

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Like winning in the casino of life, you either chance your luck to double your money with the risk you could lose it all...or you can recognise your luck, and take the money and run. ;)

Trouble is GREED clouds the judgement of most people.....and when it all goes wrong its never their fault....!

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Infinitely rising house prices require infinitely rising wages.

The lesson: If you are seeking an alternative investment as a pension, do not choose to invest in a pyramid scheme. :rolleyes:

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QUOTE (1929crash @ Aug 2 2008, 04:05 AM)

Maybe if the Labour Government had taken action in relation to Equitable Life, Allied Steel & Wire pension fund collapse etc, there would not have been so many people anxious to seek a "safe" way of guarding against the risks of old age.

quote name='Frank Hovis' date='Aug 2 2008, 07:20 AM' post='1240768']

And:

Not removing the tax credit (last estimate I read was £100bn take so far)

Hastening the death of private sector final salary schemes

At my last company only about 1 in 5 of people in their 20s / early 30s were in the company scheme. I asked a few down the pub why not and the general view was they'd had a good look at the scheme and decided it wasn't very good so were making alternative arrangements. Not, in fact, private pensions but ISAs and... BTL.

I feel nothing but sorrow for the people who because of Nu Labour policys and theft from the pension funds turned to BTL to try secure a future pension.

For the greedy in our society having portfolios of BTLs well you reap what you sow

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Maybe if the Labour Government had taken action in relation to Equitable Life, Allied Steel & Wire pension fund collapse etc, there would not have been so many people anxious to seek a "safe" way of guarding against the risks of old age.

How true. Many people completely ceased to trust 'proper' pensions that could so easily melt away like snow in May - while the fat cat mis-managers would still walk away with their fat payoffs regardless.

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I wonder how much of that cash lost was leveraged from another BTL property, their owner occupied property or some other loan of some sort?

What about the poor sods, duped by the shiny suited presenters from Inside Track, to put the deposit on a credit card, on the promise they could pay it back within a year when they flipped or remortgaged?

So now they have negative equity on their property, AND a big credit card bill at increasingly punitive rates that they can't afford to pay back.

God help them if that card is with Cap One, M8NA or the Bearded Tw&t's red card - those guys are utterly ruthless when it comes to loading on charges, and then hounding for payment.

This could be the factor that brings on bankruptcies even quicker than the mortgage repos. It will be interesting and a bit unpleasant to watch.

B

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This is another topic that astounds me. What's so funny about people losing their money? I don't care how stupid someone has been, I don't want to see people on the streets because of their stupidity. It's sad, not funny. There's a real schadenfreude going on in these forums. Reveling in other people's misfortune is not nice.

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This is another topic that astounds me. What's so funny about people losing their money? I don't care how stupid someone has been, I don't want to see people on the streets because of their stupidity. It's sad, not funny. There's a real schadenfreude going on in these forums. Reveling in other people's misfortune is not nice.

Its not sad or funny. Its investing. its life.

people lose in investing as they do in life.

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I wonder how much of that cash lost was leveraged from another BTL property, their owner occupied property or some other loan of some sort?

This is the key point IMO.

If you used equity from an existing property at the height of the boom then in the wrost case scenario you have in effect mortgaged two properties right at the top. You have no equity cushion whatsoever on any property.

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This is another topic that astounds me. What's so funny about people losing their money? I don't care how stupid someone has been, I don't want to see people on the streets because of their stupidity. It's sad, not funny. There's a real schadenfreude going on in these forums. Reveling in other people's misfortune is not nice.

You're confusing schadenfreude with apoplectic anger. I'm livid that someone as economically illiterate as me could have spotted the fatal flaw in BTL yet I will have to pay taxes to bail out the greedy losers when their pensions don't make the grade in a few year's time.

I'm neither happy or sad for these people. I don't have any personal feelings towards them. But paying taxes for services I don't receive annoys me more than a James Blunt loop tape.

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This is another topic that astounds me. What's so funny about people losing their money? I don't care how stupid someone has been, I don't want to see people on the streets because of their stupidity. It's sad, not funny. There's a real schadenfreude going on in these forums. Reveling in other people's misfortune is not nice.

Quite agree with this; OK they may have been greedy but most are gullible as well; fortunately I'm not one of them but I have sympathy rather than crow about it; a lot of people are going to get seriously hurt by all this.

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  • 395 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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