Saturday, Dec 16, 2006

The social factors boosting the buy to let market

Assetz News: Buy to let boom fuelled by changing lifestyles

As has been widely documented, the liberalisation of landlord laws in the mid-nineties has led to a remarkable boom in the UK buy-to-let market, but new research suggests that the increase in the number of renters may also be due to changing sociological trends.

Posted by jellycaster @ 11:24 AM (574 views)
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18 Comments

1. Surfgatinho said...

Assetz is a UK and International Property Investment Specialist.
Hard to take anything seriously with this at the bottom. It ishowever slightly more interesting than smoe of the crap this lot come out with!

Saturday, December 16, 2006 01:17PM Report Comment
 

2. paul said...

Simple opportunity cost of buying.

My weekly rent = 150 quid.
Cost of rented house = 200K quid.

rental yield = 3.90%
bank high interest yield = 5.25%

No new paradigm there, just old fashioned maths. The same property was sold in 2004 for 194K, 2005 for current 200K.

The buy to let boom ended in 2003. Anyone buying since has realised the same growth rates well below the bank rate.

Saturday, December 16, 2006 01:56PM Report Comment
 

3. Tangara said...

Paul,

Renters do like you, they compare interests vs rents, while BTL and Co, bet that the price will go up for a while or forever.

On the Risk side, I think the renters are in a better position, their risk is little compared to the heavy-mortgaged ones who can be ruined any morning for any reason.

Tangara

Saturday, December 16, 2006 04:18PM Report Comment
 

4. bidin'matime said...

More VI attempts to justify the continuation of the boom. When in fact it is the opposite - more and more young people decide that they will never be able to afford to buy a house and, as Paul says, they find renting cheaper, so they say 'What the hell - who wants to buy anyway?'. This is all good news for HPC and not good news for BTL, as it is a sign of more and more people bowing out of the buying market, chipping away and the pressure holding the market at its current high. Eventually, when it's just the BTLers left, and when even the most bullish realises that it's folly to 'invest' at these yields, that too will collapse and kaboom!

I had some Jehovah's Witnesses come in to the office the other day and was reminded of a friend at school who, being one, believed that the world would end in 1975. He was adamant. The odd thing is that I can now understand a bit better how he saw the rest of the world (and presumably how JWs see the world today) - as being blind to what they saw as blindingly obvious. Of course, the difference is that their belief is founded on what someone foretold a long time ago, as opposed to facts (although I am sure that they would claim that it was based on facts), whilst my view, our view, is based on an assessment of economic facts of life, but it is spooky how I suddenly felt some connection with them!

Saturday, December 16, 2006 05:20PM Report Comment
 

5. nearly30 said...

Agree - bit of a messy article - no real substance here - really crow-barring in the causes (they want) to the symptoms.

Simple maths.

"12 per cent of Brits obstinately claimed that they would prefer to rent in their ideal area, rather than own their own home elsewhere"

Yes - true - Barrow-In-Furness may be cheap - but a bit crap if you work in London!!

BTLaunder propaganda!!

Although - got my new word of the week - obstinately - brings a bit of gravitas to the article using clever words like that - NICE!

Saturday, December 16, 2006 11:42PM Report Comment
 

6. Markmywords said...

I am a Jehovahs Witness myself, but still have to live in this world with everyone else and face the same economic difficulties and hardships,
We try and live as simply as possible to buy out time to teach the truth about the creator,
Religion has mislead the masses and continues to do so along with the political element of this world but we still have a keen interest in economics as it effects us directly as we struggle in this system to make a living, but our priority is to teach the good news of the Kingdom before the end comes Mat24:14-14, this is the only solution to all our problems and addresses the cause not the symptoms of the problems we all face today weather economic, health, religious, political or whatever. We all need it but few realise it as most are consumed with day to day anxieties pressures of whatever nature, materialism etc God is put into the background when it should be the other way round .

Sunday, December 17, 2006 12:50AM Report Comment
 

7. denzil said...

Turkeys and Christmas are just a couple of words that spring to mind.
Property Investment specialist says property is a good bet. No shit Sherlock!

Sunday, December 17, 2006 04:30PM Report Comment
 

8. paolo88888 said...

Paul,

You omit the tax on your bank interest. Assuming higher rate, 5.25 * (1 - .4) = 3.15%, < 3.9%.

And the landlord gets the capital gain. Now this site is predisposed to see this as negative, but the neutral view would be to see it in the same way as any other asset price, increasing with inflation. This adds 2-3% to the 3.9% making it look respectable.

Another way is to compare it with the dividend yield on the FTSE, 3.15%. There too, one buys in anticipation of capital gain.

Sunday, December 17, 2006 07:43PM Report Comment
 

9. bidin'matime said...

Paolo - Paul is right to compare rental yield with gross interest - if the landlord buys with cash, then his yield before tax is the return on his investment and he pays tax on that, just the same as if he put the money in a building society account. So if the yield before tax is 3.9%, this is like making 3.9% on his building society account.

Of course, most landlords have a mortgage, so they pay little tax if any, but if they only get 3.9% before paying the mortgage and the mortgage is any higher rate than this, then they are making losses, which of course, most of them are.

I agree that they are often content to subsidise this on the basis of capital growth, but with prices so overblown as they are, this is far from a foregone conclusion.

Sunday, December 17, 2006 09:09PM Report Comment
 

10. paul said...

paolo, I wasn't even factoring in repair costs which landlords instantly become liable for, or even building insurance which is due from the landlord, or even tax on their earnings from the second property. And there's interest payments on the sum borrowed (cost of the property may be 200K but you'll actually pay more like 350K after all the interest is paid off of course).

I haven't even started talking about other tax minimising investments like ISAs either or private equity schemes or index linked investments.

The average capital gain is 2.4% per annum on property btw.

Dear oh dear. I was actually being very generous to BTL Bandwagoners with those figures. Now you've come along and ruined it for them.

Sunday, December 17, 2006 11:15PM Report Comment
 

11. glorious sunshine said...

Good God!

Have you lot not yet STILL figured it out? BTLs dont care a monkey how much prices have gone up, they are only interested in income verses original investments. You lot look at income verses CURRENT values...you are so...so naive!

Dream on while buying properties for landlordsoops I mean renting homes

Idiots!

Sunday, December 17, 2006 11:36PM Report Comment
 

12. paul said...

Yes, gs, as I said I think we most certainly have figures it out.

The property I am in is CURRENTLY worth 200K and I pay 150 quid a week.

Keep digging.

Monday, December 18, 2006 08:15AM Report Comment
 

13. talking rot said...

Dear Glorious Sunshine

Two questions:

1. Do you agree that Buy-To-Let (BLT) is a relatively new phenomenon?
2. Do you also agree that it is sustainable in the long term - ie it is the "cash cow" that runs over a long period that mades the greatest return on investment?

If BTL is a new phenomenon and is sustainable, tell me how many recessions BTL has survived? Or do you believe the UK economy is recession proof?

I believe the BTL phenomenon have proved itself to be sustainable when it has survived 3 recessions. When rents fall, and Government regulation starts to rise, and values drop, how many Landlords will continue their investment?

Monday, December 18, 2006 09:45AM Report Comment
 

14. Rimmer said...

I have friends that owned a second property ( not BTL ) and have recently sold to put have the money in the bank ( or what ever ), simple reason - better return on their investment in the near to mid future and far lower risk!

Monday, December 18, 2006 10:46AM Report Comment
 

15. monty said...

TR, I'm sure GS will have his own answers but here are mine.

1. No - just ask the Duke of Westminster. I believe it's been the family business since around 1677. What is new is the 1996 legislation that ended the problems with sitting tenants and lowered the barriers to entry. This has opened up the market to Joe Public in a way that it wasn't before.

2. Yes - just ask the Duke of Westminster. While Paul's landlord may have bought a dud and currently only has a return of 3.9%, he will be able to increase the amount of rent by the rate of inflation (wassat? 3.7% 9% whatever) year on year. Interest rates will go up come back down again. The only thing that will keep Paul's rent from going up is deflation and competition.

No business or economy can be considered recession proof as no two recessions are ever the same. I may be stating the bleeding obvious here but if there is a recession in this country many people will lose their jobs, businesses will go under and both buy-to-live and buy-to-let houses will be reposessed.

Monday, December 18, 2006 12:50PM Report Comment
 

16. Cstanhope707 said...

The sooner these BTL B$%S%^DS are ruined when the crash comes the better. I hope they loose it all they contribute nothing. After the crash if the person selling a a BTL owner desperate to sell I will make an offer and backout at the very last minute just to hurt them even more.

Monday, December 18, 2006 01:03PM Report Comment
 

17. talking rot said...

Monty

Thanks. I am wondering how robust the BTL market is having read an interesting article from the US which claims softening of house prices is regional and is not having an impact upon the wider economy. I believe it is too early to tell. I can't believe that the BTL market will survive contact with the enemy [recession] although some canny investors will.

Monday, December 18, 2006 02:20PM Report Comment
 

18. bidin'matime said...

A recession - the recession when it comes - will do enormous damage to BTL, not only due to fewer people 'forming households' (ie staying with mum & dad, or not getting divorced etc.), but as tenants default on their rents and properties fall into disrepair (or maybe the other way round?) the whole market will get a bad name. If successive governments couldnt make running whole estates a worthwhile enterprise, then a landlord with half a dozen disparate properties is going to struggle

Monday, December 18, 2006 02:36PM Report Comment
 

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