Friday, July 6, 2007

BTL panic selling has started

Are buy to let landlords selling up fast?

Recent RICS (Royal Institute of Chartered Surveyors) reports state that a growing number of buy-to-let landlords are now selling up due to rate increase fears which could see their profits marginalised. These figures indicate that there has been an increase in the numbers of buy-to-let investors placing their properties on the market - which may be related to the rising interest rates and the decline in rental yields over recent months.

Posted by confused76 @ 12:43 PM (489 views)
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26 thoughts on “BTL panic selling has started

  • the bald man says:

    I thought BTL’s were in for the long term

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  • confused76 says:

    yes as long as they can stay solvent… so not very long

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  • wage slave says:

    It’ll be like a stampeding herd of buffalo !

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  • bidin'matime says:

    Say they have 7 properties with £100k on each – that’s an increase of £730/month interest compared to this time last year. They’ll have to sell some to stay solvent.

    And did you see Evan Davies on the market for flats the other night? He said ‘it’s, well, flat..’

    Then on last nights BBC News at 10 we had 2 young women saying that rates might rise and prices might fall, but they wanted to buy while they could still raise a mortgage – presumably accepting that if rates rise, they would not be able to afford one – stupid, or what…?!

    But if you offered them a few tulip bulbs for silly money, they would think you were mad…

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  • uncle chris says:

    Must admit, I’ve seen a whole bunch of “investment” properties coming on the market recently (Wrexham Area), mostly the larger mature blocks containing 3+ flats. Not sure why they would be the first to bail out. Possibly because they have been in this game long enough to know when its time to get out, leaving the new flat BTL’s high and dry. Thing is, with less than 8% FTBs and BTL’s evidently NOT in it for the long term …. who is going to take up the slack to avoid a significant crash … pray tell me this NAEA?

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  • Searching For Accommodation says:

    One house I wanted to see today with a view to renting – overnight, the owner’s raised the rental from £750 a month to £850 a month. Another property (on market for sale or rent) was withdrawn from rental today as they’ve dropped the asking price by £50K overnight to try and sell it (-18%). Seems like panic to me..

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  • stillthinking says:

    I don’t think there will be a mass of properties being squeezed out. I think they might sell one of a portfolio to cover costs and hang on like grim death to the rest. I saw a rather depressing chart about house bubbles on wikipedia where a comparison was drawn with property in Japan. Although I don’t think Japan comparisons are all that useful, the length of the decline to a ~40% drop was around a decade. The new UK IR just isn’t that much. If all the sub-prime funds collapse with a credit crunch then the BOE has a free lunch. No lending anyway and they can relax the interest rates again. Could be a meet in the middle kind of thing.
    A decade is too too long to wait if you need housing. There was no glut of people desperate for primary dwellings in Japan also, but there is here. How long before the FTBs start going? Not very long for primary dwellings. 10K a year on rented is no small sum.
    Also, as a lot of these sub-prime loans are possibly going to be found lurking in pensions schemes, which will again reinforce property as a savings method. An estimated 6-7% annual house drop isn’t so much compared with a 20% drop in a fund.

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  • Disillusioned says:

    “I think they might sell one of a portfolio to cover costs and hang on like grim death to the rest.”

    stillthinking, they may be lucky to sell ONE, with no-one around to buy it…

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  • I think they’re the one’s getting out because they are the ones who’ve not been saving money. buying one property on the ‘increase’ in value of the last. — also probably got one of those porsche boxters to maintain. i.e. percived wealth and all it’s trappings. while ftbs and potential ftbs have been budgeting like mad.

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  • The cute thing about this is that when these guys have to sell at all in order to afford to keep the rest of their ‘investments’, they are increasing supply and therefore dropping the value of their properties.

    This is how you know you are in a bubble.

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  • The next article on the same website says…”Rising interest rates will continue to boost the buoyant buy-to-let sector, according to UCB Homeloans”.

    The UCB Homeloans article takes the view that FTBs are still unable to make the necessary deposit and interest payments. There is some truth in this. a few years back I gave my kids a deposit and enough cash to renovate. They wouldn’t have got started without help.

    House Prices may drop a bit (12%?) but as interest rates go up from 4.5%, FTB’s are in no different position from an outgoings perspective.

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  • I agree. The stock market and pension funds have performed very poorly considering the strength of the economy. It is no small wonder that people are looking at property to invest in. 20% drop in a fund is nothing. With a bit of bad stock picking you could be hammered. OK with some good stock picking you would be a winner but it is hard to hold onto shares in the long term as sudden movements are scary but property is easier. I do think that you should not put all your eggs in one basket though. My boss is 50 has £3m of property assets and no pension/savings. Yes he owns his own business but that is risky as well.

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  • we sold up last year, we had a lot of properties, but we feel there was a crash coming, so we played safe and sold up..yes we are those people you love to hate, but lets face it our tenants were lifers..

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  • And if you have a BTL property with a mortgage that is like putting all your eggs in one basket x10.

    If you have half a mill in the bank and choose to buy a half mill property, THAT would be putting all your eggs in one basket.

    If however you have 50k in hte bank and choose to borrow a further 450k in order to buy a half mill property, that is putting all your eggs in one basket x10.

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  • “20% drop in a fund is nothing. With a bit of bad stock picking you could be hammered.”

    Yes, but most people don’t leverage themselves to the hilt to buy stocks. If you leverage yourself highly and things go south, you usually have no choice but to sell.

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  • Kaitain. Good point but even if somebody has negative equity and can afford the repayments why would they sell? They need somewhere to live and it might even be cheaper than renting.

    If only 10% of the market is FTB then 90% of the market have tons of equity.

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  • I must admit I think one more rate rise will flush out a fair few BTLers. But not sure if it will cause a stampede. It very much depends on what happens to house prices between now and the next rise.

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  • wage slave says:

    Whichever way you look at it BTL market sentiment is changing and the properties coming onto the market will continue to increase like a snowball rolling down a hill.

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  • confused76 says:

    Maddison, Kaitain,
    BTLs are now a sizeable share of total housing. The will be forced to exit because of insolvency, i.e. when their rental income does not cover debt service, which is happening now. In addition, seeing that there is no capital profit for them in the future, they will want to take profit now. They hold enough properties now to crash the market even if owner residents decide to stay in the market.

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  • ‘In it for the long term’ is a joke.

    If prices start dropping, investors will sell. It’s not like the stock market where you can’t necessarily see the falls coming. If we get a few months of falling prices, that’ll be the trigger.

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  • From buy to letters I spoke to a couple of months ago a number said 6% was the magic number for them to get out and sell up. At the time they didn’t think it would happen.

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  • Alan you’re missing one crucial point. The banks know which side their bread is buttered on. They are extending cheap loans to first time buyers at the expense of investment buyers – it makes sense after all.

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  • Unfortunately maddison there is a sh*t load of money available through private equity and carry trade meaning things can go up in the stock market despite the US being up the spout and most people having less spare cash than ever! Fact is things are rising just on the merest suggestion a private equity firm may be interested, no concrete evidence has ever been necessary and they don’t drop when three weeks later nothing has happened.

    The real killer is that the stock markets are ignoring anything remotely bad in the news and jumping on anything slightly upbeat… when they do have a minor dip then everyone piles in and we’re back to square one. Really is that simple – people are driving up prices to stupid money much like the housing market.

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  • Mark you said you sold up last year, but if you sold all your properties in one hit you must been really hit hard by capital gains tax… If you don’t mind me asking approx how much real returns did you make on your investment allowing for all costs? I am interested as I have bought and sold stocks over the past 5 years rather than buying property and made approx 14% return (including divs) year on year, it would be very interesting to see the difference between property and equities over this period. Thanks for your feedback.

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