Monday, September 24, 2007

Dummies blowing smoke up each others arses

Buy to let landlords remain positive - ARLA

With relatively low loans on their investment properties, more than half of all Buy to Let investors expect to increase their portfolios over the coming twelve months and 90% of investment landlords said they would not sell should house prices fall, according to the latest ARLA quarterly Review and Index published today, Monday 24 September. This is based on the largest independent survey of the Private Rented Sector...

Posted by converted lurker @ 12:23 PM (767 views)
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5 thoughts on “Dummies blowing smoke up each others arses

  • Perhaps the support for this “positive attitude” is as follows:

    1. Other drops in growth have been mitigated by government action – why not the current problems.

    2. The stock market has not factored in a recession, look at today’s market.

    3. Previously reliable editorial comment (eg: Economist) suggests a further rate cute by the Fed, ASAP.

    Against this background, BTL landlords are positive.

    Taking alternative logic:

    1. The UK debt mountain should be reduced, not added to. As debt rises, so do rates of interest to build in a risk factor for lenders against national default.

    2. Stoking further the UK asset prices will just lead to unaffordability (except by lying).

    3. UK inflation of 1.8% is widely discredited as a government trick. It’s nearer 4%.

    4. A decline (perhaps even a recession) is coming across from the US.

    As the gearing of UK PLC rises, I feel that if things go pear shaped, they will probably happen more quickly now.

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  • converted lurker says:

    I’ll just call it a desperate and deluded piece of amateurish spin from an unecessary organisation that’s likely to disappear in the near future

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  • ARLA Survey Writer “And if prices were to fall, and there’s no indication that they will, then you wouldn’t sell, would you?”
    BTL Bandwagoner “Ermmm. …. he …… urm ……. no.”
    ARLA Survey Writer “Thank you very much!”

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  • It is rather surprising that they are even mentioning the possibility of falls. The very question must have shocked some BTLers who think that prices can only ever go up

    And how stupid is it to buy a highly geared asset that loses value? It just proves that BTLers have little or no sense.

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  • Nothing new here at all and the very reason why there will be a crash. May I define a ‘crash’ as some drastic fall in value of an asset (e.g. houses) not precipitated by any signal that things are about to go wrong. If one had such a signal, one would be able to divest those assets (particularly if they were perfectly liquid, which houses aren’t) and retire comfortably with their ‘assets’ safely invested somewhere else (preferably in more than one location). Being able to sense a change in market conditions would mean that there would be a gradual transition to an equilibrium value of houses, so that there would be no overcorrection. In other words, the market would perform efficiently and do its job without creating a mess.

    This news article tells me that BTL investors do not see any signal that there will be a crash, at least according to my definition and so are prepared to carry on investing in this asset class. On the contrary, BTL investors see long term capital appreciation as an attractive feature of the investment.

    Whether or not this is rational is open to debate. Leaving aside the legitimate tax implications of BTL as raised earlier, the term ‘relatively low’ as used in the article is interesting. Presumably this means a low loan to value ratio, which is not a stable measure, given that it can change in the event of a correction. The measure is also unreliable, as property investments are hard to gauge, given the illiquidity of the class. So, are BTL investors having their properties valued at an increased rate because of a higher number of transactions? Don’t be silly, the other article that ARLA published today admits a fall in property values amid a softening in the housing market to try to justify it’s members reported increase in rents. They are just having their cake and eating it.

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