Tuesday, March 25, 2008

Paragon BTL comedy continued

Landlords' gearing at lowest level since May 2005

The average gearing across landlords’ portfolios is at its lowest level since May 2005, according to Paragon. A panel survey of 200 Landlords revealed the average level of borrowing across their portfolios was 36 per cent, down from 38 per cent in the final quarter of 2007. Paragon says that rents are rising rapidly and landlords who are lowly geared are well positioned to expand their portfolios over 2008 as demand rises. In a softer housing market, landlords will be able to make opportunistic purchases of further properties.

Posted by jack c @ 02:12 PM (1321 views)
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12 thoughts on “Paragon BTL comedy continued

  • People must be mad. Here we’ve got a market that is already falling, yet if this article is correct, people are still considering borrowing more in order to purchase further properties.

    Lemmings not landlords.

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  • Ahh, I see what they did there.

    Boom = good news for landlords, because landlords can benefit from capital appreciation and rising rents
    Bust = good news for landlords, because landlords can buy up more property cheaply to take advantage of rising rents

    In the parallel world of Paragon, it’s just an ever-upward virtuous spiral towards financial nirvana, isn’t it?

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  • Hmm…. I wonder if these are a random sample of 200 BTL landlords? More likely 200 of the best examples.

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  • mark wadsworth says:

    The average is, as ever, meaningless. If they all have 36% gearing, they are all laughing, frankly. But if two-thirds have no borrowings at all and one third have 100% borrowing, then one third of them are going to be forced sellers pretty soon.

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  • Also, remember that some BTL landlords have no mortgage, they are taking the monthly rent as income.

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  • Westlondonlocal says:

    I haven’t read the whole article – just the summary on the HPC site, but the point about rising rents backs up what I’ve seen for myself in west London (W14/W6). Rent’s over the past 12-18 months in my area have gone up hugely… and I’m talking 15-30% in that period.

    It seems that there are lots of people renting while holding off buying waiting for “the crash” (I have a few friends who’re doing this) and that may well be having an effect on rental prices in more desirable areas/close to transport etc? Will it last or is it a transitory phase before prices fall – who know’s but I’ve definitely seen proof of rent rising strongly.

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  • A panel survey of 200 Landlords – suspect Paragon were very selective to make the numbers and the “story” stack up

    If things are going so well in this sector why is The Paragon Group set to make 93 members of staff redundant and is closed to new mortgage business?

    From their own website “Product Changes – Please note that our current product range is only available for Further Advances and Product Transfers”

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  • crash bandicoot says:

    Forget gearing, the ultimate BTL question is if a first time buyer can’t afford their own mortgage then how can they afford to pay your BTL one. The answer is that they can’t and you have to subsidise them. Now you might be happy with this if house prices are rising and you expect to see some capital gains but as prices fall this makes less sense.

    Now back to the gearing thing. If you are stupid enough to put in some of your own money and still have to subsidise your tennants you really have lost the plot. If you put in so much of your own money that you don’t need to subsidise your tennants, you are either being obtuse or are laundering money.

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  • Blank Cheque says:

    Just love Paul’s comment at the top of the page!

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  • it_is_going_with_a_bang says:

    Expanding their portfolios?

    Now why would anyone with half a brain cell buy an extremely expensive asset when it is depreciating in value.

    Sounds to me like Paragon trying to convince it’s ‘own’ lenders that their business model is a sound one.
    It’s like the Gordon Brown getting a survey done of how well he is doing and then telling everyone the result says he’s doing great.

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  • larry pickleman says:

    Housing benefit helps people who can’t afford to buy rent similar properties in the rental sector. I’d hate to see housing benefit pulled, but how the government doesn’t see that they are throwing away so much money at private landlords is beyond me!

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  • Paragon = Tosh!

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