Monday, March 31, 2008

Poor BTL-ers

Shocking figures reveal just four per cent of new-build flats make a profit

Just four per cent of new build flats sold at auction over the last three years made a profit, according to shocking figures published today. The report is a major worry for Britain's army of buy-to-let investors who are watching the value of their portfolios plunge. The research, by the auction giant Allsop, looked at new-build flats sold at auction between January 2005 and February 2008. In a shocking finding, the value of the average new-build flat plunged 26%. In London, the fall was even steeper at 28%.

Posted by little professor @ 09:58 AM (689 views)
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14 thoughts on “Poor BTL-ers

  • tyrellcorporation says:

    ‘Over the last year, prices have been falling in new-builds, with critics saying too many flats are being built which nobody wants to live in.’

    I think you’ll find there are plenty of people who want to live in them but they simply don’t want to stump up £200k for the pleasure! If these 2 bed flats were £80k each (which is still pretty pricey really) they’d fly off the shelves.

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  • This is good copy – and a grand about-turn for Allsops, who were previously sucking up to the BTL brigade.

    All they have to do now is to get the reserves dropped, so fewer properties go unsold at their auctions – which was probably in their mind when they penned this press release..

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  • “The report is a major worry for Britain’s army of buy-to-let investors who are watching the value of their portfolios plunge”

    – another worry for BTL investors, which crossed my mind over the weekend is what will happen if they have re-mortgaged their early portfolio to buy new properties.

    They may have bought somewhere for £100,000 a few years ago, which is now ‘worth’ £200,000 and now has a mortgage on it for £190,000 after re-mortgaging to buy further properties. If prices come down just 5% [LOL!] then they could hope to sell and clear their mortgage. BUT they would still be liable for over £16,000 in CGT. If they hang on and hope for the best, then the capital value will probably continue to fall.

    Nightmare!

    Leveraged investments – very clever…

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  • Probably locked in with Early Repayment Charges too.

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  • Landedgentry says:

    Some of these New build “luxury” flats here in South London have really gone downhill.

    I’m guessing here, but it appears some of the BTL’s have panicked and given them to the council or housing association and you can guess the type of tenant that live there now. There is now little or no hope of getting the young professional they were promised who would pay top whack rent.

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  • stillthinking says:

    Its a shame really, because there doesn’t seem to be any market variation on rents. The upper limit gets stopped by affordability, because tenants just can’t pay any more, which is why there is such a big difference in quality grouped around 800/900 (for London), whereas the lower limit gets stopped by the banks repossessing the property because the rent doesn’t cover the mortgage payments.
    I do wonder what will happen to rents in the future. It seems that they must go up as the number of empty properties increases, and then eventually go down again. Maybe rents will be falling when house prices bottom.

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  • Explain the figures Cornishman please…

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  • well I also wouldn’t mind living in a new build in london at the right price!!!

    surely if this is where the over supply is then this is where the biggest correction will be and consequently this is where the biggest opportunity for a bargin is in the next 6 months or so. basically if I want a decent standard of living in a reasoanbly sized flat then repossessed new builds is where it will be. So where do I go to get these repo new builds?!!!

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  • mr smith – you have to think who your neighbours will be in distressed circumstances like this. Especially since yopu will be living in very close proximity to them!

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  • theboltonfury says:

    just extended my lease yesterday until July 09 for no increase in rent, 3 months before renewal. Landlord was only too happy to oblige. Should have asked for a reduction actually, but am happy with no rise for another 15 months….

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  • cornishman – yes I suppose you are right. I saw that repossesion repossesion repossesion program where the tv presenter girl was complaining about all her neighbours where BTL tenants who were bringin down the vales in her newbuild block.

    I guess it all depends how bad you beleive it will get. personally I’m not a mega bear so I don’t beleive that all the london new builds will be lying derilict in three years time. still I guess it might be a bit risky

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  • 2. uncle tom said…
    This is good copy – and a grand about-turn for Allsops, who were previously sucking up to the BTL brigade.

    You are right in suggesting that they are talking down the market now because transaction numbers have decreased. The volume of sales is more important to them than the price, and they know if the market stagnates for too long they will go bankrupt. This could well be the first signs of a rush to the bottom caused by VIs talking prices down to try and create sales.

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  • Orwell

    sale @ £190,000 clears mortgage of £190,000 – but CGT liability on £90,000 uplift since purchase @ £100,000 = £16,200 CGT @ 18%.

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  • Thanks Cornishman. Good job I didn’t become a tax lawyer!

    This does seem quite bad for all those BTL’rs out there though……

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