Thursday, April 17, 2008

BTL Market ‘Unraveling’

Vacant Homes in U.K. Prove Speculator Nightmare as Losses Mount

Richard Lee spent 5.3 million pounds ($10 million) buying 20 rental homes across the U.K. with just 150,000 pounds of his own money. Today, the properties are worth about 60 percent less and owned by the banks that financed the purchases. // Buy-to-let investors who were behind on their mortgages by three months or more increased by 25 percent to 7,584 in the fourth quarter, according to the London-based Council of Mortgage Lenders. Repossessions rose 26 percent to 1,247.

Posted by 51ck-6-51x @ 08:54 AM (2044 views)
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42 thoughts on “BTL Market ‘Unraveling’

  • UK sub-prime !

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  • 5.3 million pounds borrowed with just 150,000 pounds – that’s a leverage of over 35.
    – I’d call that risky.
    “The valuations were 15 years ahead of their time,” Lee said. “The biggest genius in the world couldn’t have got those loans to work.”
    – So why did you take them on?
    Lee and 85 other investors plan to sue the developers, lenders, appraisers and solicitors involved in their property transactions.
    – Oh right I forgot, blame culture to the rescue for the idiots. (Oh and don’t forget GB and AD, and the generous tax payer.)

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  • He’s going to get back in it again!! ? Doesn’t he owe 3 million pounds?
    I forgot it’s not his fault.
    The Bank of England will sort out this mess.

    It all makes me sick.

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  • it_is_going_with_a_bang says:

    “The biggest genius in the world couldn’t have got those loans to work.”

    Then why on earth did he take them out? Not once, not twice but 20 times.
    There is an obvious idiot here and he appears not to know it.

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  • The leverage of these things always amazes me.

    Any asset other than property and everyone would think you were mad. Join the madness of the crowd and it appears sane.

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  • Once he has dug himself out of his current financial difficulties, Lee will consider getting back into the business.

    Really….chuckle, chuckle

    Bit like one of the nutcases you find on Pop Idol saying “you wait, i’ll be back next year, im going to make it, you’ll see”

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  • tyrellcorporation says:

    It’s great to know that tax-payers (you and me) are about to underwrite all these bad investments!!!

    ‘Moral Hazard’ on a biblical scale!

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  • “Lee, 37, bought an apartment in the City Gate 2 development in Manchester for 239,500 pounds in October 2005. An identical property in the same building sold for 115,000 pounds earlier this year, said Lee, who has surrendered his keys to the bank. …”

    “Once he has dug himself out of his current financial difficulties, Lee will consider getting back into the business.

    “Would I do buy-to-let again?” he said. “Without a shadow of a doubt. ..”

    He started with £150k and is now £3m in debt, is suing those who sold him a score of pups – and thinks he can start all over again.

    He probably hasn’t stopped to consider that the bunch of people he’s suing will mostly go bust, and that even if they don’t, a court will almost certainly judge him to be personally liable for a proportion of the loss. His chances of clearing his debt through litigation are effectively zilch.

    – And it probably hasn’t dawned on him that if he could be stupid once he could be stupid again..

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  • Yes, “Would I do buy-to-let again?” he said. “Without a shadow of a doubt. ..”, says it all really!

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  • sold 2 rent 1 says:

    This is why only a depression can fix the problems here.

    Too many people believe that this is still a 1990s style crash and that there will be another debt driven recovery.
    Not this time. The 60 year debt bubble is about to implode and it will be carnage everywhere.

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  • “Lee and 85 other investors plan to sue the developers, lenders, appraisers and solicitors involved…”

    That’ll be Legal Aid money he’s using I presume?

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  • Oldfashionedbanker says:

    BTL mortgage rates, LTV and rental covers are going throught the roof. Property values especially in the rental market are falling and most importantly this guy is soon to be *bankrupt*.

    That he would even consider BTL again beggars belief. He is so financially inept I suspect with his credit score he will have trouble getting a hire purchase agreement from argos to buy a toaster.

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  • it_is_going_with_a_bang says:

    Titanic-
    I wouldn’t worry too much. I would think it’s more likely to turn into a huge waste of time and money, the end result being that it won’t change a thing.

    It is after all a government idea.

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  • DId anyone see the sad cases on the Property Ladder yesterday? Oh dear, oh dear. The programme is becoming a joke, and to think that they are advertising for MORE people to join them on their next series.

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  • Good comment Oldfashionedbanker.

    @titaniccaptain – I feel your pain, and as I said in a comment yesterday, “How many people will withold their income tax after GB’s, AD’s, & the BoE’s decision next week?”

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  • theboltonfury says:

    @14

    I don’t know, Brown doesn’t run the country the Banks do. They called the shots here

    I too feel absolutely cheated and completely incensed.

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  • theboltonfury says:

    harold

    I saw it. I don’t mind Beeny. At least she is now highlighting the halfwits that are out there. It seems this series is beginning to show that the good days are gone. there were constant references to the state of the market, and this was 6 months ago. Also the chubby sisters were made to look ridiculous. Their greed was highlighted then they sold at a huge discount, leaving the other one rented whilst depreciating.

    The other one, which was quite nice actually, is still kicking around on rightmove, unsold. So not snapped up as the guy thought, but instead depreciating with funds dwindling for them to fix up thet unfinished one next door

    to me the point of this show has changed – Beeny seems to be playing these fools for all they are worth. Allsop and Spencer can still f**k off though. Absolute pair of tw***

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  • There are quite a few interesting stats in this piece (Bloomberg pieces are usually very careful with numbers) – the total value of BTL loans is higher than some previous estimates, and there is interesting data on the proportion exposed to ‘off-plan’ type speculation.

    ~~~

    I don’t normally watch the TV property shows but I did watch Sarah Beeny’s effort last night – the sisters with 24 BTL’s ‘mortgaged to the hilt’ who had had a survey done on a property they were working on but ‘hadn’t bothered to read it’ – You just sensed the time bomb ticking…

    ~~~

    – It confirms in my mind that the BTL carnage will not be confined to a minority of fools, but will be wholesale – out of 1m BTL mortgages now, will even a quarter of that number still exist in 5 years time? And of the others, how many will find buyers before the lenders re-possess?

    I can see a fire sale of half a million properties in a couple of years time – opportunities, opportunities…

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  • @TC – Couldn’t agree more. It seems both illegal and utterly immoral. Whatever happened to ‘letting the market take care of things’. I’m 37, still living in a rented house (3-bed £500pcm – quite good value, I’d say) because the prospect of a 40 year mortgage on my salary was unbearable. I thought, as I’m sure many here did, that this crash would be allowed to run it’s course. The longer this takes to unravel, the more painful it will be for everyone. Including me who wasn’t even involved in the whole [email protected]@dy scam in the first place. If they try using taxpayers money to bail these idiots out, I sware I’ll flip.

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  • bolton,

    I looked for that yellow semi on Rightmove but didn’t find it – as a project, it seemed quite a sensible venture, although the couple were slightly nuts..

    How much are they asking now?

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  • theboltonfury says:

    BTW
    she deserves all that lovely profit because she worked SOOOOOO hard on it

    try being a nurse or a firewoman sweetheart. See what graft actually is

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  • mark wadsworth says:

    I missed the ‘comely’ Sarah Beeny. Drat. Anyway, the house price/credit bubble is deflating so fast, no way can The Goblin King & The Badger rescue it now. They are wasting £100 bn in taxpayers’ money each year on crap, they’ll do a Lamont, throw ten or twenty billion at the banks and then give up the ghost.

    BTW, these soft loans they are giving to the banks are solely to prop up banks. They can not and will not prop up house prices, that ship has sailed. Titanic, deckchairs and all that.

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  • Thanks bolton – I wonder how long ago the program was made?

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  • Hardly surprising with people like this are still advertising today!

    Money for Nothing Property for Free – that’s what the man says
    property investment secrets: “How Anyone Over 18 Can Easily Retire In 7 Years… And Be Wealthy For Life!

    http://www.propertyinvestmentsecrets.co.uk/offer/index.htm

    NEW UPDATED FOR 2008

    It doesn’t matter what the property market is doing now or in the future for you to make your fortune (could be going up or down). No matter what’s happening, I can show you exactly why you will still make a literal MOUNTAIN of money.

    Hi Andy
    Just finished your book… and have decided to immediately read it again!
    It was full of invaluable information and as a total novice in the buy-to-let market I found it fascinating.
    I really enjoyed the book and I am already scouring the local papers property section for some good deals.
    Regards
    Graham E.

    It doesn’t matter what other so-called “experts” say… the truth is you never need to sell your investment properties to make your money – yep! You read that right! I’ll show you exactly why you will make more money by NOT selling, and why only amateur investors sell!

    hpc yesterday
    7. Jock’s Trap said…
    I have unfortunately read the book. His system is to buy a btl property then remortgage a few months later when it has risen in value(!) using money as deposit on next btl. Repeat as necessary. Use some of the mew money to live on-it’s tax-free! How could this strategy possibly fail?

    Wednesday, April 16, 2008 04:15PM

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  • I can imagine the conversation:-

    Andy Hornby (with menacing look)- ‘Give us what we want or the economy, your government and you Mr Brown, will be toast, mwahahahahahahahahahaahh’.

    Gordon (frightened rabbit in headlights)- ‘Err, no problem Andy. I’ll start working on the spin today. I already have a cunning plan – we could get Carole Vorderman to explain how sensible it would be for the tax paying suckers to consolidate all your toxic debts into one easy payment – they always fall for that one’.

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  • theboltonfury says:

    UT

    started filming in sep 07, the house went on in March 08. They appear to be ready to have to bite the big one

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  • mark wadsworth says:

    An HPC drink up! Sounds good to me!

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  • sold 2 rent 1 says:

    QUOTES ABOVE
    “I too feel absolutely cheated and completely incensed.”
    “It all makes me sick.”
    “Im feeling sick to the pit of my guts today”
    “‘Moral Hazard’ on a biblical scale!”

    There seems to be some anger today.
    Is it time for change?
    WE ARE CHANGE

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  • sold 2 rent 1 says:

    “When this is over im buying you lot a beer”

    Let’s pencil in the autumn, at the end of Calleman’s fifth night destruction period.

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  • anger cooler

    Richard Lee’s got nothing on this bloke

    Jefri Bolkiah is a fellow who knows a thing or two about money – not that you’d ever guess as much if you met him.

    His brother is the Sultan of Brunei, which is to say, one of the wealthiest men on the planet.

    The sultan may control the purse strings but little bro’ Jefri has been making do nicely with hand-medowns.

    He has a personal fleet of 1,700 – yes, you read right – luxury cars.

    He also commandeers a 180- foot yacht and owns hundreds of paintings by Picasso, Renoir, Modigliani and the like.

    And for those oh-so important getaways, he has his very own New York pied a terre – the Palace Hotel. All of it.

    But that’s all about to morph into the past tense. Prince Jefri, in his capacity as head of Brunei’s investment agency, has made rather a b0ll0cks of the business. He’s managed in just a few short years to blow a total of US$14.8 billion.

    How? No one’s more mystified than Prince Jefri. “I keep asking the lawyers,” says the prince. “Where did it go?”

    Here’s a suggestion, Jefri: frisk those lawyers before you let them out of the room.

    http://www.sott.net/articles/show/153872-Money-The-rue-of-all-evil

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  • tyrellcorporation says:

    Anecdotal evidence of HPC in Exeter.

    Two houses I have tracked for 2 months:
    1 at £425,000 now £365,000
    2 at £325,000 now £275,000

    Not bad crops eh? although they were maniacally priced by delusional EAs in the first place.

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  • tyrellcorporation says:

    ‘drops’ even…

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  • bolton – nice find.

    I see that they have ignored the agents’ valuations and stuck on another £5,000 to the asking price – over and above the highest ‘valuation’.

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  • Check out:

    http://www.propertysnake.co.uk

    You can search by %age falls, max price, bedroom size etc… Very disappointed to see virtually no falls in the Bath area.

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  • mark wadsworth says:

    TC, re your price drops, did they happen in the last 2 months? That’s pretty good going. Is this from the EA’s window or Propertysnake or where?

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  • British Exile says:

    annectdotal re house price changes – I saw a house I liked in West Cornwall at 525K it dropped 3-4 weeks later to 495K. I offered 400K as a silly offer…..Only problem is that now they are interested and and would ‘accept’ 405K. Once I have the surveyors doom and gloom report I envisage a further reduced offer. But just shows that sellers who need to sell are starting to wake up and smell the coffee……

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  • Lets all go on an all day bender, put it on a credit card then default and expect the state to pay for it.

    Now THAT would be a fitting celebration.

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  • “Lee and 85 other investors plan to sue the developers, lenders, appraisers and solicitors involved…”

    That’ll be Legal Aid money he’s using I presume?

    Doubt it Harold. Legal Aid only covers personal assets and not business assets. I wouldn’t touch it on no win no fee with a barge pole…

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  • Hurry_up_and_crash says:

    £369,000 eh.

    Nice to know they were going to make £83,000 at that price based upon yesterdays programme. Bit of a folly letting the UK know your balance sheet before the property was sold. Now every one knows where to be bidding at (if they want this house).

    I want to follow this one on property snake and then on the regisitry list (if it sells that is).

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  • “Bit of a folly letting the UK know your balance sheet before the property was sold”

    But the publicity the program provides will probably result in them getting a buyer – provided they’ll take a cut on the price..

    ..my money’s on them getting an offer of £300k and settling for £10k more, but they might get gazundered if the buyer can’t sell their place.

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