Friday, May 23, 2008

Pile in, boys

Buy to Let bandwagon has not yet hit the buffers

Bearish commentators love to raise the spectre of Middle England landlords being forced to dump their investment properties on an already fragile property market. A "buy-to-let" crash would appease the green-eyed monster that exists inside all of us. But however much we may wish for it, the reality is somewhat different. Many of those who have invested in property have done so to provide for their retirement - they will ride out these difficult times even if it means re-mortgaging their own home. The demise of the buy-to-let landlord is overdone.

Posted by little professor @ 12:36 AM (1476 views)
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14 thoughts on “Pile in, boys

  • gone-to-colombia says:

    What nonsense, the demise is not over done just a little delayed.
    Of course some of the BTL scum will hang on until the last moment, after all its a dream of wealth they are trying to keep alive, and some will have bought early enough to have avoided the highest prices. But in the end many will become victims to the down side of their own greed.

    What I long for is a country where houses are not an investment but just a home. A place where prices are not inflated by sheer greed.

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  • There will always be some demand for rented property. Students, people working on temporary contracts, recent divorcees, etc. Therefore there will always be some landlords. They just won’t be making any money – in fact some are actively subsidising their tenants without realising it.

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  • History_yoyo says:

    They never seem to bother scratching beyond the surface.

    How many BTL-ers can’t sell at the price they want and are hoping rental will see them through until the market recovers? How many are suffering rate reset shock and are subsidising mortgage repayments themselves. How many new rental properties are coming on to the market from other home-owners?

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  • Bottom line is that the more recently a buy-to-let landlord entered the market and the more properties they own the more pain they are likely to be feeling. The highly-geared buy-off-plan brigade are obviously REALLY in trouble.

    I’m not sure what percentage of the BTL market these people account for but there must also be lots of landlords that can and will stick. Especially where they have been in the market for a long time and see it as a long term thing. It may not be the best place for their money but if they’re not feeling the pain too directly there may be little motivation to sell in a falling market.

    And some landlords are needed. What we don’t need is rampant buy-to-let speculation that distorts the market and helps to price out first time buyers. And this is exactly where the pain will be felt most acutely.

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  • I don’t see how losing over £1000 per month is a good investment!

    you only need to look at stocks and shares to know that most of them have disappeared over the last 25 years into something else thats why it needs active management.

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  • I still think that 60-70% of BTL’s will go to repo, but they won’t all go that way at once.

    The players who were 85% + mortgaged on very large portfolios (especially those who were suckered into the ‘off-plan’ scams) will be the first casualties, many of those will go to forced sale in the latter half of the year, and the first half of ’09.

    However, those who have smaller portfolios that are less heavily mortgaged (and try to ride out the storm) will be the late casualties. They will go down when rents slide to match the sustainable level of house prices.

    The last forced BTL sales are likely to be more than three years down the line.

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  • ”…There will always be some demand for rented property. ..”

    But I’m not sure whether the demand will satisfy the huge amount of greed & ambition of some of the BTL’ers.

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  • Not selling at the top of the market is investing at it’s finest. Yep, when prices are falling, best ‘ride it out’.

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  • ”…There will always be some demand for rented property. ..”

    Don’t forget that most privately rented property is still owned outright.

    I have no problem with that – it’s the greedy levered speculation that has been the problem.

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  • PS: When I refer to BTL’s – I mean properties that are subject to BTL mortgages

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  • I think we need to remember that the majority of demand for rented property has been created by BTL business model pricing out FTB’s.

    The tide is turning hence why I was advising any potential FTB’s out there to save like crazy for the next couple of years.

    Late entrant BTL’s will be using any spare cash to top up mortgage repayments (maybe even equity levels).

    They won’t have any equity to be purchasing with in a couple of years time as prices fall. Even a 20% fall over 2 years will leave the majority of BTL (66% LTV) with an LTV of 82%. Which would leave them unable to withdraw equity to expand and buy more properties.

    So FTB’s your time is coming just keep saving hard.

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  • I saw this rubbish yesterday. Note once again the source of the optimism – yes, enterprise of the decade, Paragon of ill-virtue. The assumption that everyone who hasn’t entered BTL is jealous is ridiculous. I wouldn’t like to have all my eggs in one precarious basket. Anyway, a far better way to have invested in property over recent years would have been commercial premises funds. No hassle, no management, good returns, and, if you had any sense, diversified by other sector investments.

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  • looking at the properties for sale in Rightmove, in my area, approx 50% are either new build/conversion properties or BTLs. If you look at the decor/ furnishings you can often get quite a good idea of which properties have been pitched at the rental market.

    ‘I’m in it for the long term’ was a mantra used by many Dot Com investors as their portfolios wilted……………………

    Charles

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  • I don’t think you can ever under estimate just how much the establishment is entrenched in property. In another of the articles posted at the moment the Daily Mail (who also own PrimeLocation.com) are saying that some of their regional papers are being affected by lack of advertising so the affects of a downturn in the whole property fiasco spreads far and wide. Bottom line for BTL is that where I live a two bed terrace sells for about £150K and a BTL mortage for that amount is approximately 6%. Interest only that’s £750 per month and rents average out at around £650. So before all the other expenses and periods of non-occupation there’s a net loss of £1200 per year and a capital item depreciating in value. Granted it might not be the same throughout the country but the only reason anyone would stay in BTL at the moment is because the ycan’t afford to get out or if you’ve been in it for more than five years, you can afford to sit and wait (although I suspect you’ll be waiting a long, long time).

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