Thursday, May 22, 2008

Shameless

Sales slowdown lifts buy-to-let

The downturn in property sales is having a positive affect [sic] on buy-to-let, a survey from the Royal Institution of Chartered Surveyors (Rics) suggests. Its survey of residential lettings says the number of new instructions to let property rose by 29% in the first three months of 2008. Weaker demand to buy houses has forced sellers back into the rental market, where yields are rising, Rics says.

Posted by little professor @ 12:49 AM (1147 views)
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10 thoughts on “Shameless

  • Watching The Wheels says:

    Why does the BBC seem to want to talk up the property rental market.It seems that encouraging low rents and fairness is pretty out of vogue these days,is it because the media seem to think that it’s audience are all landlords,or that they have a vested interest in the ruin of the working class masses? Low rents and low house prices+ fair wage= Good Standard of Living.This should be able to be done without buying a house and then renting it out so that you can exploit fellow workers,and if it can;t then there’s something very wrong somewhere………..welcome to the 21st century feudal system.

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  • btl investors at these price levels rely on capital growth

    they are losing £1500 a month on the property price and rents are unlikely to rise to that level……btl investors should sit back…and will!

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  • This is no great surprise, indeed my rent is going up in a couple of months (though only in “exchange” for major upgrades to my flat which I feel is the ‘quid pro quo’ for the increase in rent). However for the hundreds of thousands of amateur landlords a torrid time is potentially in store if house prices continue to fall in line with the surprisingly bearish prediction of the CML (though this “prediction” could just be a gambit to try and force additional government action). Quite simply the landlords will have to balance their increase in rental yields against the falls in the capital gains on their investment. In the longer term it’d probably work out fine however if you’ve “bet the farm” on BTL there’d be alot of sleepness nights inbetween and like investing in gold the arguments can look compelling on paper but in practice the volatility of the investment makes for a truly stomach churning ride (which I for one gave up on since like many I like to make money but really am not in a position where I can afford to lose it and I suspect the same goes for many amateur BTL’ers where the stakes are much, much higher than my once meagre stake in gold).

    I still think the media’s position on the housing market has swung from absurdly bullish 12 months ago to hyperbolically bearish now. I think the implications of the BoE / Government’s enormous bail-out of the banks through the ‘special liquidity facility’ has not been fully appreciated, especially since it has already been subscribed to the tune of £70 billion (almost 25% above the BoE’s initial prediction). When this “secure money” feeds through the banking system will inevitably lead to laxer lending criteria (though not to the extent of absurd 125% mortgages, they’ll be gone for years) which will put a brake on house price falls. It be a few months before all this becomes apparent but I would not be surprised that if by the end of this year or early next LIBOR has fallen to the extent that the banks begin to loosen up their lending criteria and open the sluice gates to a degree. This of course is what the Government wants since prolonged house prices falls would jeopardise the basis of the ‘additional liquidity facility’ with genuine losses possible for taxpayers (ie. you and me), the spectre of this happening has already been raised for the Northern Rock bail-out by the Telegraph since its mortgage book is looking “vulnerable” if house prices continue to fall at their current rate. All this is a attempt to bail-out recent FTB’ers but also has the effect of helping many thousands of disgusting speculators (including notoriously those who buy properties and then leave them empty) with backing from taxpayer money, possibly the purest manifestation of “moral hazard” ever? The one thing that could upset the Government’s applecart is inflation since Mervyn King has flagged that he doesn’t want additional interest rate cuts with inflation already roaring away and with the possibility of a oil price “superspike” in the pipeline in the next year or two, which could counteract any moves by the banks to loosen lending criteria at the end of the year with consumers hit in the pocket by continuously rising fuel and food prices. This prospect is probably giving Brown and his puppet chancellor a few sleepness nights at the moment but unfortunately inflation is one thing that hits everybody, including you and me, since it erodes our savings for a house deposit, a situation that will only be mitigated if house prices continue to fall at an rate exceeding “real” inflation and I still think the jury is out with regard to this prospect. I’m inclined to feel the ‘special liquidity facility’ will put a floor under prices early next year after relatively modest falls in the context of the previous few years’ gains but I fully admit inflation could bring the whole temple down on the Government’s heads (for which I would be ambivalent – seeing Brown utterly humiliated would be sweet since he laid the groundwork for this whole farrago years ago but inflation is a dangerous thing and it a case of “be care what you wish for, you might get it….”).

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  • Ah…how does increasing the supply on rentals “lift” the letting market?

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  • “the rental market, where yields are rising, Rics says”

    yields can rise for two reasons. One is that rents are going up – maybe a little, but from what people on here are saying, not in all areas.

    The other is that capital values are falling…

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  • Are the BBC completely detached from reality?

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  • The BBC will argue that an organisation like RICS are well established and credible and what they say is worthy of reporting. It is no more than that. The idea that by reporting this kind of thing the BBC is involved in some sort of knowing falsehood or ‘detached from reality’ is a bit far fetched. Now if/when the BBC starts giving establishment credence to someone like Assetz then something has happened and worth venting our spleen over but in fairness no real sign of that..

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  • Agree with D’oh.
    Rics posted yesterday that rents in London dropped 1.2% in April against a backdrop of 6.9% increase in available property.
    As property is falling in price the desire will be there to rent for those fortunate enough to be able to sell.
    Rising rents will I believe be short lived as more properties become vacant and are put up for rent.

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  • Bumped into a EA whilst having a sauna a couple of nights back. He pretty much tells it how it is and is not the anti-christ as many on believe EA’s to be. He re-iterated press talk about the bottom falling out of the market but did comment that properties £400,000+ were selling reasonably well. I can back this up as I’ve noticed a surprisingly number of “SOLD” signs around my area. The area he operates in is not typically BTL but he did comment about BTL and word on the street with the VI’s is that the housing market will go into melt-down if BTL’s start to bail. If non-BTL do not need to seel, they can sit tight, BTL may just rush to the exits en masse. This fact probably explains the amount of spin on BTL over the last few days (led by cheerleader-in-chief the BBC) about how rents are increasing. Personally I’m not seeing rent increases and neither are other people I know who are also renting.
    It’s not clear to me what involvement and expertise RICS have with the rental market, but they are a respected voice who the BBC are quite happy to publish verbatim.

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  • Good comments Faustus

    However, I wonder how much of the special liquidity facility is simply needed to replace previous credit lines (which it now turns out were coming from overseas).

    It appears that a couple of years ago banks like UBS in Switzerland would pay billions for wads of Ninja mortages (probably with paw prints on them rather than signatures 🙂 ).
    Now they are trying to get rid of them as fast as they can and taking eye watering losses. As Northern Rock found out there are no longer any buyers for 125%
    mortgage certificates. In fact they would probably have difficulty selling on 90% certificates. Another thing causing liquidity to dry up is all the banks rights issues.
    That money has to come from somewhere. Instead of buying mortgage certificates, Pension Funds Sovereign Wealth Funds (in countries who have money like Dubai)
    can buy highly discounted stakes in the banks themselves.

    :- Duncan

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