Saturday, Sep 26, 2015

Equivalent to margin in stocks

Dailymail: BTL could spark property crash

It's the elephant in the room...BTL at these levels is a pure play on rising prices..leveraged loans speculating on
Rising prices.Problem is it goes pear shaped if prices fall...1929 stock crash was fuelled by margin trading
As was 2007 crash and recent Chinese stock crash...trouble is you can't short physical property!BTL makes no
Sense at these levels unless prices rise

Posted by taffee @ 06:56 AM (6787 views)
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21 Comments

1. cyril said...

They are obviously very concerned about it because they've decided to do nothing as usual. Do we pay for this?

Saturday, September 26, 2015 10:30AM Report Comment
 

2. cyril said...

They are obviously very concerned about it because they've decided to do nothing (as usual). Do we pay for this?

Saturday, September 26, 2015 10:30AM Report Comment
 

3. cyril said...

They are obviously very concerned about it because they've decided to do nothing (as usual). Do we pay for this?

Saturday, September 26, 2015 10:31AM Report Comment
 

4. libertas said...

Not necessarily, most BTL properties start at 30% deposit, minimum, and you cannot get a BTL if you depend on it, i.e. if you do not own a home, so it is not necessarily a risk asset even if prices fall 10 to 20%.

Saturday, September 26, 2015 11:18AM Report Comment
 

5. Janch said...

I think it is definitely a risk asset if the BTL'r is heavily leveraged and he also has to find some extra tax to pay than he does at the moment.

Saturday, September 26, 2015 12:11PM Report Comment
 

6. pete green said...

Libby that just protects the banks and a small buffer to BTLs, not the propensity to sell in an accelerating falling market when the panic of a new paradigm sets in

Saturday, September 26, 2015 07:30PM Report Comment
 

7. libertas said...

Most BTL investors are buying when prices are falling, as should first time buyers, but they always wait until prices have gone above their previous peak. I know, I am one of those people.

Saturday, September 26, 2015 07:34PM Report Comment
 

8. Alan Lubin said...

Will BTL investors really be buying when prices are falling? Who is going to lend them the money?

Saturday, September 26, 2015 07:41PM Report Comment
 

9. quiet guy said...

"Most BTL investors are buying when prices are falling"

Some evidence please? BTL has been surging on the back of rising prices - indeed BTL may be one of the factors in rising prices.

Saturday, September 26, 2015 09:48PM Report Comment
 

10. britishblue said...

House price drops have always been buffered in the past by private home owners because of the following reasons:

a. If they get close to negative equity they cant sell.
b. If the the price gets too low they wont be able to get another mortgage as their 'deposit; is wiped out and theyneed somewhere to live
c. Often there is a battle going on between two partners. One wants to keep and one wants to sell.
d. People go into denial, they mentally take the gains, but when prices fall don't accept they are worth less. In fact many people who think prices are too high would like prices to remain the same, rather than fall.

We now have a whole different set of 'investors' who are considerable more liquid and can dispose of property without some of the reasons above.
a. A buy to let landlord who is worried about falling prices may decided to get rid of a percentage of his stock, decrease his debt to capital ratio. This would be a sensible thing to in any business where there was risk. They don't have the same need for a roof over their or the same emotional needs that their house should be worth x. It is just a business.
b. A rich overseas investor who has bought in London and made 100- 200% would think nothing of divesting and losing 10, 20 or 30% from the peak. They have just viewed property as any other investment that goes up and down.
'
I remember the crash in the last century when 1000's of people were stuck in homes and couldnt move. This puta brake on the market. Some of the brakes will not be there next time.

Sunday, September 27, 2015 05:59AM Report Comment
 

11. i remember the 90`s said...

@8 I remember that crash as well I was in it ,we needed to move as family was growing we were fortunate as had cash in the bank for deposit (equity was 0)but I know of many who were burnt and have rented since ,my question is what is going to make property crash as I can`t see it with BTL waiting in the wings with cash on the hip.

Sunday, September 27, 2015 08:50AM Report Comment
 

12. debtserf said...

>> my question is what is going to make property crash as I can`t see it with BTL waiting in the wings with cash on the hip.

Same thing as made the 80s boom crash and burn - events, old chap. Oh, and interest rates.

Maybe the end of MIRAS, but interest rates prolonged the agony for millions of over-indebted borrowers. Tory props lead to Tory boom, followed by Tory bust. history may not repeat, but it often rhymes.

Of course, it could never happen here.

Sunday, September 27, 2015 08:45PM Report Comment
 

13. libertas said...

debt serf, no, its all about time.

Right now, so many people have put off things since 2008, and so there is little holding them back, and it simply is not time for another crash. One will come, but as I keep saying, I believe this will not abate until just after 2025. Crossrail, opening in London, 2018, will give the capital a huge boost along with so much development coming online, that may help moderate central London slightly but do nothing for the suburbs.

Normally a crash is part of the credit and sentiment cycle. Given that we just broke out from the 2008 highs, and with London way above them, that signals that this is not a double top.

Frankly, it is dreadful, and this complete open door policy with no attempt to create competition between BTL and first time buyers (ban sales that go through quicker than 28 days, so that mortgage buyers are on equal footing to cash buyers, and ban letting agents from letting homes their estates wing sold in the last 2yrs to stop them manipulating sales towards BTL). Make these types of changes in the interests of a more competitive market, and maybe there can be a better future.

Sunday, September 27, 2015 09:00PM Report Comment
 

14. Markp said...

Libertas, because we broke out above the 2008 highs means nothing. Bull runs often end in ending diagonal 5 th waves which break to new highs before crashing down.

The stock markets have already seen this, margin debt has been decreasing the last 3 months which is a very strong signal for an impending bear market.

When the trap door door opens not even negative rates will save you.

Sunday, September 27, 2015 10:47PM Report Comment
 

15. taffee said...

Bubbles don't actually need a catalyst to burst often they just collapse under their own weight

This one is a big one

Monday, September 28, 2015 06:23AM Report Comment
 

16. taffee said...

Fwiw...the fear of real labour forming a government could be a catalyst for btl to start selling.apparently
They have radical policies like building council houses and taxing companies properly

Don't forget the young have been shafted by this giant ponzi scheme so is it any surprise real labour have
Elected Jeremy Corbyn?

35 year old good earners living at home without a chance of living in a house they own....did anyone actually
Believe this could continue?

Monday, September 28, 2015 06:34AM Report Comment
 

17. taffee said...

http://www.iii.co.uk/articles/261609/prime-london-house-prices-are-plunging-and-uk-could-follow

Some reports suggest things are already starting to fall off a cliff

Monday, September 28, 2015 06:41AM Report Comment
 

18. britishblue said...

T @13 I also heard the rumour that this new Labour chappie was going to build council houses, use QE to build schools rather than give it to the banks to gamble and also not charge our students fees, so they don't come out of University with 50k debts and are on a level playing field with students from Poland and Scotland, countries who obviously can afford it, whereas we the 5th wealthiest country in the world cannot. . I must admit if i was a 30 year old the threats of Michael Foot and the Minors strike wouldn't frighten me as much as the apathy towards the young, especially in London. I suspect whether Corbyn fails or suceeds, he will at least get housing on the agenda and the need for more homes versus the need for the housing ponzi scheme to be kept afloat. Remember, Milliband got slated for the non dom tax, but then Osborne carried through with it. It could be that housing is getting such a massive issue for the young that a Corbyn shadow cabinet could change the agenda, which could be the catalyst the housing market needs.

Monday, September 28, 2015 02:20PM Report Comment
 

19. i remember the 90`s said...

Labour do scare me but I starting to cherry pick their potential good bits that suit poor people like me !!!!!!

Monday, September 28, 2015 02:45PM Report Comment
 

20. libertas said...

Such a shame that Labour cannot combine the good parts of Tory policies with sensible scrapping of tuition fees, and various other nice things. They really should realise that the majority voted Tory and do not necessarily share their vitriol.

Monday, September 28, 2015 08:07PM Report Comment
 

21. taffee said...

@15

Agree with what you say...real labour can feel a bit scary but it's rise is a direct result of young people being shafted by hmg policies
Corbyn tapped into that which is good for democracy

Whilst Tories have spun that the economy is doing well...it isn't and its terribly unbalanced...the real question is whether
Things will.unravel in the next few years...far from being conservatives the Tories are more looney left wing imo by propping markets/companies up with subsidies and props akin to Russia in the 80s/90s

Tuesday, September 29, 2015 06:01AM Report Comment
 

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