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Buy-To-Lets start to flee/renting poll

schizoboy Avatar
9y, 3m agoPosted 9 years, 3 months ago
Useful links:

Useful website for tenants/lodgers:
http://wwwshelter.org.uk/http://www.shelter.org.uk/

Useful website for Landlords:
http://www.landlordzone.co.uk/http://www.landlordzone.co.uk

MSE - Forums > Pure Money » House Buying, Renting, Selling & Prices Forum:
http://forums.moneysavingexpert.com/forumdisplay.html?f=16http://forums.moneysavingexpert.com/forumdisplay.html?f=16



Buy-to-let landlords head for the exit

The proportion of buy-to-let (BTL) landlords selling properties has risen to its highest level for two years as agents report a glut of flats for sale. Could the property market be turning down?

The Royal Institute of Chartered Surveyors (RICS) produces the authoritative quarterly survey on the UK BTL market. Its latest shows that in the three months to April, 5.2% of landlords sold properties, a sharp rise from the 4.1% of the previous quarter.

Falling yields and rising interest rates were the probable triggers, but while in most areas the conventional residential housing market is pretty tight, many agents now report gluts of flats for sale in many parts of the south-east - a development Ive been predicting for several months.


Demand for lettings is over-concentrated
And heres a straw in the wind: individuals now account for the highest-ever proportion of new lettings (83%), while students now barely feature in the figures and corporate letting are down to their lowest level of under 10%. Students have got nice new purpose-built student blocks which are financed by pension funds, so they dont need to rent normal flats, and most companies with spare cash will buy a flat rather than rent it. Sharply lower demand from two groups of potential tenants isnt good news for landlords.


Leave early to avoid the rush
You may think that one in 20 landlords selling properties isnt that many, but the price of property is set at the margin - its the extra few properties for sale in an area that bring asking prices down. With another interest rate rise almost certain in the next few months, the returns for new BTL investors are falling, and though this hasnt yet been reflected in new BTL loans, thats the next area where I expect to see a significant change in the trend in the next few months. If we get lower demand and rising supply, theres only one way prices can go.


Any BTL landlord thinking about taking chips off the table should do so fast, in my view - its best to get in ahead of the rush. RICS predicts a soft landing for BTL - well, they would say that, wouldnt they? In the very long run, you may still do OK from BTL, but the next few years are likely to see price declines for new-build, especially blocks that have been sold off-plan and where early buyers are looking to flip.


It isnt cool to bank on a greater fool
When I search for off plan, I get links to hundreds of firms promoting high-risk property investment from here to Thailand. That alone should tell you its getting too warm out there.


Off-plan investing was huge in the US in 2002-05, but has since crashed and burned. The concept is simple and terribly appealing. For signing up to buy a flat in a new-build block, you only need to put down a 10% deposit - sometimes even less. If - as you and the developer hope - prices keep rising, you sell your flat on before its even built for a fat profit. How fat? Well, if the price of a £200,000 flat rises to £215,000, and you only put down a 10% deposit, then you have made a gain of £15,000 on an outlay of £20,000, which is a 75% profit margin. In the US, hundreds of thousands of people played this game and flipped their condo purchases at a profit from 2002 onwards. But, as in Old Maid, those left holding the cards when it all went wrong in 2006 lost not just their deposits - because the contract required them to pay the full price. Many were bankrupted as they had to buy flats they had contracted to pay for £200,000 but that they could only sell for £150,000. The US property market is still falling.


Rental fictions
In the UK, the game has been a little more sophisticated. Developers have joined forces with clubs or marketing operators to sell off-plan at a discount and with rental guarantees. Often, the rental income guaranteed for the first year or two is well above the actual free market rent in the area. That makes the flat look like a good investment. But its real capital value depends on the free market rent it can command, so unless theres a big rise in rents after you buy, you could find the resale value lower despite the discount. Ive watched with some amusement over the past three years as UK mortgage lenders have regularly upped their Loan-To-Value maximums, lowered the rent cover requirements and generally made getting a buy-to-let mortgage easier than a homeowner one.


Bankers will even tell you with straight faces that lending on buy-to-let is less risky than lending to salary-earning homeowners. You dont have to think hard for long to realise that simply cannot be true. One thing Ive learned in 35 years of watching the financial markets is that when bankers fall over themselves to lend money on something, its better to be a seller than a buyer.


One way of looking at off-plan purchases is that you are going into partnership with the developer. Your deposit replaces costly (and maybe hard-to-get) bank lending so that the place can get built. But if the developer doesnt sell enough off-plan, and cant get enough bank finance to complete, then the project could grind to a halt, locking up your money until some sort of sale can be achieved. There are thousands of unfinished condos all over the US where off-plan investors may eventually get back a few cents on each dollar they invested.


Flip off abroad
So far, UK off-plan buyers have been able to flip profitably, thanks to falling interest rates and rising rents. Now interest rates are rising. Rents have risen too, but not nearly as fast as mortgage repayments. So increasing numbers of potential buyers, especially younger ones, are deciding the game is more profitable overseas- Bulgaria, Turkey, Croatia, Thailand. Thats where the off-plan party has migrated. I guess its natural for a party to migrate to where the booze is cheaper and the cops are always fast asleep.


In these countries the off-plan game gets much, much riskier. Many of the firms doing the developing are one-off cowboys. Local law may make it hard to establish 100% bomb-proof legal title; theres not a well-developed local rental market, so what the actual free market rent of a property is may be hard to establish (and could be affected anyway if theres a huge rash of development going on); the promoters, who earn big commissions on sales from the developers, are unlikely to be around to deal with any problems that arise; local mortgage lenders may prove somewhat more muscular in repossessing a property if you dont pay your interest than would be the case in the UK.

Both here and in the relevant countries, property investment is unregulated and caveat emptor applies in its red in tooth and claw form. Few countries have a developed framework of commercial law governing property investing, which means going to court will be expensive.


Greater foolishness
In fact, off-plan investing is not investing at all - which implies a long-term commitment- but speculation. It is based on the expectation that there will be willing buyers you can sell to at a good profit. And the big risk is: what if there arent? The greater fool theory says that its OK to be an idiot when you buy something so long as theres an even bigger idiot who you can sell to. But as US off-plan speculators have discovered, the greater fool game gets very ugly when the music stops and the idiots suddenly all wise up. So the rule you should apply if you want to join this or any other speculative game is: only play with money you can afford to lose.


In the worst-case scenario the one being played out right now in the US - you could lose all of it. Do not kid yourself that there are special factors that make it different here, there or anywhere else. The present off-plan property game in undeveloped countries is about as obvious a bubble as Ive seen in the past 30 years. After the boom there will be a bust. Leave the party while there are still plenty of people arriving if you want to avoid a nasty hangover.

by Chris Gilchrist
June 07 2007
http://money.uk.msn.com/Mortgages/BuyToLet/article.aspx?cp-documentid=5182780http://money.uk.msn.com/Mortgages/BuyToLet/article.aspx?cp-documentid=5182780
A very interesting article I believe and extremely poignant if anyone has purchased a house recently, BTL or not.
schizoboy Avatar
9y, 3m agoPosted 9 years, 3 months ago
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[mod]#1
Glad i got on the property ladder at 18. Means i have had a very small mortgage for the last 5 years or so.
[admin]#2
Syzable
Glad i got on the property ladder at 18. Means i have had a very small mortgage for the last 5 years or so.


:thumbsup: Same here, only 24 but I've been on the property ladder for five years, and bought before the big boom. I was skint when my friends were going on all inclusive holidays, but I'm allowed to be smug now :giggle: :giggle:

With interest rates going so high, it's not as profitable to have a BTL anymore- I rented my old apartment out when hubby and I bought our first house together, but couldn't justify keeping it as our mortgage payments kept creeping up. So I sold that and put the money toward the mortgage on our current house. It was a good move as we've just bought a cottage that needs renovating and extending, and we'd never have been able toafford to do all the work to it if we didn't have the amount of equity we've gained.
#3
If only most young people were that wise.

I had a leg up from my parents luckyly, but considering London prices I'd of had to leave to afford elsewhere without them.

Radio5 recently predicted 40% increase over 5years too.

It's definitely plateauing, as for bust that article implies or that boost Radio5 says, we shall see, people will always need a roof over their head...
[admin]#4
Don't think it will bust, demand for housing is as high as ever.. I saw about the predicted 5 yr boom too, can't really see it going up 40%, not the way interest rates are increasing...
London is extortionate ;-) I'm in The Lake District so prices are very high for the NorthWest, nowhere near London prices though :giggle:
[mod]#5
When i think how much i paid for my first house 13 years ago, by today's prices i think i could have bought half the street. :giggle:
banned#6
I sold my property 3 years ago then lost the one I was buying so had to move into rented so as not to lose the sale. Then couldn't find anything and the prices shot up out of my reach. The average price around here is £250,000 now which is pretty much out of most peoples reach unless they have help.

If the interest rates rises to anything like it did in the late 80's early 90's then loads of people will lose their houses. Then if it does crash there will be the negative equity problems.

On the plus side, I have no money worries now, no debts and haven't go a property to lose.
#7
I Rent - love the place too. most say its dead money, but I beg to differ in my situation Its more cost effective to pay rent and save about £1000 per month rather than take out a 100% mortgage and pay the interest on it. My own fault becuase I got into financial trouble in my youth.

If I showed you the home and the price they are currently going for it'd blow your socks off. Its a 3 year old 3 bed town house with en suit to master bedroom, downstairs wc as well as family bathroom. balcony overlooking the huge garden, garage and drive, cul de sac location and backs onto North Manchester golf course - £140,000 all becuase of the area. get off our street and its a right dump but the house itself is bargin of the century. I might try and strike a deal with our landlord if he's thinkin of selling up.
banned#8
MinstrelMan
I Rent - love the place too. most say its dead money, but I beg to differ in my situation Its more cost effective to pay rent and save about £1000 per month rather than take out a 100% mortgage and pay the interest on it. My own fault becuase I got into financial trouble in my youth.

If I showed you the home and the price they are currently going for it'd blow your socks off. Its a 3 year old 3 bed town house with en suit to master bedroom, downstairs wc as well as family bathroom. balcony overlooking the huge garden, garage and drive, cul de sac location and backs onto North Manchester golf course - £140,000 all becuase of the area. get off our street and its a right dump but the house itself is bargin of the century. I might try and strike a deal with our landlord if he's thinkin of selling up.

but if you get a mortgage and only pay the interest on it the value of the house may increase so it could be worthwhile doing that
#9
hothothot it depends on your lifestyle and how much you want that lifestyle toimpinge on your disposable income.

I have a lodger in the small room who earns more than anyone else in the house @ past 40k but likes the low rent as it means she can live a lavish lifestyle

Others do not mind the sacrifice and get a mortgage and the majority are fortunate and can use the time doing that to sell up later and profit on the difference in market prices after that time, also not everyone can stump up the deposit or want to move to be able to afford a house.
#10
I currently live with my parents, I can't see me getting onto the property ladder for a good few years yet, The prices are just mad!

Cheapest nice aparment/Studio flat/Flat is around 90K, So still looking at a mortgage 10x my income.

Mate who is 27 in the South west of England and is currently doing half rent/half buy, Its going to take him years to pay it off!!, He got in pretty bad debt (Sum of 22K!) but woke up and started paying it all off!)
#11
Iom-RF
I currently live with my parents, I can't see me getting onto the property ladder for a good few years yet, The prices are just mad!

Cheapest nice aparment/Studio flat/Flat is around 90K, So still looking at a mortgage 10x my income.

Mate who is 27 in the South west of England and is currently doing half rent/half buy, Its going to take him years to pay it off!!, He got in pretty bad debt (Sum of 22K!) but woke up and started paying it all off!)



Got a serious gf/good mates you can joint buy with?
Are you saving for a deposit?

It's possible to get onto the property ladder, but it does depend on circumstances of course and you need to have people you can trust really
#12
schizoboy
Got a serious gf/good mates you can joint buy with?
Are you saving for a deposit?

It's possible to get onto the property ladder, but it does depend on circumstances of course and you need to have people you can trust really
banned#13
im confused iom you didnt say anything
#14
schizoboy
Got a serious gf/good mates you can joint buy with?
Are you saving for a deposit?

It's possible to get onto the property ladder, but it does depend on circumstances of course and you need to have people you can trust really


I don't think i'd ever joint buy, Mates are solid but I wouldn't trust them enough with money, As for GF, Not at the moment but if I meet my sole mate i'd consider a joint buy, But its not going to happen for a good few years yet!
#15
hothothot
im confused iom you didnt say anything


Don't know whats going on there, Not happened before!, I must have hit submit without typing a reply! :giggle:
banned#16
no you were just trying to increase your post count, be honest :lol:
#17
Maybe family members? Just being nosy... :)

Unfortunately for each year you don't mortgage and buy is another year of house price increase and equity increase you miss out on, for 95% of places that is...
banned#18
schizoboy
Maybe family members? Just being nosy... :)

Unfortunately for each year you don't mortgage and buy is another year of house price increase and equity increase you miss out on, for 95% of places that is...

yeah unless there is a price crash, which i cant see happening because people will always want houses, and also im sure the government will do their best to ensure there is not a crash because lots of people will lose a lot of money.
#19
Yeah its been discussed that part buying with another family member would be a start, But I can see that being full of hassles, I'd never work with family as its all to easy to fall out/disagree!, Much the same for buying a flat/house.

I personally spend next to nothing on personal items and i've always been careful with money (or a tight ass depending how you word it!, lol!) But any cash rapidly disappears, Through Car, Tax, Insurance, Electric, Gas, Telephone/broadband etc!
#20
Iom-RF
Yeah its been discussed that part buying with another family member would be a start, But I can see that being full of hassles, I'd never work with family as its all to easy to fall out/disagree!, Much the same for buying a flat/house.

I personally spend next to nothing on personal items and i've always been careful with money (or a tight ass depending how you word it!, lol!) But any cash rapidly disappears, Through Car, Tax, Insurance, Electric, Gas, Telephone/broadband etc!


and 3/4/5+ people sharing the Gas, Leccy, Water, Council Tax even TV License bills will always be far more efficient :)

Although there are limits:
http://england.shelter.org.uk/advice/advice-6497.cfm
#21
hothothot
yeah unless there is a price crash, which i cant see happening because people will always want houses, and also im sure the government will do their best to ensure there is not a crash because lots of people will lose a lot of money.



We have had a price crash before, there wasn't anything the Government could do about it, and yes lot's of people lost a lot of money and their homes as well.

People have very short memories.:)
banned#22
im aware of that, but that was before i was born ( i think) but because its happened before surley there must be a plan to aviod it again, the only way i can see it happening again is if too many houses get built. which i cant see happening.
#23
At 16, and how crazy prices are. I haven't even thought to buying my own place, renting will be the next step by the looks of things.
#24
Inactive
People have very short memories.:)


In the 80's there was also a huge interest rate rise + fuel price rise, That crippled a lot of people!
#25
Iom-RF
In the 80's there was also a huge interest rate rise + fuel price rise, That crippled a lot of people!


Before my time but, it was averaging 18% interest rates. And it said on BBC Radio 2 earlier interest rates had gone up 5 times in the past year, and is set to decrease 2% with inflation by 2009.

Pays to listen.
banned#26
Iom-RF
In the 80's there was also a huge interest rate rise + fuel price rise, That crippled a lot of people!

sounds similar to now
banned#27
jamesterror
At 16, and how crazy prices are. I haven't even thought to buying my own place, renting will be the next step by the looks of things.

our only hope is to buy houses with other people or wait for parents to die
#28
hothothot
our only hope is to buy houses with other people or wait for parents to die


Pretty much. I had a 2hour discussion with my dad about buying property when i was on holiday, after drinking for two hours it came to the conclusion. Its a gamble. Pff. But to be fair, it is a big risk being a house, flat, just some sort of building. With the floods from the past two weeks, I'm sure that'd affect the prices of houses, so your best to buy in an area which doesn't have a high, or medium risk zone.

On top of a really really big hill.
#29
hothothot
im aware of that, but that was before i was born ( i think) but because its happened before surley there must be a plan to aviod it again, the only way i can see it happening again is if too many houses get built. which i cant see happening.



Quite simply, there is only so much any government can do to avoid it happening again, the government cannot wave a magic wand and send inflation away, we are presently seeing ever increasing BOE rate rises to help to stem inflation, however inflation is still increasing.

We are almost certainly going to get a further BOE rate rise very shortly.
#30
hothothot
our only hope is to buy houses with other people or wait for parents to die



Not always a good idea, your parents may just leave the house to a charity.:)
#31
lol i got no chance of moving out all the houses in my area are min 850 a month and like 300k to buy
banned#32
Inactive
Quite simply, there is only so much any government can do to avoid it happening again, the government cannot wave a magic wand and send inflation away, we are presently seeing ever increasing BOE rate rises to help to stem inflation, however inflation is still increasing.

We are almost certainly going to get a further BOE rate rise very shortly.

build more houses and fast, and tell people to stop spending so they dont increase the interest rates :)
banned#33
Inactive
Not always a good idea, your parents may just leave the house to a charity.:)

i am the charity :-D
#34
hothothot
build more houses and fast, and tell people to stop spending so they dont increase the interest rates :)


More houses means destroying more flood plains and flood reliefs and natural beauty! Think about the angry green people! :D
#35
i think (and im sounding stupid now) why we cant build houses wherever we want -- how can someone own land-- if i wanna build a house ina forest why should i pay some guy money when its not his - his great great g father just claimed it
#36
Waiting to inherit a house doesn't really work unless you're an only child, When you've got brothers and sisters, Everything is split equally.
banned#37
dandoc2
i think (and im sounding stupid now) why we cant build houses wherever we want -- how can someone own land-- if i wanna build a house ina forest why should i pay some guy money when its not his - his great great g father just claimed it


You want Earth to be renamed Cement?
#38
Iom-RF
Waiting to inherit a house doesn't really work unless you're an only child, When you've got brothers and sisters, Everything is split equally.


I don't like the sound of "waiting to inherit". I've always thought you should make your own steps in life, and see that as something which is a little extra, like icing on a cake :)
#39
dandoc2
i think (and im sounding stupid now) why we cant build houses wherever we want -- how can someone own land-- if i wanna build a house ina forest why should i pay some guy money when its not his - his great great g father just claimed it


Yeah, Lets all just build houses where ever we want, Sure the planning application won't matter! :giggle:
#40
jamesterror
I don't like the sound of "waiting to inherit". I've always thought you should make your own steps in life, and see that as something which is a little extra, like icing on a cake :)


I'd agree, I like to be independant and wouldn't wish harm on any family for my personal gain, I treated HHH's post as more of a joke!

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