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Buy-to-let landlords desert the property market
brit1234
Posts: 5,385 Forumite
Buy-to-let landlords desert the property market
Article by Toby Serter
Saturday 16th February 2008, 12:09
A growing number of estate agents are signalling that a glut of properties for sale could seriously affect property values over the coming months and landlords are anticipating huge falls in the value of their buy-to-let properties. Many are escaping before the problems escalate.
“I have a portfolio of a dozen buy-to-let properties” said Colin Atkins, a London property dealer. “Last year I bought three more, but I am very sceptical about falling values and negative equity” he said. “Especially as their seems to be a marked reduction in rental values”.
Colin, an investor in London’s prime area of Kensington believes that many more properties will flood the market in April when capital gains laws change and buy to let landlords will not have to pay the full 40% tax if they sell.
“Because of the forthcoming changes in capital gains laws, it is inevitable that many buy-to-let landlords will be selling properties which they perceive to be too expensive now that prices are falling. Landlords who have bought recently in the last 18 months will be most affected but I there will be an influx of for sale properties from buy-to-let landlords on the run up to, and following April’s changes”.
Chris Brown from property experts Foxton’s said “We've already seen an increase of properties coming onto the market from buy-to-let landlords for sure and this is having a profound effect on rental values as well as for sale prices” he said. “Smart investors have already left the market, but others are holding on for the tax changes”.
He added, “Recently I have seen rental demand fall, interest rates rise and I am concerned about the outlook for the UK property market”. "Many landlords are now seriously looking to offload their stock”
On the sales side, Stuart Ambridge from estate agents Kinleigh’s said "There are so many flats on the market, buyers haven't got the time to get round them all. One couple said to me they had so many flats to choose from they couldn't make a decision," one agent said. Another agreed that first-time buyers would be the big winners. "For them, the fall in prices is great news but you have to feel for the people who are in negative equity. You can expect to see a lot more repossessions over the coming months,".
The losers are likely to be the late-comers to buy-to-let. Reported in the Guardian recently. Guardian Money spoke to the residents of new-build apartment blocks in Manchester, we found that virtually all were occupied by tenants whose landlord was a buy-to-let investor.
Early investors are still sitting on large gains. But more recent entrants have been burnt by price falls, and those who have been unable to find tenants are now facing repossession. :eek:
http://functionpix.com/index.php/article/Buy-to-let_landlords_desert_the_property_market/1702/
Article by Toby Serter
Saturday 16th February 2008, 12:09
Journalists, photographers, writers and reporters earn money buy selling your creative material on www.functionpix.com
7 out of 10 lettings agents in London are reporting a rise in landlords hoping to sell up buy-to-let properties as the April deadline for capital gains tax changes approaches.A growing number of estate agents are signalling that a glut of properties for sale could seriously affect property values over the coming months and landlords are anticipating huge falls in the value of their buy-to-let properties. Many are escaping before the problems escalate.
“I have a portfolio of a dozen buy-to-let properties” said Colin Atkins, a London property dealer. “Last year I bought three more, but I am very sceptical about falling values and negative equity” he said. “Especially as their seems to be a marked reduction in rental values”.
Colin, an investor in London’s prime area of Kensington believes that many more properties will flood the market in April when capital gains laws change and buy to let landlords will not have to pay the full 40% tax if they sell.
“Because of the forthcoming changes in capital gains laws, it is inevitable that many buy-to-let landlords will be selling properties which they perceive to be too expensive now that prices are falling. Landlords who have bought recently in the last 18 months will be most affected but I there will be an influx of for sale properties from buy-to-let landlords on the run up to, and following April’s changes”.
Chris Brown from property experts Foxton’s said “We've already seen an increase of properties coming onto the market from buy-to-let landlords for sure and this is having a profound effect on rental values as well as for sale prices” he said. “Smart investors have already left the market, but others are holding on for the tax changes”.
He added, “Recently I have seen rental demand fall, interest rates rise and I am concerned about the outlook for the UK property market”. "Many landlords are now seriously looking to offload their stock”
On the sales side, Stuart Ambridge from estate agents Kinleigh’s said "There are so many flats on the market, buyers haven't got the time to get round them all. One couple said to me they had so many flats to choose from they couldn't make a decision," one agent said. Another agreed that first-time buyers would be the big winners. "For them, the fall in prices is great news but you have to feel for the people who are in negative equity. You can expect to see a lot more repossessions over the coming months,".
The losers are likely to be the late-comers to buy-to-let. Reported in the Guardian recently. Guardian Money spoke to the residents of new-build apartment blocks in Manchester, we found that virtually all were occupied by tenants whose landlord was a buy-to-let investor.
Early investors are still sitting on large gains. But more recent entrants have been burnt by price falls, and those who have been unable to find tenants are now facing repossession. :eek:
http://functionpix.com/index.php/article/Buy-to-let_landlords_desert_the_property_market/1702/
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Comments
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It makes me wonder who the putative sellers will sell to. FTBers have been notable by their absence from the market in recent months. Given achived sale prices vs rents in London it's not going to be possible for BTLers to buy unless they have big deposits.
It may sound obvious but many people miss the fact that for every seller you need a buyer. If the buyer isn't there you need to cut your asking price to bring another buyer into the market.
The residential property market in the UK is highly illiquid and so volitile. In the past few years that volitility has been shown in rapid price increases as buyers have bid prices up. Prices now appear to be falling. Perhaps we'll now see what happens if buyers aren't prepared to chase prices forever higher.0 -
Most professional BTL investors haven't been buying property for at least the last couple of years because we can't make the business equation work. Rents haven't kept pace with property prices and most of us have no interest in subsidising the monthly rental income in order to pay the mortgage. Those of us that have bought BMV & property a few years ago when prices were lower are doing very nicely. The amatuer buyers who have bought recently at over maket value for new build flats are likely to get badly burnt.
There are still BMV's, refurbs, redevelopments and repossessions available. If the suggestion of lower priced property being offloaded by dissillusioned BTL investors is true.....there will be many of us viewing it as a buying opportunity.0 -
When panic sets in, the whole market will suffer.
A flood of BTL properties on the market will cause ALL prices to fall - including those owned by owner-occupiers. BTL LLs can bail out and accept lower capital gains but more recent owner-occupiers cannot. I guess the former tenants that are made homeless by sheep-like LLs selling up may add some upward pressure on the market to help balance things out.
In short, the pain will be harder for owner-occupiers than for BTL LLs. And tenants will have less choice. In the meantime, I'm offering my tenant a new 12 months contract with no increase in rent. Made her day.
GG
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
Gorgeous_George wrote: »When panic sets in, the whole market will suffer.
A flood of BTL properties on the market will cause ALL prices to fall - including those owned by owner-occupiers. BTL LLs can bail out and accept lower capital gains but more recent owner-occupiers cannot. I guess the former tenants that are made homeless by sheep-like LLs selling up may add some upward pressure on the market to help balance things out.
In short, the pain will be harder for owner-occupiers than for BTL LLs. And tenants will have less choice. In the meantime, I'm offering my tenant a new 12 months contract with no increase in rent. Made her day.
GG
GG
As I said in another post, an increase in rent isn't likely to make much of a difference to BTLers who didn't do their sums properly and whose rental income comes nowhere near to that needed to meet mortgage repayment obligations. That pretty much describes most people who got into BTL in the last couple of years or so.
They face continuing to subsidise a tenant in a now depreciating asset or getting out with some equity intact whilst they still can.
It'll be a nice bonus for Landlords who knew what they were doing when they bought their property though.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
Well, devils advocate here.
1 out of 27 mortgages was BTL, currently 1 out of 13 mortgages is BTL.
A lot of professional BTL'ers were starting to pull equity out of their properties as far back as 2 years ago to amass a warchest so when property falls they can buy in en masse.0 -
Gorgeous_George wrote: »A flood of BTL properties on the market will cause ALL prices to fall - including those owned by owner-occupiers. BTL LLs can bail out and accept lower capital gains but more recent owner-occupiers cannot. I guess the former tenants that are made homeless by sheep-like LLs selling up may add some upward pressure on the market to help balance things out.
In short, the pain will be harder for owner-occupiers than for BTL LLs. And tenants will have less choice. In the meantime, I'm offering my tenant a new 12 months contract with no increase in rent. Made her day.
Price falls for most owner occupiers are a good thing aren't they? Many owner occupiers would love house prices to halve, so that they could afford that four bedroom detached they always dreamed of. OK, recent owner occupiers might not be too happy about it but then I doubt that recent landlords will be too pleased either. Some might need to bail out at a loss rather than a reduced capital gain.
If landlords sell up the number of people needing housing will be the same, as will the number of houses. I suppose that there might be more homeless people and more empty houses in the near future, but there are things that can be done to (eventually) get the homeless people into the empty houses. Long term vacant properties can be compulsory purched and brought back into occupation. If prices fall then more people could buy. SquatNow would have more choice.
If you've given your tenant a new contract with no rent increase, isn't that a rent reduction in real terms? I'm not surprised your tenant is pleased but how happy does that make you feel as a landlord? You sound as if you're better off than many but it's hardly ideal.
As a non-recent owner occupier, I'm rather hoping that prices plummet. That way at least my kids might stand a chance of buying somewhere when the time comes.0 -
More BTL goodness:
http://www.moneyweek.com/file/42259/how-to-get-poor-quick--invest-in-buy-to-let-today.html
Buy-to-let is now just a rich man’s game, apparently.
That’s what the head of Britain’s second-biggest buy-to-let lender, Bradford & Bingley, suggested yesterday, amid a set of woeful results that saw the share price plunge by 23%.
Chief executive Steve Crawshaw warned that the bank would be looking for better profit margins (that means higher interest rates) and more equity (that means higher deposits) from landlords. Higher costs tend to lower demand, and arguably would shut out amateur landlords, leaving the field to only professionals and the wealthy.
I'd be more inclined to say that BTL (at current prices) is just an idiot's game. You'd have to be a cretin to be thinking of 'investing' at this time.
And established landlords aren’t daft. The professionals focus on getting decent rental yields, and making sure they can cover any void periods. So plenty of them bailed out of the market a long time ago, realising exactly where it was headed. In fact, I remember reading in one of the weekend supplements a couple of weeks ago, about a buy-to-let professional who had stopped adding to his portfolio as far back as 2001, because he wasn’t happy with the yields.
Sadly, the housing market has been propped up by a string of buy-to-let latecomers who have overstretched themselves, often to buy dubiously valued city centre flats, who will now find that they are in serious financial trouble. That means repossessions and fire sales ahead. Buy-to-let may now be a rich man’s game, but no rich man who wants to stay that way will pile in now.
:rotfl:
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Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
I'm buying now!
Its a repossession, its VERY cheap, its a 1 off (unless and equally attractive bargain comes along), it requires very little time, effort or money to refurb and it will rent very easily.
I'm paying cash and the rental yield will be better than I can get investing the money elsewhere.0 -
well if you pay cash then nearly any deal will be ok.0
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But I might mortgage it later.....Northern Rock might have some good deals !;)0
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