Buy to Let - Further Proof that it is on its dying legs

brit1234

Buy to Let - Further Proof that it is on its dying legs

Have a read of this article

Texans abandon pursuit of ailing UK buy-to-let lender Paragon


By Simon Evans
Sunday, 24 August 2008


TPG Capital, the buyout group that abandoned its attempts to rescue Bradford & Bingley earlier in the year, has pulled out of the race to buy Paragon, the ailing buy-to-let mortgage lender.


Sources close to the Texan private equity group have confirmed to The Independent on Sunday that it is no longer interested in pursuing the Solihull-headquartered firm, leaving the private equity houses Blackstone and Apollo, which owns the Countrywide estate agent chain, to fight it out for Paragon.

"No, TPG is no longer interested in buying Paragon," said one source. "There will be no deal on this."

Shares in Paragon, which is being advised by UBS, jumped by more than 30 per cent at the end of July when details emerged of a prospective bid by TPG. However, it is thought that TPG's plans to roll up a number of UK lenders to sit alongside Paragon were scuppered when Alliance & Leicester was snapped up by the Spanish banking giant Santander for £1.26bn.

TPG's decision to once again drop out of a high-profile auction comes in the wake of its move to abandon a planned £179m cash injection for the buy-to-let lender Bradford & Bingley. The buyout house, led worldwide by David Bonderman and in Europe by Philippe Costeletos, ditched its planned rescue after B&B faced a downgrade in its credit rating by the Moody's agency. This enabled TPG to invoke a get-out clause.

Four City fund managers – Standard Life, Legal & General, Prudential and Insight Investments – eventually stepped in to fill the void left by TPG's decision. However, just two days ago it was revealed that underwriters in B&B will be left holding around 30 per cent of the remaining rights issue stock not taken up by investors.

B&B has been leaderless for several months pending the arrival of a new chief executive, Richard Pym, who formerly held the same post at Alliance & Leicester. It reports half-year figures on Friday, which are once again expected to disappoint.

TPG's exit from the Paragon bidding process comes at a difficult time for the group. Earlier in the year it was forced to go cap in hand to its investors for £287m as the extent of the downturn in the buy-to-let arena emerged.

Nearly 90 per cent has been wiped off the value of Paragon shares over the past year. They closed down 1.65 per cent on Friday at 108p.

http://www.independent.co.uk/news/business/news/texans-abandon-pursuit-of-ailing-uk-buytolet-lender-paragon-906776.html

The simple fact is that three of the biggest buy to let mortgage companies are up pooh creek. Paragon, Alliance & Leicester and Bradford & Bingley’s mortgage books resemble toxic waste and almost no one now after seeing their books wants to bail them out.

Paragon has had no money since January to lend and now their potential biggest savour has walked away after analysing their books and the current market. The predecessor company went bust in the last crash and Paragon is likely to follow this one.

Bradford & Bingley is simply a dead man walking. It seems in the most vulnerable position of all the banks to go Northern Rock on us. Moody's poor credit ratings of the company mean it can only now borrow from the Bank of England now.

Alliance & Leicester’s future hangs in the balance. Their bosses have openly said that if share holders don't accept Santanders buy out that they are finished.

Now if the buy to let biggest fishes are in trouble what does that say for the smaller fry? Finance is almost dried up for the buy to let sector and what is still available is too expensive or conditions to hard for investors.


With finance gone, tumbling values of property portfolios, rapidly increasing repossessions and now widely reported falls in rents from oversupply the future for buy to let looks dire.

:eek:

What your opinions especially any investors out there?

brit1234

Just forgot to add that if you go on any buy to let forum you will see them having great problems in getting money in the way they use too.

Singing Pig

http://www.singingpig.co.uk/forums/?GroupID=10



Landlord Zone

http://www.landlordzone.co.uk/forums/index.php?

:exclamati PS not trying to advertise these other forums, just there as evidence and I recommend you use this forum instead of them as it is far better. Plus you are likley to get banned from Singing Pig if you disagree with their views.:exclamati

RichOneday_2

It is bad and getting worse. BTLers are unable to bail out because they have mostly been bought on highish LTVs. The wait to get back to healthy prices of last year is likely to be 7/8 years if the downward part of the cycle takes another 3 years as expected.

There have never been such a large number of BTLers in a big downturn before so it will be interesting to see how they react.

pickledpink

People have to live somewhere..................where d'you think everyone's going to go?:money:

Neillgb

Fair point, whether they pay well or not is another question. There are a lot of people with serious unsecured debt issues, repossessions etc, that I simply would not trust to have as a tenant.

I note ex EA's are moving into the letting agency business and are desperately trying to ramp rental rates. Ring any bells...........

mewbie_2

RichOneday wrote: »

There have never been such a large number of BTLers in a big downturn before so it will be interesting to see how they react.

They were not buying to become landlords that's a fact. It is not possible that so many people in the last few years suddenly decided they wanted to become professional landlords and enter the world of tenants, DSS, HMO's, student accommodation, etc. No, the dream was a bubble of capital appreciation fed by InsideTrack (bust), B&B (going bust), Paragon (mod: OK mewbie we get it)

Hmmm. What's the opposite of a dream? It will indeed be interesting, as an [strike]im[/strike]partial observer.

Here's a funny .. http://www.thedailymash.co.uk/news/business/buy%11to%11let-investors-age-1,000-years-in-four-seconds-20080325820/

Pobby

Btl is a business just like any other. I have had a number of businesses, some very good, some didn`t really get off the ground. What i have learn`t is that no business remains constant and it`s often from influences that you may not have thouight of.

Some years ago I was a director of a company with exclusive rights in the UK and Eire to sell a successful USA manufactured product. For many years all went very well. However the exchange rate dropped over a third making our product to expensive and in consequence sales dropped in a dramatic fashion causing us to lay off staff. I will say that we would always try to keep on staff until they had found something else.

OK back to buy to let. A lot who got into this years ago will be fine.Good rental yields coupled with good capital gains but as often in investments loads of people piled in because they saw others making good money from it and thought they could. I mention in another post about a friend who is subsidising his tenant in a Dublin property. reading between the lines I think it was the capital growth that appealed to him.

As the frenzy of btl took grip people made some BIG assumptions not the least that interest rates would remain very low for ever. Easy lending, capital gain, another couple of assumptions. It`s easy to gloss over the realities of life when all is booming. Never considering void periods, maintainance and all the other costly stuff that comes with ownership.

I think right now that people are being faced with the reality of what is a tough business by it`s own nature.

Treadmill

The problem is for BTL landlords is that most of them own 2 bed new build flats in this area at least, there may be a shortage of rental property but the area has 100s of 2 bed flats stood empty and hundreds still getting built, Call them penthouse or luxury apartments etc but they are still 2 bed flats...

If you are a BTL Landlord letting a nice 4 Bed semi with a garage you are laughing though as they are as rare as rocking horse poo and the rental price reflects this.

lostinrates

pickledpink wrote: »

People have to live somewhere..................where d'you think everyone's going to go?:money:

I came home to live with my parents and DH lodges Mon-Thurs. Lots of our professional friends still flat share and cannot afford to do otherwise. Lots more than we would ever have imagined still live or half live at home.

Very regretfully I envisage a lot more people living on the streets. Because you are right: people without homes don't die, and 'somewhere' includes unpalatable, horrifc and truely sad options. Hopefully out of this will come a serious review of the role and provision of state housing and the position people need to be to buy rather than rent pivately for it to be of benefit to them.

Have we, personally, wanted house prices to fall for years? I suppose so. Although we were looking three years ago - and fuly prepared and able to get a mortgage (though not a wise mortgage and with guarantors) life got a shake which included relocation abroad. I'm very grateful now that we didn't buy then....it would have been a shortsighted purchase.


ETA: it might just be my imagination but I think this has posted on a thread different to the one I thought I was replying to! Oh well....its all the same arguments under different headings eh?!

FraudBuster

And how many Buy-to-Let businesses have been funded by Lie-to-Buy mortgages?

Incisor

pickledpink wrote: »

People have to live somewhere..................where d'you think everyone's going to go?

They will live in houses and flats. Plenty of BTL around to choose from and quite a few trying to offload their non main properties.