Misery of the BTLers and property developers...

Graham_Devon

Kenny4315 wrote: »

When are you predicting a 5% Base Rate ..... I can't see this happening in the next 2 years ??

Are these the same FT experts who predicted a smooth decline or the banking crisis. I predicted a significant correction a few years ago, ie 2006. Rents may take a short hit while the repo brigade are forced out but once this is done it'll be business as usual. It's simply demand versuses supply. BTL's down demand increases ... rents movement up.

Incidentally rents never kept pace with the HPI either .... or they'd be double what they currently are.

For example, the house I rented in 1994 was proably worth about £40k now around £120k, the guy got £420pm from the 3 of us, these are now renting at around £550, not £1260.

Do you REALLY think that? Seriously!?

We have a massive shortage of housing. That doesnt mean house prices are going up.

Come on, this is all fluff to sidestep any questions.

As for £420 per month rent in 1994, you really ARE having a laugh.



That graph shows where we are going.

mewbie_2

I preferred the Fungus and Dan show.

Kenny4315

Devon what is your current equity position ?

Kenny4315

The fallout of this correction will be those dinner-party BTLers that have been keeping rents artificially low. How can a reduction in supply lead to a reduction in rent. We have an over-supply at present because of dinner party BTLers and folk close to the repo man trying to save there house by renting, a system that simply ain't going to work. Another few months and these guys are going to be history, and something the banks won't let occur again.

Once the market gets close to the bottom the serious BTL investors will be buying agressively, while the market is low. The UK population is expanding not contracting, houses aren't getting built as profit margins are reducing.

mp2

Dan: wrote: »

I have no idea how you came to the conclusion that my argument is "but things are different this time" but I ensure you, it isn't



Individual cases are not irrelevant, it is sensible lending.



Using your examples - 3.5 x earnings and the mortgage payment is about 35% take home pay, but maybe there are other outgoings, personal loans, credit cards, CSA payments, car payments. What if the total commitments end up around the 60% - 70% mark?

And Someone who borrows 4.5 x earnings and uses around 45% of take home pay and has no other outgoings. What is less risky?




Banks are still businesses, they still need to make a profit and as a tax payer it's in your interest they do so. There is plenty of money to be lent to those that meet the criteria.

if you agree that things are no different then you accept that we have been in a massive bubble over the past 10 years which reversing back to the norm again.

remember, you dont get to choose how much you can borrow, the banks do.

if the banking industry has now decided to go back to 3.5 times earnings then thats what you can borrow. . theyve been burnt before and nearly bankrupted themselves. they wont do it again.

if they say 3.5 times earnings is how much you can borrow then thats the going rate. its not for the borrower to decide.

individual cases may be considered, but for the industry as a whole it will be 3.5 times. and its not your own circumstance you should be concerned about i.e how much you can borrow , but the market itself. the amount the market can borrow will determine the market price for houses.

its inevitable that prices will crash back down to equilibrium.

mp2

Kenny4315 wrote: »

The fallout of this correction will be those dinner-party BTLers that have been keeping rents artificially low. How can a reduction in supply lead to a reduction in rent. We have an over-supply at present because of dinner party BTLers and folk close to the repo man trying to save there house by renting, a system that simply ain't going to work. Another few months and these guys are going to be history, and something the banks won't let occur again.

Once the market gets close to the bottom the serious BTL investors will be buying agressively, while the market is low. The UK population is expanding not contracting, houses aren't getting built as profit margins are reducing.

you need to understand that its not the demand of people that determines prices but the supply of money.

the same amount of people can be looking for a house tomorrow as there were yesterday, however if the supply of money drops by 20% then so does the price of houses, and so do rents.

our population has not trebled in 10 years. the country has not tripled its earnings in 10 years. demand for housing has not tripled in 10 years.

Graham_Devon

Kenny4315 wrote: »

Devon what is your current equity position ?

What exactly has that got to do with anything?

It's just avoiding the questions again.

Kenny4315

mp2 wrote: »

you need to understand that its not the demand of people that determines prices but the supply of money.

in reality the lower the price, the higher the demand.

the same amount of people can be looking for a house tomorrow as there were yesterday, however if the supply of money drops by 20% then so does the price of houses, and so do rents.

Rent value is almost entirely based on supply and demand. At present there is an oversupply and thus rents have been coming down. Once the supply evaporates then there will be an under-supply ..... what's the supply of money got to do with paying the rent. You need somewhere to stay and you'll therefore pay the market rate, out of what you earn, you don't go to the bank to get supply. You either pay or you move back to the parents, or you have to get a place in the budget you have, that's the economics of it.

Graham_Devon

Kenny4315 wrote: »

The fallout of this correction will be those dinner-party BTLers that have been keeping rents artificially low. How can a reduction in supply lead to a reduction in rent. We have an over-supply at present because of dinner party BTLers and folk close to the repo man trying to save there house by renting, a system that simply ain't going to work. Another few months and these guys are going to be history, and something the banks won't let occur again.

Once the market gets close to the bottom the serious BTL investors will be buying agressively, while the market is low. The UK population is expanding not contracting, houses aren't getting built as profit margins are reducing.

So what happens to all the houses that these amateur BTL investors leave behind? They just vanish in a puff of smoke?

They don't get used / bought and all these people come to you to rent your place?!

I think you know the answer. It means houses become cheaper as more become available on the market. Which means some other BTL investors will buy them, which means they can offer lower rent than you, which means to compete, you also have to provide a lower rent. JUST like house prices, rents can come down.

Of course, you will probably avoid this answer and just say you will buy them. Which leads us back to earlier....how are you going to buy them when interest rates are back up to 5%, your making no money on the rent, and your asset is falling.

Kenny4315

Graham_Devon wrote: »

What exactly has that got to do with anything?

It's just avoiding the questions again.

Let's establish what your credentials are on predicting the market and how well you been able to do out of these predictions.