The Four Horseman of the BTL Apocalypse.

ad9898_3

Plunging house prices, falling rents, lack of mortgage finance and growing tenant defaults.... can anything save investors from the buy-to-let apocalypse?
Who would be a buy-to-let investor right now? After a decade of unbroken growth, amateur landlords are now fleeing their very own four horsemen of the property apocalypse: plunging house prices, falling rents, lack of mortgage finance and growing tenant defaults.
All they need is a plague of locusts for the storm to reach Biblical proportions, and New Labour has done its best to deliver, with a host of red tape and regulation.

I know it's lovemoney, but still a worthwhile humourous read.


http://www.lovemoney.com/news/the-property-ladder/its-a-buytolet-apocalypse-3732.aspx

Kev09

The Wilsons do not own every BTL in the country! no point in rejoicing in other peoples misery

amcluesent

That's the sort of end-of-days rant which maybe signals that we're near bottom. John Hunt (of selling Foxtons at the top for £370M) thinks so...

ad9898_3

Kev09 wrote: »

The Wilsons do not own every BTL in the country! no point in rejoicing in other peoples misery

The government should have made very strict rules regarding BTL, of course they didn't because they were all on the gravy train as well. To let people buy a house, mew 10%, buy another house, mew 10% etc.... on the back of HPI was negligent to say the least. Can anyone see the resemblance to this and pyramid schemes, which are illegal ?

There is only a finite amount of money to shovel in at the bottom end, when this stops, which it has, the pyramid collapses. BTL should have been for serious LL's only, perhaps a mandatory 50% LTV on applicable mortgages would have done the trick, after all it's not only LL's that suffer when it goes 'pear shaped', thousands of tenants will also suffer on the back of the 'money for nothing train' as well.

julieq

It's a laughable article really, once again it's a basically political view attached to a morality tale - BTL landlords inflated the market and stopped FTBs getting in, therefore they are being punished, hoorah.

But look at it more closely and it falls to bits.

Rents have been "hacked" by about 5%, wow, big deal.

When mortgage repayments even for BTL deals are either down by significantly more (he is very selective about his figures, but if they're down 1.51% from a 6% deal that's a 25% reduction in costs) or the landlord fixed anyway and was working on that basis when calculating return.

And then he's forced to admit that most BTL landlords are OK anyway unless they bought right around the peak.

Total arrears have risen by £1.5M out of £250M, which is less than 1% of a tiny total in absolute terms. He doesn't (wisely because he'd look a bit of a plonker) reference that to total UK rental spend. Most people, overwhelmingly, aren't in arrears.

Then he is forced to admit that the current situation is helping even those in trouble.

He concludes with the happy clappy idea that properly run BTL is a good investment at present (I agree with that), but that there will somehow be less of it because businesses will politely refuse to fill their boots and keep the market comfortably restrained for the benefit of FTBs. Nice theory, won't work.

It's a classic example of the journalistic hyperbole that springs up around this subject. Emotive choice of language and words and unreferenced numbers in the most suitably impressive form for the particular sentence, regardless of how anything else is measured.

Newsflash: badly run businesses fail. Badly run BTL businesses fail at a lower rate than businesses in the general economy (i.e. it is still a better bet for the clueless than starting any other form of business).

And before anyone starts saying I have a vested interest, I don't. I don't have a BTL investment, I'd prefer prices to stay restrained to be honest.

julieq

ad9898 wrote: »

The government should have made very strict rules regarding BTL, of course they didn't because they were all on the gravy train as well. To let people buy a house, mew 10%, buy another house, mew 10% etc.... on the back of HPI was negligent to say the least. Can anyone see the resemblance to this and pyramid schemes, which are illegal ?

No, except in the broadest possible terms. It's possible to view everything as a pyramid scheme by a process of reduction, but pyramid schemes are negative sum games where paper values are circulated and inflated.

Rented housing has new money introduced via rental income.

The value of the income bearing asset is determined by the return on capital. Capital payback periods are calculable, even if the value of the asset stays static the payback is 15-20 years for most rented houses. It's a positive sum game.

StevieJ

julieq wrote: »

It's a laughable article really, once again it's a basically political view attached to a morality tale - BTL landlords inflated the market and stopped FTBs getting in, therefore they are being punished, hoorah.

But look at it more closely and it falls to bits.

You think that is bad journalism, in this one Barclays appear to be getting a lashing for making a profit, they didn't even receive the govt handout

Barclays profits spark new bonus row :rotfl:



http://uk.news.yahoo.com/4/20090803/tuk-barclays-profits-spark-new-bonus-row-dba1618.html

ad9898_3

julieq wrote: »

No, except in the broadest possible terms. It's possible to view everything as a pyramid scheme by a process of reduction, but pyramid schemes are negative sum games where paper values are circulated and inflated.

I disagree, property has been the ultimate pyramid scheme, 30 years a go 1 average wage shovelled in at the bottom gets you a 3 bed semi detached house. In 2007 1 average wage gets you a studio flat hence the fact nowadays people talk about 'two incomes buying now', instead of one.

If the banks had been able to carry on in 2007, HPI would have given us 30, then 40, then 50 year mortgages, then it would've have been mortgages passed through generations........etc. The ultimate pyramid.

StevieJ

ad9898 wrote: »

If the banks had been able to carry on in 2007, .

But they didn't

ad9898_3

StevieJ wrote: »

But they didn't

I know the pyramid collapsed. The pyramid grew in between 2000-07, before this time '96-2000 we had HPI but it was sustainable HPI, which grew in line with salaries and the economy, hence not a pyramid.

chucky

ad9898 wrote: »

I know the pyramid collapsed. The pyramid grew in between 2000-07, before this time '96-2000 we had HPI but it was sustainable HPI, which grew in line with salaries and the economy, hence not a pyramid.

it didn't actually.

it was only in the period of 2006 and 2007 that BTL accounted for 11% of mortgages. surely you can't be blaming HPI on 11% of house sales by investors?