Independent says UK enjoys price rises, Telegraph praises BTL

Turnbull2000

http://www.independent.co.uk/property/house-prices-up-home-loans-down-7854346.html

http://www.telegraph.co.uk/property/expatproperty/9326529/Why-buy-to-let-homes-are-a-worthy-investment.html

And finally...

http://www.thisisdorset.co.uk/story-16378178-detail/story.html

Chris Baguley, Director at Auction Finance Limited, said: "The buy-to-let market is the perfect option for investors, while interest rates and property prices are low. Savvy investors are continuing to snap up properties before prices rise and are looking to auction rooms as a great way to grab a bargain."

the_flying_pig

buying an infinitely long-lived pwoperdee because interest rates are low this month is a little bit like buying a soft-topped sportscar because the sun is shining this morning. need to focus on the fundamentals really.

chewmylegoff

Turnbull, can you think of any scenario in which, Chris Baguley of Auction Finance, who offer "FAST FUNDING FOR PROPERTY PROFESSIONALS" would advise that it was a bad time to invest in BTL?

Even if a "savvy investors" hadn't bought a BTL through Auction Finance for 208,567,345,878,004 years (which I suspect to be the case anyway), Chris Baguley of Auction Finance would be telling you that "savvy investors" were snapping up BTLs.

Asking Baguley's view of whether it is good time to buy BTLs is a bit like asking Brit1234 if there is going to be a massive property crash; you don't learn anything new.

shortchanged_2

"The buy-to-let market is the perfect option for investors, while interest rates and property prices are low."

Well he's got one part right in that yes property investment is attractive while interest rates are so low. However property prices are still not what many people would class as low so actually as a capital investment property remains high risk and you can just see the potential bang when interest rates start to rise and rents no longer cover mortgage payments and the capital has also depreciated.

DpchMd

shortchanged wrote: »

"The buy-to-let market is the perfect option for investors, while interest rates and property prices are low."

Well he's got one part right in that yes property investment is attractive while interest rates are so low. However property prices are still not what many people would class as low so actually as a capital investment property remains high risk and you can just see the potential bang when interest rates start to rise and rents no longer cover mortgage payments and the capital has also depreciated.

Why would rent "no longer cover mortgage payments" as "interest rates start to rise"?

Are all of the renters suddenly going to buy a home, or will they continue to live in rented accommodation and therefore be forced to pay the required rent?

shortchanged_2

DpchMd wrote: »

Why would rent "no longer cover mortgage payments" as "interest rates start to rise"?

Are all of the renters suddenly going to buy a home, or will they continue to live in rented accommodation and therefore be forced to pay the required rent?

Does this mean you are another of the brigade that feel that LL's can just continue to pass on all their increases to tenants?

Personally I think you are deluded if you think this will happen.

As I stated quite some time ago the rental market will eventually go the same way as the housing market in that it will get itself into a bubble that will eventually pop.

Why is it that many LL's think money grows on trees and tenants have a bottomless pit of money?

Expect to see many LL's, notably the ones who have bought in the past 4 or 5 years to be in for a big shock when interest rates do eventually start to go up.

chewmylegoff

DpchMd wrote: »

Why would rent "no longer cover mortgage payments" as "interest rates start to rise"?

Are all of the renters suddenly going to buy a home, or will they continue to live in rented accommodation and therefore be forced to pay the required rent?

A BTL is obviously riskiest for the first few years because if you have a 75% mortgage the gap between the rent and total costs [mortgage interest + other costs] is likely to be relatively small. Thus if the interest rate goes up then you could be exposed.

Obviously if you have been sitting on the BTL property for a few years, the rent will have increased in line with inflation (unless you are an incompetent landlord of course), but the mortgage payments will still be the same (or less if you have paid off capital). Therefore you are less exposed to the risk of a rate rise, and would not necessarily need to hike your rent out of step with inflation to cover your costs.

Thus, if there are interest rate rises, the fact that LLs who recently bought on variable rate mortgages (at 5%+ above base rate) may need to increase rent to cover their costs does not mean that all LLs will suddenly hike their rent accordingly. The newest LLs will be the outliers and there is a risk that they will not be able to find tenants willing to pay enough rent to cover their increased mortgage payments.

Not that I'm suggesting that there is an imminent apocalypse in which all BTL LLs will be made bankrupt and forced to go on tour with westlife to pay their debts off, but if rates do increase (they won't for ages anyway in my view) the newest LLs will be exposed to the greatest risk, which is why you should consider future rate rises carefully when considering whether to buy a BTL property.

Thrugelmir

chewmylegoff wrote: »

Obviously if you have been sitting on the BTL property for a few years, the rent will have increased in line with inflation (unless you are an incompetent landlord of course),

Surely rent is linked to disposable income not inflation.

Disposable income is falling for many. So how can rents be increased without exception.

LL's with high LTV's are going to be squeezed in the years to come.

HAMISH_MCTAVISH

Thrugelmir wrote: »

Surely rent is linked to disposable income

No, disposable income is linked to rent.

As rent is a primary need, expenditure on anything and everything else can and will be squeezed to pay it.

And given we live in a country where Sky just paid 3 billion pounds so the great unwashed masses can pay them excessive amounts of money to watch 22 idiots run around a muddy field for 90 minutes, there's clearly plenty of room to squeeze a whole lot more....:cool:

Turnbull2000

Aye. There's lot of scope for substantial rent rises outside of London. Like mortgages, rents will likely grow to become dependent on duel incomes, with disposable income of tenants diminishing greatly.

HAMISH_MCTAVISH

Turnbull2000 wrote: »

Aye. There's lot of scope for substantial rent rises outside of London. Like mortgages, rents will likely grow to become dependent on duel incomes, with disposable income of tenants diminishing greatly.

Inevitable really.

The market will ration the shortage of housing via raising prices until sufficient people are forced to share that equilibrium is reached.

And with population growing rapidly, and house building not remotely keeping up, we're a long way from the end of rising rents.