Where have I gone wrong?

Guy_Montag

Gonnae lend us £5k from your dream, so I can get my car back in mine?

sortofok

I can't mate. In my dream I'm buying next door for £3m

I reckon it'll be worth £4m this time next year.

kingkano

mystic_trev wrote: »

How many of the newbie Landlords are going to stay around when they see the value of their Pension going down.Once sentiment changes it'll be that, that heralds the start of any correction. You can forget fundamentals to a large extent, the worst of the last crash happened when Interest rates were going down!

Thats the question. How many of them have bought in 'as a long term investment' and how many think its quick easy cash and I'll sell it in 2 yrs. If its 50/50 thats gotta ease things a bit. even 80/20 means the 20 who think long term might pick up alot of the stuff that comes up for sale?? I just dont know.... but thats why I pose the question

Guy_Montag

kingkano wrote: »

Thats the question. How many of them have bought in 'as a long term investment' and how many think its quick easy cash and I'll sell it in 2 yrs. If its 50/50 thats gotta ease things a bit. even 80/20 means the 20 who think long term might pick up alot of the stuff that comes up for sale?? I just dont know.... but thats why I pose the question

As others have pointed out if we have a recession, we'll probably have something of a credit crunch(tm) to go with it. Making borrowing much more difficult. All that equity you built up starts to disappear.

So, for example, you have three 100k properties (mortgages at 80k on each), you plan to remortgage at 90% on your current stock freeing up 30k as a deposit on your next property.

But prices fall 10% & banks start tightening their lending, now we have the situation:
You have three 90k properties that you can only remortgage for 77k each (85% instead of 90%).

But hold on: your fixed rate btl mortgage has just come to an end & now you need to remortgage to avoid being on the SVR, but you can't, not enough equity. So your mortgage rate goes from 5.5% to 7.5%. Ouch.

So you see why I think once prices start going down they're going to keep tumbling.

silvercar

If you want prices for FTB to fall, then there needs to be an increase in supply.

Current CGT rules mean that selling a BTL is more expensive than re-mortgaging and releasing the equity. (selling creates a CGT liability). So landlords don't sell, so supply is stunted. If landlords were allowed rollover relief ie they could transfer any gains made to the next property, there would be more liquidity in the FTB market. Rollover relief is given on business assets (and effectively on owner occupiers with no CGT liability) so there really is no reason for this rule.

At the moment let property is sold far less frequently than owner-occupiers so blocking up some of the FTB market, so creating a shortage of FTB property and increasing prices.