Not a time to be a buy-to-let landlord

westernpromise

cells wrote: »

The crash-wishers have just had a crash in the form of 2008-2009 and what happened was that volumes fell prices dipped a bit and for a couple of years mortgages were rationed

There was no mass buying by renters they largely missed or ignored it.

A lot of the crash-wishers would not buy almost irrespective of the price.

They could also look into next door Ireland which had a much bigger nominal crash. 100% ownership now? No.

Most likely the reality is that crashes result in a small transfer of wealth from those who were going to sell anyway to those who were going to buy anyway. As per your observation if you want to know who will own after a crash just look at who owns before the crash...

Just so.

As exemplified by HPC, the crash trolls always think the right price for a property is that of about 5 years ago. Yet 5 years ago they thought the right price was that of 5 or 10 years before that. They always the price should be lower than it is and as you rightly point out, in the wake of a crash they will be the people precisely inequipped to buy.

Either they are too dumb to get this or they get it perfectly well but are unhinged by rage at others' having called this better. Not all crash trolls are the same, probably, but I don't think there's much more to any of them than that.

westernpromise

HornetSaver wrote: »

who'd have thought the Tories would take the first step in reducing buy to let support?

Me for one; I really struggle to think of anything in my life that was broken in this country that anyone other than the Tories fixed.

Structurally Britain has a more modern and successful economy than the rest of Europe so we are a huge draw to those looking for work; we're also in a convenient time zone between east and west and we speak English, so you can relocate your family here and your young kids will acquire the most useful language in the world. Unlike say Portugal or Cyprus we don't (yet) routinely expropriate private property or rob your bank account and with the repulsive exception of UKIP supporters we are pretty tolerant of everyone and everything. The real worry would be if people were not coming here. Who's got the bigger problem: a country everyone wants to come to, or a country everyone wants to leave?

As you say, this creates a problem in that we need more accommodation. Where the state's thinking has completely failed on this is that there is no reason to expect that these incomers all want to buy property. If they do and the economic climate changes they risk getting stuck here, which is not to their benefit or anyone else's. This is why we need a thriving PRS, which our Labour chancellor doesn't seem to have grasped.

westernpromise

lush_walrus wrote: »

With regards to stretched rents, that will not have an affect on the rent charged or rent rises. What happens now and has always happened is people move to a cheaper area they can afford. So where as now they may be renting a 2 bed near to a train station, any rent rises beyond their affordability will give them a choice - cut back costs elsewhere, or change to a 1 bed or move further away from the station to an area that is cheaper. And so on. I think most landlords are aware of that process and without a concern there is always a fresh person to come and fill the gap for them as they push up rents to cover costs. Supply and demand, the demand will not change the cost will just pass down the line.

I'm very sceptical of these oft-repeated claims that rents can't possibly go up further from here (because landlords are already charging the maximum the market will stand). If this were so, of course, then rents could never have risen in the past either, because if it's all driven by what landlords want, they'd always previously have been charging the maximum the market will stand.

What will drive rents up is if the alternative to renting looks costlier. In a climate of rising house prices and flatlining interest rates, buying looks pretty good - you can fix your finance costs for a decade, and participate in a rising market. So this has tended to hold rents down. A place I rented in 2009 for £700 a week has been empty for 3 months now and the landlord has just knocked the asking rent down to £695, meaning he'll take less; so rents clearly are flatlining in quite a few places. I have found the same with the place I let out.

When home-owning starts to look ugly, that's when rents recover.

That place the landlord wants £695 a week for? Let's see. Buy somewhere like it for £1.4 million, pay £84k in stamp duty, and lose £300k in price falls over the next 3 years? - or pay him £1,000 a week for it and buy in 3 years' time? It's not a difficult call, once prices do start to weaken. Paying £300 a week more only blows away an extra £50k over 3 years which is about £350k less of your money than buying it blows away. £1,000 a week suddenly looks cheap. Come to think of it, £1,500 a week looks cheap, too.

And so up goes the rent.

If renters are furious with their landlords now, they're going to be absolutely incandescent in any crash, when their landlords double the rent, and they get evicted - because somebody else is perfectly prepared to pay it. That somebody will be downsizing from a place they themselves have been outbid on.

Welcome to 1989.

The irony of all this is that the only bear factor for housing right now is exactly this possibility of forced sales by distressed BTL landlords, which is precisely what angry crash troll renters think they want. If they were a bit older and a bit more reflective, they'd perhaps have worked out they are the ones who will get crushed by any such outcome, and then perhaps they might not applaud Mr. Osborne quite so hard. I am pretty sure, from the comments I've read over at places like the DT and HPC, that the majority of these crash trolls have given no thought at all to what a house price falls would do to their rent. If they have, most imagine it won't have any effect on their rent. Big, big, big mistake.

cells

maybe some people are not aware but there is a seasonal variation in rents (at least in London).

They tend to be weak in Dec-Mar and strong in July-Sep, probably to do with the school calendar and maybe tourist season.

Anyway, what this shows is that landlords are price takers not price setters. Willing and able to move prices down when demand falls and up when demand rises.

HornetSaver

westernpromise wrote: »

Me for one; I really struggle to think of anything in my life that was broken in this country that anyone other than the Tories fixed.

(If we're going down that road, what was their position on the minimum wage before it came in? Every party gets some of the big decisions wrong).

It wasn't intended as a political criticism as such - if anything the opposite. An acknowledgement that the problem is such that even the party which would attract a greater proportion of landlords to the ballot box can see that action must be taken to slowdown an increase in BTL.

Thrugelmir

westernpromise wrote: »

Structurally Britain has a more modern and successful economy than the rest of Europe

Structurally Britain has an unbalanced economy. Something successive Governments have been unable to influence for some decades now.

lisyloo

Not in the real London, only the one that exists in forums.

I don't agree with you and my experience is real.
I used to live within 300m of a tube station on the Victoria line.
I moved about a mile down the road and I'm not within 10 minutes of a tube station.
I chose to get the bus and in prime time it takes 1 hour to do 3 miles across the busiest parts of London (average at peak times) - yes there are days I can cycle or walk, but there are also days I need to carry luggage or I'm not feeling well.

So yes, there are parts of central London that are nowhere near a tube.

There is no way I could do my 3 mile journey in less than 40 minutes (you have to swap Boris bikes if you go over 30 minutes and there is a 5 minute wait), and if I cycled I would then need to get changed, do my hair, shower etc.

chucknorris

lisyloo wrote: »

There is no way I could do my 3 mile journey in less than 40 minutes (you have to swap Boris bikes if you go over 30 minutes and there is a 5 minute wait), and if I cycled I would then need to get changed, do my hair, shower etc.

I used to evaluate cycling to work differently to that, the time after arriving, for showering etc. it wasn't additional time, it was merely moved from before leaving my home, to after arriving at work. Instead of getting a shower just after getting up, I would get a shower at work just after arriving.

In fact, I gained a huge amount of time, because not only was the commute much quicker, it meant that I didn't have to use up as much of my otherwise free time going for a run/jog.

buglawton

cells wrote: »

maybe some people are not aware but there is a seasonal variation in rents (at least in London).

They tend to be weak in Dec-Mar and strong in July-Sep, probably to do with the school calendar and maybe tourist season.

Anyway, what this shows is that landlords are price takers not price setters. Willing and able to move prices down when demand falls and up when demand rises.

Or that tenants are?

Generali

lisyloo wrote: »

I don't agree with you and my experience is real.
I used to live within 300m of a tube station on the Victoria line.
I moved about a mile down the road and I'm not within 10 minutes of a tube station.
I chose to get the bus and in prime time it takes 1 hour to do 3 miles across the busiest parts of London (average at peak times) - yes there are days I can cycle or walk, but there are also days I need to carry luggage or I'm not feeling well.

So yes, there are parts of central London that are nowhere near a tube.

There is no way I could do my 3 mile journey in less than 40 minutes (you have to swap Boris bikes if you go over 30 minutes and there is a 5 minute wait), and if I cycled I would then need to get changed, do my hair, shower etc.

The way I see it, I make myself presentable when I get to work when I ride in.

Who cares if I've shaved when I'm on the bike?