Carney vows to take action on the BTL sector

Crashy_Time

cells wrote: »

So you think the reason landlords did not jump ship in 2008-2009 but instead the rental sector grew by >500,000 was because interest rates fell?

Its a good idea but I don't think its the case. For a start only a few Landlords ejoyed long term cheap trackers that saw their payments crash. most Landlords would have gone from ~5.5% interest to ~4% interest during 2009-2012.

Landlords did not sell because to sell a property is costly, to re-enter the market is costly, to time a crash is difficult, and there are no safe assets in a crash to run to.

I did not sell in 2008-2009. Like >500,000 other Landlords/Properties I bought during those two years.


So you can keep insisting all you like that Landlords will rush to the exit making things worse in a downturn. The reality is not only did that not happen in 2008-2009 the landlords were rushing to add >500,000 units to the rental stock. The areas with more BTL recovered stronger and marginally faster than the areas with little BTL

My area is awash with BTL, I hope landlords cling on because there will be much more to choose from at ever cheaper rents as they do everything bar just sell the dam things :rotfl:

kinger101

The supply of oil is controlled in large part by the current geopolitical situation, the available extraction technologies, the discovery of new fields, etc). The demand for oil is largely determined by the current global economic situation, as it's used in practically every industry in one form or another. Attempting to predict the supply of, or demand for, oil, is practically the same thing as predicting it's price.

cells

Generali wrote: »

If you could send back information from the future you would have removed all risk. That is what would make you successful.

However, as there is no way in the real world to remove all risk we seek to diversify in such a way as to mitigate it.

How do you reduce (mitigate) risk without trying to predict the future?

I think we (perhaps mostly me) getting into silliness. You can mitigate your risk of developing cancer by eating less red meat or not going out in strong sunlight*. I would call that a prediction about the future but I suppose you could say its got nothing to do with the future.

*lets say someone takes that advice and cuts out red meat and strong sunlight but twenty years from now it is discovered that the opposite is true. The person acted on historic data and applied it to be true in the future. So the predicting the future bit was predicting that past data will not be disproved as incorrect in the future

cells

Crashy_Time wrote: »

My area is awash with BTL, I hope landlords cling on because there will be much more to choose from at ever cheaper rents as they do everything bar just sell the dam things :rotfl:

:rotfl:*







*if you cant beat em, join em

Crashy_Time

cells wrote: »

:rotfl:*







*if you cant beat em, join em

Mmmmm....I love the smell of fear on a winters night. My rent has been cheap during the "Boom" years so I have no idea what mental gymnastics you must go through to convince yourself that it will be expensive during the bust :rotfl: You have had one too many I.O mortgages mate, it is playing havoc with your head :rotfl:

cells

crashy_time wrote: »

mmmmm....i love the smell of fear on a winters night. My rent has been cheap during the "boom" years so i have no idea what mental gymnastics you must go through to convince yourself that it will be expensive during the bust :rotfl: You have had one too many i.o mortgages mate, it is playing havoc with your head :rotfl:

..........



:j

buglawton

Mr Carneys warnings about a sell off risk are a result of Mr Osbornes intervention - the turnover tax - that really will make highly leveraged landlords sell off come about 2018. If that group of landlords all react equally slowly or quickly then there could be a big sudden dent in the market. Weird that Carney cares about the risk of a sell off. Osborne dives to the left, apparently the tories are tired of propping up house prices, and Carney takes up the mantle of worrying about sudden price falls instead!

cells

buglawton wrote: »

Mr Carneys warnings about a sell off risk are a result of Mr Osbornes intervention - the turnover tax - that really will make highly leveraged landlords sell off come about 2018. If that group of landlords all react equally slowly or quickly then there could be a big sudden dent in the market. Weird that Carney cares about the risk of a sell off. Osborne dives to the left, apparently the tories are tired of propping up house prices, and Carney takes up the mantle of worrying about sudden price falls instead!

so he should reduce the capital banks need to hold for BTL mortgages making BTL rates fall and the sector more attractive so landlords dont sell...

Generali

cells wrote: »

Using housing as an example. An investor tries to predict the future. Population changes, laws, politics, demographics, taxes, finance costs, labour costs, wages, rules and regs.

calling all of those factors right to a pinpoint will be close to impossible but predicting the future direction of movement not so impossible

If you made a call on housing that relied on definite capital gains and thus 'invested' all your money in buying a single house you are gambling not investing.

If you call looking at potential future risks trying to predict the future then fine, investment is about trying to predict the future. You have a different definition of 'predicting the future' to me. TBH, I don't think you believe this argument any more than I do!:)

buglawton

michaels wrote: »

On topic though, at least Carney has come up with a rationale for treating BTL differently from residentila mortgages. In general with higher deposits they would appear to present less systemic risk but I can see the arguement that they are more liquid in bieng investments rather than homes and so there is the possiblity that price changes could lead to big changes in supply disrupting a market that is systemically important in UK financial market terms.

I am not convinced that there would be such a huge 'supply response' to changes in interest rates/the house price environment but I can see that even if low likelihood it can be considered a risk in a sort of low probability / high impact sort of way.

In the share market, it's an axiom that a part of any company's stock must be liquid - easily tradable - and a market comprising such stocks has the ability to find the correct price level day by day.

There have been examples of stocks held mainly by one family, these are much less liquid and the market has to guess at their true value. Such shares can stay mysteriously stable for years, then suddenly lurch when a block is put on the market.

So Carneys logic about BTLs is that having a lot of highly mortgaged ones is a bad thing for stability and the solution is to discourage them. Let's see how he goes about that. If he wants to discourage highly leveraged borrowing then will he also ban the banks from getting involved in hedge funds and derivatives? Perhaps he could rein in credit card usage at the same time.