Britain's deflating buy-to-let bubble

Doc_N

http://news.bbc.co.uk/2/hi/business/7040061.stm

Great programme - unless you're a buy to let landlord. Nice to hear of so many landlords now finding that the rents aren't covering their mortgage interest, and that they're having to sell up to make ends meet.

More BTL sales = more of a glut of properties on the market = lower prices for youngsters wanting to buy to live in rather than let.

Good news all round really - unless you're a BTL landlord!

Sammy85_2

Good news all round really - unless you're a BTL landlord!

Depends how you look on your BTL investments. It seems to be that most BTL investors get branded as people just in it for a the short term to turn a quick buck.

Im a small time LL with 4 properties (yes, one of those who gets so much bad press on these forums, as crap LL's who treat their tenanats unfairly and want to make as much money, as quickly as possible - we're not all like that by the way!!!)

Anyway, my partner and I are both aged 22 and we both work at sea. Our companies do not provide any kind of pension plan, so these houses are our investments for the future.
They have to be long term investments as the monthly rent no where near covers the mortgages, but 12 years down the line, when we're mortgage free the rent will finally support us. Then we wont have to go away for 3 months at a time! Yay!!

Personally, i doesnt matter to me if the market goes up or down. As has been pointed out in other threads, what goes up must come down, and so on, eventually it'll come full circle again and we'll be back to this point again, and there will be some forum somewhere, arguing constantly on whether a crash is going to happen!!

There will always be people who need to rent. Even if prices crash, there will be those who still cannot afford to buy, aswell as those who need to rent for other reasons such as work commitments. Where we are this is especially true as we have many contractors for the dockyards, and with a new 15year contract signed at the yard, contractors will be plentiful for a long time to come!


Sammy

nelly_2

The most important thing about the above post is "were both 22"

I feel I must add - 'the rent doesnt cover the mortgage'

so basically you have listened to 'whoever' and they said bricks and mortar etc etc and you fell for it?

these days any bank acount is paying higher than nearly all BTL yet you choose to opt for a losing investment???

Strange strange logic............ good luck...you'll need bucket loads of good luck

PROFESSIONAL_LANDLORD

Doc_N wrote: »

http://news.bbc.co.uk/2/hi/business/7040061.stm

Great programme - unless you're a buy to let landlord. Nice to hear of so many landlords now finding that the rents aren't covering their mortgage interest, and that they're having to sell up to make ends meet.

More BTL sales = more of a glut of properties on the market = lower prices for youngsters wanting to buy to live in rather than let.

Good news all round really - unless you're a BTL landlord!

Two years ago in my neck of the woods 75% of all viewings for property sales were BTL since then most have melted away, but if prices drop significantly they will return like vultures .

= lower prices for Landlords

IveSeenTheLight

PROFESSIONAL_LANDLORD wrote: »

Two years ago in my neck of the woods 75% of all viewings for property sales were BTL since then most have melted away, but if prices drop significantly they will return like vultures .

= lower prices for Landlords

And if there are more buyers it will start pushing the prices up again ;o)

guppy

Doesn't work like that in reality though...it takes a brave soul to dive headfirst in to a falling market. And a stupid one if they buy at the point of the graph below marked "bull trap"

Bubble Psychology



And is the flattening out we keep hearing about, the point marked "new paradigm"?

Doc_N

PROFESSIONAL_LANDLORD wrote: »

Two years ago in my neck of the woods 75% of all viewings for property sales were BTL since then most have melted away, but if prices drop significantly they will return like vultures .

= lower prices for Landlords

The reason all the BTL investors have melted away is simple - BTL just doesn't make any economic sense any more. Rents aren't covering interest payments, and the asset is actually falling in value. Why would anybody want to BTL in that situation?

The other reason they've melted away is that a lot of them are actually selling to cover the losses they're making on the rents.

And although falling prices will indeed mean lower prices for landlords, tighter lending criteria mean that there are going to be very few who can raise the money to buy. Most of them are going to be selling to avoid bankruptcy.

tr3mor

PROFESSIONAL_LANDLORD wrote: »

lower prices for Landlords

A house bought for £200k at 6% costs the same per month as a house bought for £150k at 8%.

Sammy85_2

Nelly

We purchased 4 houses, each on 12 year mortgages, so of course the rent isnt going to cover the mortgage. If i took them over 25 years then it would be a different matter.

But in 12 years time i will own 4 houses, of which i will have paid approximately half the mortgage payments on out of my own pocket (taking into consideration my contributions to the mortgage ontop of rent, times when property may be empty etc etc).

Compared to those who have bought a house recently and in 25 years time will have paid off their mortgage out of their own pocket (plus the additional 13 years worth of interest which i wont be paying!) I will be much better off, even if house prices do fall.

The only reason i mentioned our ages in the previous post was to make the point that you can purchase property at a young age.
It seems to be a constant theory that young people cant afford to buy full stop. I agree that this is true in some cases, but as we have proved, if you work hard (and play hard!!) it can be done.

Of course we had been advised that bricks and morter are a good place to put your money. Better i spend my cash investing in properties that i eventually will own, than fritting away my cash on rent elsewhere!

We might not be seeing a return on our investment just yet, but thats why we have done this while we're young. Its a long term investment.

PasturesNew

tr3mor wrote: »

A house bought for £200k at 6% costs the same per month as a house bought for £150k at 8%.

But a house bought cash at £150k is £50k still in the bank compared with paying £200k cash.

WTF?_2

PasturesNew wrote: »

But a house bought cash at £150k is £50k still in the bank compared with paying £200k cash.

And seeing as how interest rates can vary over time, it's always better to have less capital debt to pay back.

All that low interest rates do is make it easier to get into debt - they don't allow you to afford more debt unless your debt is very short term.