Independent - Time to batten down the hatches

Turnbull2000

That last line reflects exactly what I stated yesterday in response to high prices being sustained by a thirst for housing.

Time to batten down the hatches

The clearest sign that an investment bubble is in desperate danger of bursting is the moment you discover that those with a vested interest are the only ones still insisting that everything's going to be OK. So, when a press release from Bradford & Bingley (the UK's largest buy-to-let mortgage lender) landed in my inbox this week, boasting that Britain's landlords are "upbeat" about the prospects for the residential-property sector in 2008, it finally became abundantly clear to me just how bad things are looking for the UK housing market over the next 12 months.

In fact, in spite of the happy headline on B&B's press release, the lender's statistics tell the true story very well. Apparently, 95 per cent of landlords are positive about rental yields in 2008. No wonder, because as house prices start to nosedive, the one upside for the buy-to-let landlord is that rents will represent a bigger proportion of their properties' values, hence bigger yields. Unfortunately, however, this will not necessarily make up for the massive fall in capital values.

Many landlords – especially those with just one or two properties who have taken their first steps into the market over the last year – are now badly exposed.

Unfortunately, lenders' insistence that the housing shortage in the UK will always prop up prices is simply not true. Britain was faced with a similar situation during the last housing crash 15 years ago. When bad sentiment grips a market – in this case, exacerbated by the credit crisis – supply-and-demand patterns shift dramatically.

Pobby

Nothing to add.Sounds about right.