Panic selling by landlords could turn slump into rout

dopester

And for England, I'm not sure if its been mentioned in this thread yet or not, the slump to rout could be worsened not just by desperate sellers or panicky BTL landlords ~ but people with second homes which are not let out on a regular rental basis.

Check this article: (including some analysis from Seema Shah of Capital Economics who, whilst still only predicting 20% falls, may well soon come to realise the full reality of the situation)

The Sunday Times
June 1, 2008

Second home sales may worsen house price drop

There are now fears that second homes rather than buy-to-lets will derail property prices as their owners become desperate to raise cash

One in four second-homeowners could sell up in the current downturn, prompting even more dramatic house-price falls, according to a new report. Until now many commentators had thought buy-to-let could be the weak point that topples the market, but the research from consultancy Capital Economics suggests the second home market is where the danger lies.

There are currently about 240,000 English households with second homes that are not rented out on a buy-to-let basis. Figures show that around four in 10 second homeowners purchased another residence for investment purposes — in other words, in expectation of price increases. If those prices are no longer forthcoming, many owners will be tempted to sell, said Shah. “The last time second home ownership fell sharply coincided with a time when people were not expecting rapid house price growth because it was non essential spending,” she said.

Worth repeating I think. :eek:

There are currently about 240,000 English households with second homes that are not rented out on a buy-to-let basis. Figures show that around four in 10 second homeowners purchased another residence for investment purposes — in other words, in expectation of price increases.

IveSeenTheLight

dopester wrote: »

You don't put a value on having that absolute certainty the 4 bedroom house is fully yours outright - without any mortgage debt? Sleeping easy, and you'd have less regional stat checking to do.

You won't sell both BTLs, that much I gather. Still you aren't open to forgoing the one of the rental income streams for that absolute ownership certainty given what is happening in other regions of England?

I appreciate you have equity cushions and savings liquidity, and therefore you seem open to the possibility of risk, but why risk it anyway? Is your yield worth it for those risks. Just a 10% fall in your region would hit you on both your properties.

I think I have already answered this when I said

IveSeenTheLight wrote:

I could sell the 2 bed flat (at today's prices) and pay off the mortgage on the 4 bed, but then in the future I would only receive an income from 1 property and like I've said, I don't want to move this ahead of schedule goal into speculation

To try and see through your eyes, I could decide that route, have 1 BTL mortgage free and a sense of security.
Selling one could mean that with no risk, I could continue to save the rent from one property and have either a larger deposit to go back in in the future, or have enough to have deposits for two properties
Believe me I did consider it for reducing risk and weighed it against my long term goals.

However my rental income would be down of course my insurance, maintenance, factor fees etc would go down also. With my rent going down, I also would receive less profit (as I do generate a rental income that meets the 125% rent to mortgage ratio and rising as I increase the capital payments I make), meaning that extra profit I make cannot go into saving / reduce the outstanding capital.
I think you maybe do not realise but actually having a mortgage on the BTL's is in my interest as the interest is discounted before I pay any tax on the properties (means my actual profit is on a smaller taxable amount).

I guess it boiled down to the fact that if I sold one to make the other mortgage free, I would generate less income than if I continue leasing out two properties and the income from one property while nice, is not enough for what I would like for my (early) retirement.

Yes it is a risk, but that's business. You have to speculate to accumulate

I've assessed it, valued it and made my decision.
Maybe time to move on from my personal decision, you trying to convince me to change it, me defending my views and move on to another topic

I do really appreciate balanced views. It's really good when you see good hard facts to help make your decisions. Keep them coming.

P.S. notice that not once in the above did I take into account house prices (up or down) when I assessed the viability of the properties as a BTL investment. I'm not in them to make money this way. I'll only consider this near the end of my involvement as a LL

IveSeenTheLight

Night-owl wrote: »

http://www.guardian.co.uk/business/2008/jun/03/housingmarket.mortgages

This link is discussed in more detail at the beginning of this thread.
The journalism is speculation.
The facts come from the CML website

Please feel free to read from the start of the thread for the comments (which you can add to;)) or go to http://www.cml.org.uk/cml/statistics for the stats

Generali

IveSeenTheLight wrote: »

This link is discussed in more detail at the beginning of this thread.
The journalism is speculation.
The facts come from the CML website

Please feel free to read from the start of the thread for the comments (which you can add to;)) or go to http://www.cml.org.uk/cml/statistics for the stats

To paraphrase for Night-owl, the CML numbers say BTL mortgages in trouble have almost doubled by total number or increased by 50% by proportion. That sounds like a lot but it's from about 6.5k to about 13k which sounds like a lot less!

IveSeenTheLight

Generali wrote: »

To paraphrase for Night-owl, the CML numbers say BTL mortgages in trouble have almost doubled by total number or increased by 50% by proportion. That sounds like a lot but it's from about 6.5k to about 13k which sounds like a lot less!

This is not how I have read the statistics.
In Q4 2007 there was 0.73% of 1,024,300 outstanding BTL mortgages which were more than 3 months in area. This is 7477 mortgages

In Q1 2008 there was 0.9% of 1,073,300 outstanding BTL mortgages which were more than 3 months in area. This is 9660 mortgages

The percentage increase of defaulting mortgages 3+ months is 29%
7477 to 9660 is not double
29% is not 50%

m00m00

29% or 50% doesn't really matter

what's significant is that more and more BTL mortgages are slipping into areas at a time when rates are actually being cut.

IveSeenTheLight

m00m00 wrote: »

29% or 50% doesn't really matter

what's significant is that more and more BTL mortgages are slipping into areas at a time when rates are actually being cut.

I think accurately quoting percentage and facts are important.

While it may be significant that more BTL have defaulted payments of 3+ months, the current figures is only 9660 BTL mortgages.
When you compare the amount of mortgages period that are in default of 3+ payments at the end of 2007 its 129,800 or 1.1% of the total mortgages.

Comparing like for like at the end of 2007 (there is no data yet for the first quarter 2008 for the whole mortgage market): -

BTL mortgages in default 3+ months = 7,477
Total Mortgages in default 3+ months = 129,800
Or only 5.7% of mortgages in default of 3+ months payments are BTL mortgages.

Now I ask you, which is going to affect house prices more, normal mortgages in default or BTL's in default?

I grant you that there is a higher chance that these BTL LL's will want to sell their properties.
At end of Q1 2008, do you really think that 9,660 BTL properties in default will grossly affect the whole of the UK house prices?

moanymoany

My local property guide arrived yesterday and there are a lot of small properties labelled 'no chain'.

They may be btl's and might not, but it looks a bit suss. There are also lots of price reductions.

I generally look at the sort of house we had as I know that market best. Both on Right Move and in the property guide they are way down on price from February.

I did wonder if we reduced the price too much, but houses in the same bracket, are now going onto the market for what we got - and it was on the 12th April we got the offer. (Date emblazoned in mind as mum died the next day.) It completed on 9th May.

I also got a glimpse on the selling of btl's from the agent blog - sorry can't remember who gave the link but brill - http://agentsdiary.blogspot.com/ His view of the property market is not hopeful and the only green shoots he sees are the weeds growing under the office window!

Generali

IveSeenTheLight wrote: »

This is not how I have read the statistics.
In Q4 2007 there was 0.73% of 1,024,300 outstanding BTL mortgages which were more than 3 months in area. This is 7477 mortgages

In Q1 2008 there was 0.9% of 1,073,300 outstanding BTL mortgages which were more than 3 months in area. This is 9660 mortgages

The percentage increase of defaulting mortgages 3+ months is 29%
7477 to 9660 is not double
29% is not 50%

Post #9 - I made the jump of distressed BTL mortgages up from 0.73% to 1.2x% which is very approximately a doubling. Up 2/3rds is closer though.

IveSeenTheLight

Generali wrote: »

Post #9 - I made the jump of distressed BTL mortgages up from 0.73% to 1.2x% which is very approximately a doubling. Up 2/3rds is closer though.

I see the stats as from 0.73% to 0.9%
Where do you see the 1.2%?