Warning: The Buy To Let Boom Is Over!

[Renegade Landlord]

Warning: The Buy To Let Boom Is Over!

Lets be honest, it is isn't it?

Especially for a lot of full time property investors that started their businesses in the last two or three years. Many will be forced back into their previous careers, some inevitably will go bust.

With tightening credit markets the heady days of cash-backs at completion are largely over.

Sure you might be able to get the odd deal through, but with underwriters continually moving the goal posts how sustainable is it?

Not to mention that with lower valuations, loan to value ratios, higher interest rates and rental cover requirements, you need to be buying at a deep discount to have any chance of a cash back at completion at all.

If you're not able to get cash backs and you've recently become a full time investor, where does your income come from? (Apart from HMO rentals.)

And don't even think about selling! In my opinion Buy To Sell (BTS) isn't an option right now, as there are simply very, very few buyers around. In fact I'd say this is the best buyers market for a generation. To sell a property right now you've either got to be lucky or selling at a big discount yourself.

Put it this way, have you been in an estate agent's recently? The ones I've been in, well, to be frank I've seen more life in a morgue! Make no mistake a lot of companies associated with property will go to the wall before the end of the year, estate agents, mortgage brokers, removal companies, surveyors etc. Not to mention all those people who gave up jobs and spent their hard earned cash to train as HIP providers. How much business are they doing right now?

Apparently the Council of Mortgage Lenders and Royal Institution of Chartered Surveyors have recently announced they expect property sales to be down by 35% and 40% respectively, this year. Unless things pick up soon, which I very much doubt, I think 65%-75% is more realistic.

How long is this credit crunch likely to last? Nobody knows, could be 6 months, 12, 18. One thing that is a good bet, with falling house prices and the massive losses many financial institutions have suffered, lending criteria won't be as lax has it has been for the foreseeable future.

How far are property prices likely to fall? We'll in the last property cycle prices fell by about 35% in real terms (allowing for inflation) and 12% in nominal terms. In addition it took over 12 years for property prices to exceed their previous peak reached in 1989.

This fall did however coincide with the recession of the early 1990's. At present the economy is holding up fairly well, and as long as it continues to do so we may escape the same level of depreciation. Personally, I think the fate of house prices in the UK will to a large extent be dependent upon the price of oil. If the price of oil continues to appreciate, then inflationary pressures will limit the Bank of England's ability to lower interest rates, as they have a mandatory inflation target of 2%.

By now you're probably thinking I'm a right doom and gloom merchant! I have after all laboured the point to the downside. But no, I think there are some fantastic deals to be done right now, provided you can secure the deal no-money-down and most importantly it produces good positive cashflow. (Why else would you want to acquire a depreciating asset right now unless it puts money in your pocket every month?)

As a full time landlord with properties throughout South Yorkshire and Lincolnshire, I have a vested interest in property prices going up like most people here! However, I do think it's all too easy to see just what we want to see. As the saying goes;

"We see things not as they are, but as we are."

When you think about it, it sure does make sense. As an analogy, on 9^th November 2001 two planes flew into the World Trade Centre. Some saw it as a barbaric, cowardly act that claimed the lives of thousands of innocent people. Others saw it as an act of martyrdom and a just response to aggressive US foreign policy. The fact is two planes flew into the World Trade Centre, yet people saw it differently - based on their belief system.

I guess most of us are here because we believe property investment is a good way of making money. And because of that it's easy to ignore or discount any news or opinion that is counter to those beliefs.

Anyhow, I thought I'd share some of my thoughts and experiences with you. How are you finding it, what's been your experiences of late, and how do you see things going forward?

Andrew

[GPEL]

Or you could just do nothing, weather the strom and do what you can to ensure a good rent from a good tenant. My BTL interest rates have just come down and I'm happy to sit tight, for now.

[Simon Dewsberry]

Only really a problem if you are selling !!!

If you are buying then as you point out

"In fact I'd say this is the best buyers market for a generation"

Thats the bit "my belief system" saw !!!!!

The Rodent

[Guest MortgageBroker]

BTL dead what a load of rubbish

There has never been a better time to buy, what with 100's of BMV properties for sale with 30% BMV

Then there are the disstressed sellers rent buy back and so on with 75%-80%LTV they work well

[tamgoose]

BTL dead what a load of rubbish

There has never been a better time to buy, what with 100's of BMV properties for sale with 30% BMV

Then there are the disstressed sellers rent buy back and so on with 75%-80%LTV they work well

Well said

[Melboy]

I'm still buying......I'm still renting out property and not even considering selling them......I've survived before and I shall survive again!

If another buying opportunity comes my way then I shall buy.

Mel.

PS 11th September not 9th November. WTC

[simonbaldry]

We are all doomed ! Doomed

[Simon Dewsberry]

Doom on and Doom away!

looks good to me !

The Rodent

[rentrescue]

Where there is a will there is a way.

I am a firm believer in working within the parameters of the business world.

In this case Andrew my question is did you buy for Capital Growth ?

Or did you buy for rental profit.

If you went for the former then you have to worry about the market

If you went for the latter then you should not have to worry

Whenever I have worked with investors on projects I always advise them go for the rental yield

If you are not making at least 100 per month on each property . Why are you in it?

Its like everything invest in something for a return

A long term investment is a short term investment that went wrong

[SHUES]

Warning: The Buy To Let Boom Is Over!

Lets be honest, it is isn't it?

Especially for a lot of full time property investors that started their businesses in the last two or three years. Many will be forced back into their previous careers, some inevitably will go bust.

With tightening credit markets the heady days of cash-backs at completion are largely over.

Sure you might be able to get the odd deal through, but with underwriters continually moving the goal posts how sustainable is it?

Not to mention that with lower valuations, loan to value ratios, higher interest rates and rental cover requirements, you need to be buying at a deep discount to have any chance of a cash back at completion at all.

If you're not able to get cash backs and you've recently become a full time investor, where does your income come from? (Apart from HMO rentals.)

And don't even think about selling! In my opinion Buy To Sell (BTS) isn't an option right now, as there are simply very, very few buyers around. In fact I'd say this is the best buyers market for a generation. To sell a property right now you've either got to be lucky or selling at a big discount yourself.

Put it this way, have you been in an estate agent's recently? The ones I've been in, well, to be frank I've seen more life in a morgue! Make no mistake a lot of companies associated with property will go to the wall before the end of the year, estate agents, mortgage brokers, removal companies, surveyors etc. Not to mention all those people who gave up jobs and spent their hard earned cash to train as HIP providers. How much business are they doing right now?

Apparently the Council of Mortgage Lenders and Royal Institution of Chartered Surveyors have recently announced they expect property sales to be down by 35% and 40% respectively, this year. Unless things pick up soon, which I very much doubt, I think 65%-75% is more realistic.

How long is this credit crunch likely to last? Nobody knows, could be 6 months, 12, 18. One thing that is a good bet, with falling house prices and the massive losses many financial institutions have suffered, lending criteria won't be as lax has it has been for the foreseeable future.

How far are property prices likely to fall? We'll in the last property cycle prices fell by about 35% in real terms (allowing for inflation) and 12% in nominal terms. In addition it took over 12 years for property prices to exceed their previous peak reached in 1989.

This fall did however coincide with the recession of the early 1990's. At present the economy is holding up fairly well, and as long as it continues to do so we may escape the same level of depreciation. Personally, I think the fate of house prices in the UK will to a large extent be dependent upon the price of oil. If the price of oil continues to appreciate, then inflationary pressures will limit the Bank of England's ability to lower interest rates, as they have a mandatory inflation target of 2%.

By now you're probably thinking I'm a right doom and gloom merchant! I have after all laboured the point to the downside. But no, I think there are some fantastic deals to be done right now, provided you can secure the deal no-money-down and most importantly it produces good positive cashflow. (Why else would you want to acquire a depreciating asset right now unless it puts money in your pocket every month?)

As a full time landlord with properties throughout South Yorkshire and Lincolnshire, I have a vested interest in property prices going up like most people here! However, I do think it's all too easy to see just what we want to see. As the saying goes;

"We see things not as they are, but as we are."

When you think about it, it sure does make sense. As an analogy, on 9^th November 2001 two planes flew into the World Trade Centre. Some saw it as a barbaric, cowardly act that claimed the lives of thousands of innocent people. Others saw it as an act of martyrdom and a just response to aggressive US foreign policy. The fact is two planes flew into the World Trade Centre, yet people saw it differently - based on their belief system.

I guess most of us are here because we believe property investment is a good way of making money. And because of that it's easy to ignore or discount any news or opinion that is counter to those beliefs.

Anyhow, I thought I'd share some of my thoughts and experiences with you. How are you finding it, what's been your experiences of late, and how do you see things going forward?

Andrew

[SHUES]

ok you raise some good points im new to the btl market mad maybe . i have only 2 properties one in the uk and 1 in turkey . i toyed with the idea of going into this market for years , i prayed for a crash in the booming times thinking id missed the boat on a dream id harboured for years , lets be realistic people with multiple properties were envied by the millions who knew what they were into. I love property I am full time employed for the last 20 years and hate my day job i was recently threatened with redundancy and a measley pay out . The people with multiple property i still envy (they can weather the storm) remember for all the monsters that creep out of a box ie fuel rises,lower house prices,banks tightening the purse strings etc there is always hope and that is what this great country was built on.

[BarryM]

In prime central London areas, at least, we seeing rental yields increase. People who a year ago would have rushed to buy are now renting - or staying put in rented accomodation. There is a serious shortage of small, affordable one and two bed flats to let in areas like Kensington, Notting Hill, Fulham, Brook Green, Bayswater to cater for this demand and rental prices are rock solid at this end of the market.

At the same time there's more choice of property for sale. Sales prices haven't dropped - although they have I agree stopped rising (the think of a number and add 50K school of thought is long behind us with vendors' expectations).

So if you have 30% LTV now might be a good time to be looking. We are selling more to BTL investors now than a year ago that's for sure.

As for short term capital appreciation I agree.