Tuesday, 27 November 2007

Gloomy Tuesday

There is so much bad housing news out there that I don't know where to start. Here are a few select stories to warm the hearts of any renter.

Will the rental sector save the bubble?

Of course not. However, we are detecting an increasing number of stories pointing to higher demand for rental properties. According to the Association of Residential Letting Agents (Arla), the level of tenants seeking to rent property privately has hit a five year high in the UK. "This peak demand should come as no surprise" said Ian Potter, head of operations at Arla. "Softening in the sales market is always a driver of further demand in the rental market," he added.

However, is it a good time to go out and invest in a buy to let property? Unfortunately for BTLers, rental values are very closely linked to incomes. So far, banks and building societies haven't found a way of providing loans to pay for bloated and overvalued rental properties. As we all know, you can't have a speculative bubble without masses of credit. So there will be no bubble in rental values.

When rents go up, tenants tend to move out and seek cheaper properties. Thanks to the BTL Brigade, there are plenty of choices out there, even in London. This keeps rental inflation very close to wage growth.

America's housing inventory reaches a nine-year high

I keep saying this, but if you want a vision of the future of the UK housing market, you need look no further than across the Atlantic. The latest US housing inventory data shows that the number of houses available the sale has reached a nine-year high. At the current existing-home sales rate of 5.04 million units a year, it would take a full 10.5 months to sell the 4.4 million existing homes now on the market.

Buyers shoud "avoid panic as property prices fall"

There are times when I wonder what goes on inside the heads of estate agents. Clearly, the don't think the same way as the rest of us.

Today, I read a story that urges buyers to "avoid panic as property prices fall". Avoid panic? I would have thought that for all sane buyers, falling prices would be a cause of celebration not to panic.

Sales director of Miller Homes Yorkshire, Carolyn Rushbrook helpfully points out that "At the moment we are hearing daily reports on the news about how house prices are falling and the housing market is slowing down and this of course is making people think twice about buying property, but they shouldn’t be put off. Your house is not only your home it is also a solid investment for the future and will not only help you move up the property ladder, it will also provide much needed security and peace of mind for your family." No conflict of interest here, Carolyn. You're not giving this advice because you have a strong vested interest in keeping property prices high.

Here's another thing that annoys me. This woman is, for all practical purposes, giving investment advice. However, she is under no legal obligation to point out that prices can go up as well as down. Other financial advisers operate with much stricter rules. Estate agents are not competent to give advice on investments, and therefore the government should pass regulations preventing them from acting as financial advisers.

Why buy-to-let will be the British subprime?

I can answer this question. The answer is definitely yes. The vast majority of buy to let investors are rank amateurs, who have no idea what they are doing. They haven't properly assess the risks of leveraging themselves. Furthermore, the vast majority have bought assets are likely to fall significantly in value in the coming years. Many of them are already bankrupt and don't realise it.

Those banks who foolishly financed the buy-to-let boom will see those loans turned to dust. As bad debts mount, many banks will find themselves in serious difficulties. We know which banks we are talking about don't we?

But I haven't already convinced you, you might want to take a look at this article.

Darling seeks Brussels approval for wreck aid

Alistar needs to check up with the folks in Brussels, just to make sure that he didn't contravene any state-aid rules. Pumping in endless billions of taxpayers money did give the Wreck an unfair advantage over other reckless mortgage lenders. If he can bail out one bank, why not others? Paragon looks like it needs a little cash.

2 comments:

Anonymous said...

No cookie monster dreams today?

Raj said...

UK is a hot cake as a buy to let market. But before entering in this property investment, one should thoroughly research about the property, where they should invest to gain maximum profit at the minimum time frame. For this you need some good property education about the latest trends.