Wednesday, 21 May 2008

Just keep building up the pile

The buy to let industry was quite noisy during the last couple of weeks. I don't know how many times I've seen media stories telling me that everything is just fine, and that seasoned buy to let investors are picking up bargains as property prices soften. Like the old song goes, "when the going gets tough the tough get going." The buy to let hard nuts dive right back in into a declining market, when the more anxious and nervous types are pulling out.

Unfortunately, the credibility of this media hype took a serious knock today. Paragon, the pinnacle of the buy to let industry, suffered a sharp fall in half year profits. Furthermore, the credit crunch has forced it to cut new lending by more than half.

Nevertheless, Nigel Terrington, the chief executive of Paragon remains confident. "While the credit environment has been significantly disrupted and new lending levels have been reduced accordingly, we do expect a return to market stability in due course."

So according to Nigel, it is only the nasty credit environment that holding everything back. If only credit conditions could improve, the housing market will improve, sales volumes will increase, and prices will again begin to rise. If it was only that simple.

6 comments:

DCV said...

We have a Paragon theme running on this blog right now. B&B look a lot more vulnerable. Paragon has secured its future for some time into the future. It is probably quite safe.

Anonymous said...

Alice, your lack of seasoning shocks me. It's really quite simple:

It's always a great time to buy, or sell, or hold.

Nick

Anonymous said...

Apologies for being off topic, but this is a really interesting presentation on the commodity bubble:

http://hsgac.senate.gov/public/_files/052008Masters.pdf

Page 4 is interesting on gold too.

Nick

andyrich29 said...

I'm with you Alice, I'm sick of everyone blaming the collapse in house prices on the credit crunch.

House prices and sales volumes have been slowing for a couple of years now as more and more people realised houses were overvalued and chose not to buy, or couldnt afford to buy.

Its a shame that in the the main people and the media are blaming the credit crunch for the collapse in house prices.

It would of happened everntually though loss of confidence.

Andy

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Russell said...

Another idea for a post - there is an assertion that rents will rise if prices fall and this will restore yield for BTL investors. I knocked up a quick spreadsheet that did show about a 40% increase in RPI adjusted rents between 89-94.

Personally I think that the 1988 Assured shorthold tenancy act might also have had an influence, in effect de-regulating the rental market. It bears some investigation as there seem to be some stories emerging in the press about increased rents.