You have to admire the optimism of buy-to-let investors. House prices are tumbling, banks are pulling out and rents are stagnant, but according to a recent survey by Mortgage solutions, the BTL brigade feel just fine.
"The credit crunch has done little to diminish the appetite of buy-to-let investors, according to intermediaries, with 62% revealing their clients believe the current market presents good buying opportunities.
A survey of more than 300 intermediaries by Mortgage Express found the credit crunch appears to have had little impact on confidence among buy-to-let investors, with landlords remaining upbeat about rental demand."
Confidence? Buying opportunities? The BTL industry is about to have a Wile Coyote moment. Don't look down, there is nothing holding you up.
8 comments:
I find it bizarre how many people (BTL) seems to cling to this idea that rents are about to rocket. With the economy slowing, surely rents will slow? Or have I missed something?
Rents are linked to average earnings. See an earlier post on this blog.
Did the coyote ever catch the road runner?
Why are you wasting your time with buytolet. It is finished, over, and kaput.
How about a thinkpiece on the psychological need for BTLs and everybody else in the industry to remain optimistic?
I think it's no coincidence that the renters I know are were more open to the house crash theory (before it became fact) than the owners. As late as last Christmas all my homedebtor friends expected no worse than flat prices in 2008.
Do you think it's not just fear of loss but also the damage to self-esteem of admitting you made a terrible decision? Is that not also why renters are so happy now - they are getting delayed validation of the decision not to buy and therefore no longer suffer the psychological problem of seeing the world appear to contradict your entire world view.
Nick
I think that a large number of people who are renting are doing so because they were saavy enough to realise that buying did not make sense in spite of low interest rates. I think that is why renters have been more receptive to the idea of a crash... they might not have been thinking in those terms, but they saw huge risks in home ownership. Conversely, owner occupiers who've "stepped onto the ladder" (AAAAGH!) looked at the risky market and saw barely affordable prices escalating wildly. Subconsciously they expected high inflation that would eventually erode their debt - and felt they needed to mitigate the risk that they would loose out to unscrupulous landlords over the risk of an unmanageable debt.
I don't think either group took their decision lightly... and, in my opinion, never has an objective opinion been more difficult than during the last decade.
In reality, some from both camps will be winners, and some losers. The decision will be whether the individuals made good choices in their individual circumstances rather than by the fluke of correlation of their personal circumstance with market conditions. It is my personal opinion that many who bought have massively over-valued their position... but, assuming they haven't borrowed and spent against their gains, they might still emerge prosperous.
asteve,
I think you're right to imply first-time buyers where motivated more by fear than greed (opposite for BTL "investors") but I strongly suspect they weren't anywhere near as financially savvy as you make out (e.g. even thinking about inflation as a debtor's bail out). I think they simply saw five years of double digit increases, extrapolated a straight line from that trend and figured if they waited any longer they'd be screwed.
I doubt they ever considered P/E rations, historic income multiples, historic interest rates. I especially doubt they had the slightest idea how to value a house.
Nick
I'm a home owner who bought in early 2002, and I want this (I expect substantial) correction to be seen through to restore broader sanity to the economy.
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