It is hard to believe, but the number of buy to let mortgages increased in the third quarter of 2008. The total number of BTL loans stands and 1,134,000. BTL investors now account for 11.1 percent of the mortgage market.The warning signs for BTL investors are screaming red; house prices are falling, and so are rents, why would anyone jump into such an investment? Can someone help me here?
14 comments:
Do we have any idea who these investors are?
It amazes me how many people think this is a short term slump.
My brother in-law just the other day was advise his friend that he was marketing is house for too little and should not accept the £5000 low offer saying he should up the price. These people are just not accepting the dier nature of the present situation!
lemmings all.
Who is gonna bet, much of the money being used to finance these purchases, is derived from the money the Government is forcing the banks to lend.
The question is, I suppose, who is getting the money, wouldn't by any chance be those sympathetic to the government do you suppose?
If you don't ever expect to pay the money back, you don't care the likely rate of return.
People will not let go of their obsession with owning property as an investment. Around my way, some deluded landlords are still trying to ramp up rents (even in Dovecot Towers, for anyone who knows about that.) It makes sense to buy at auction, where prices have reached realistic levels, but elsewhere, it's very stupid. But it's not a short term slump is it? This could last for 20 years, or indeed, with buy-to-let newbuilds, forever.
The sums still don't work. Nationwide has an amazing 4.7% variable rate (not for buy-to-lets) - but even at that rate one can't cover the mortgage with the rent at present prices - at least not where I'm living! A small monthly loss and maintenance costs. What's the point?
...unless the currency is about to inflate badly?... mmmm...
B. in C.
They are everywhere. Last night I was informed that my idiot mate is borrowing half a million using existing property as collateral because "the market could turn at any moment".
I said my opinion but apparently that is his plan.
It is likely (in my opinion) that these btl'ers acquired dirt cheap houses at auction. That would be one reason for the increase in btl mortgages. It's just possible these people are taking up repossessions at auction, etc, and even getting 50%+ off the market price. This is one reason not to go to an estate agent if you are looking for a property.
Land Registry ignores auction prices (crazy but true), so it falsely appears that you get a bargain at auction, rather than just setting the true market price.
I agree with B. in C., interesting what i just read over at Naked Capitalism.. http://www.nakedcapitalism.com/2008/11/blog-post.html..
Here in San Diego, there are tons of perfectly rentable low-end houses in good locations for sale at low prices. With a proper down payment, an average rent will cover the mortgage, or close enough. It's a good time to get into the rental market as an owner. Times like this (at least in San Diego) a very rare.
I've got a friend who has three such properties, bought in previous crashes. He's got a fantastic retirement nest egg built up on almost no investment at all.
I can see the logic in buying at auction and having a long-term plan ... but a "market could turn at any moment" ?
Naaah !
Surely a better plan would be to pay off existing debts, realise assets if you can and make a sharp exit to a more sensible country than this one.
But if its not your money you are putting up, whats the problem. It goes t#ts up its the banks problem, it goes all right you win.
Its not an entirely stupid gamble when you lose nothing by taking it.
Because with interest rates so low, rents are still more than the interest payment?
Yeah the situation is simply horrifying. Another interesting post "Buy to let Time Bomb" is published by http://www.themoneyferret.co.uk/blog/index.php.
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