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BUY-TO-LET EXODUS TO SPARK COLLAPSE

The price of homes has soared

Sunday March 30,2008

By David Parsley

Comment Speech Bubble Have your say(8)

DESPERATE landlords are about to flood the fragile property market with buy-to-let homes.

Half a million owners have been badly hit by rising interest rates and are struggling to make a profit on their investment. Experts predict they will want to cash in.

The mass dumping that results could send house prices plummeting to levels not seen since the recession of the early Nineties.

The buy-to-let sector, which many people entered to supplement their pensions and savings, has suffered as lenders attempt to squeeze as much as possible from landlords to gain back billions lost in the current financial squeeze.†

With thousands of properties lying empty, especially city-centre flats, and with mortgage rates rocketing above six per cent, many landlords are running their properties at a loss.†

A tougher mortgage market is also driving away thousands of potential new investors, with some lenders asking for larger deposits.†

Specialist lender UCB Home Loans has raised its requirement from 15 to 25 per cent.

Jonathan Moore, head of marketing at Mortgages for Business, a leading buy-to-let broker, said: ìUncertainty in global financial markets is beginning to affect borrowers and investors.

ìMortgage lending criteria is being tightened across the board with some smaller regional building societies having restricted lending or temporarily closing their books to new inquiries.

ìIn the last five years buy-to-let lenders have lent at 85 per cent loan to value, with many lending up to 90 per cent last year. However some are introducing a maximum loan to value of 75 per cent or 80 per cent. Some see this as forewarning of a crash.î†

One of the biggest changes the buy-to-let market has seen is the collapse in demand and over supply of city-centre apartments.

One buy-to-let investor, who wished to remain anonymous, told the Sunday Express that she had bought a new-build flat in Jesmond, Newcastle upon Tyne, for £230,000 a couple of years ago.†

She was promised great returns on her investment by the developer but the flat is lying empty, its value has plummeted to £170,000 and the investor is trapped in negative equity.

Lisa Barge, a partner at property lawyers Eversheds, said the Government was about to make matters worse by introducing new codes of conduct which will add to the costs of running a buy-to-let portfolio.

She said: ìIn June the Government is set to propose self-regulating landlord schemes to which buy-to-let investors will have to sign up.

ìThis will increase the burden on investors so much that many may just want to exit the sector.î

BUY TO LET

30.03.08, 4:59pm

Well this should be good news for all the people this government claims needs housing. It must be better for all the people who will never be able to afford their own house. Selling off most of our council houses was a disaster so having rental accommodation coming on board will be good for low income families.

• Posted by: Tip • Report Comment

RATS DESERT SINKING SHIP.

30.03.08, 4:03pm

I was under the impression that these folk saw BTL as a "long-term investment".

Looks like I was wrong and that BTL was a way for greedy parasites to make a quick buck at the expense of others.

Either way, they are toast.

• Posted by: wanderer • Report Comment

BUY TO LOSE

30.03.08, 2:52pm

It is clear that house prices have risen to unsustainable levels over the past few years. Much of this increase is due to the demand for property from the greedy, lazy people who jumped on the BTL bandwagon in search of easy profits.

Their "knowledge" of the property market seems to consist of tips from that nice lady on Property Ladder and the mantra "property prices only ever go up". They have been buying property at prices that mean that their rental yields are tiny and they are relying on large capital gains.

It has now get to the stage that first time buyers are priced out of the market and the only people willing to purchase BTL property at the current market value are other BTL speculators. The only way that prices can continue to increase is if more and more people join the BTL bandwagon (and banks continue to finance them). This is now effectively a pyramid selling scheme and like all such schemes is doomed to fail in an abrupt fashion.

Personally I look forward to the end of the BTL phenomenon and to residential property being viewed as a home rather than a speculative investment.

• Posted by: porkpie • Report Comment

BUY TO LET

30.03.08, 11:16am

I bought a new-build "luxury" city centre flat (oops apartment sorry!) in Winchester for my sole occupation - only to find myself greatly outnumbered by upper class BTL investors. A striking feature of this type is their selfishness and greed. It was very hard to get their support to deal with common issues affecting the block (eg builders, council etc). The response was typically " I don't give a *** about that - all I want is my ***** rent" . I sold my flat and looking at the current melt-down thank God I did ! BTL investors are a cancer in our society and the government should generally penalise ownership of property beyond a principal residence. But given that most of our corrupt Westminster politicians are themselves up to their necks in BTL I doubt that anything will be done.

• Posted by: panadero • Report Comment

SERVES THEM RIGHT.

30.03.08, 10:31am

It is cheaper to buy a house than rent one these days and to the greedy people who use" buy to let " to fill your pockets, it serves you right.

The older people who have rented all their life and the young who cannot get onto the housing ladder because of them have no way out.

The government should make a "right to buy" policy on rented property, I know the Imperial party will, to help the old and the young trapped by greedy landlords.
These greedy people are hoping to make a pile from the backs of people who have little choice.

• Posted by: thomasd • Report Comment

BUT TO LET MELTDOWN

30.03.08, 10:04am

Personally I believe buy to let has been uneconomic for almost the last 5 years in certain parts of the country. Even if you own 100% of the property, the yields on the capital value are so low that you'd get more sticking the money in the bank. OK there may have been some sense when property prices were rising, but now house prices will probably fall 25% and many buy to let properties could lose or have lost 50% or more of their value. Once upon a time the word "investment" used to mean putting money into a financial scheme/vehicle with a view to coming out with more than you started. Now it means gullible fools being parted from their hard earned cash.

• Posted by: MikeLivingstone • Report Comment