Anne Ashworth
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Amateur landlords who borrowed wisely and put their money into well-located properties, with tenant-pleasing features, such as proximity to public transport and neutral decor, are doing OK, thank you.
This was not the outcome expected when the housing market started to weaken in the summer of 2007. The demise of buy-to-let was forecast widely, with hundreds of thousands of overextended buyers of rental flats becoming overwhelmed by the burden of more expensive mortgage repayments and succumbing to repossession.
These predictions show the error of assuming that the property market collapse of the early Nineties will repeat itself in every detail in the downturn of the late Noughties. For one thing, the experience of the last decline provides no useful guide to the behaviour of buy-to-let investors, as their numbers were few at that time.
Today's typical amateur landlord is described by one observer of the sector as “quite wealthy, in a good day job and with a good slug of equity in his own home”. Suspicious of the blandishments of developers, he is also sensible enough not to have committed funds to inner-city schemes in towns oversupplied with new apartments.
He may be dismayed at the slew of statistics suggesting that the housing market is stagnating, but he is under no immediate financial strain. Quite the reverse, in fact, as the income from his rental properties is improving, compensating for increases in the cost of borrowing.
Rents have been rising strongly, up by an average of 11.7 per cent across Britain and by as much as 29.2 per cent in the South West, according to research from Paragon, the lender. These statistics accord with Royal Institution of Chartered Surveyors research, which highlighted how lucrative the landlord game had become for many.
Estate agents now report that landlords who are possessed of some spare cash are even adding to their portfolios. They are snapping up properties that hapless first-time buyers who are currently compelled to rent could acquire in the future when the credit crunch at last loosens its grip. For the moment, however, slumping figures for mortgage approvals, released yesterday, suggest that this will not be any time soon.
Another forecast made as the sentiment in the housing market started to deteriorate was that lower prices could produce bargains for would-be first-time buyers. Such opportunities are appearing, but only those possessed of substantial deposits can secure them. The cost of borrowing is rising remorselessly, with some two-year fixed-rate mortgages now priced above 7 per cent; at the end of 2006, the typical rate was 3.99per cent. This latest increase indicates that banks remain disinclined to lend to anybody, least of all first-time buyers.
Those who cannot rely on the Bank of Mum and Dad must continue to dwell in rented accommodation in a state of youthful irresponsibility that starts to pall once you are close to 30. They may feel grateful that they have a roof over their heads - at a price - but resentful too at the tax breaks enjoyed by their landlord for whom the downturn is proving surprisingly rewarding.
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Peter, Wimborne. What's the point living in poverty just to say that youy own a few (devaluing) properties? If you buy and SELL at the right time you can make big money. If not, you have non-liquid assests which can become a major burden and, in most cases, offer little or no profit.
Clint, Brighton, UK
Keep it coming Anne - its great to see a fellow BTLer who really appreciates what a great opportunity this market is, this time next year prices will be rising again and we'll be bragging to our friends about how clever we are.
Meanwhile I have some flats in Leeds you might be interested in?
simon, london,
I am a Landlord. Good property in good location in the S/West, high equity, no mortgage on own home. Local rents up by CPI. Before you stick the boot in, I've made sacrifices to get into this position. V.old car, no holidays in 5 years. You can rent and own a new car & take holidays your choice.
Peter, Wimborne,
As long as prices are falling demand for rented accommodation will hold up. But a rough ride on the way for landlords as the market bottoms, people start buying and demand for rented accommodation falls. Many BTL landlords will loose tenants and be forced to sell just as the market bottoms.
Etienne , london, uk
I have a friend who runs an estate agents he says
50% of the property for sale are BTL whats that telling you
Dave, Bristol,
We have a property market which is all about speculation and nothing about families.
We have the highest levels of societal dysfunction in Western Europe.
In my humble opinion, the two are not unconnected......
Mr Cameron's political integrity will stand or fall on how he handles this.
Rhys Jaggar, Leeds, UK
Anne Why do you have to keep trying to talk up the market. Wake up the market is crashing. Of course people like Paragon will always try to keep publishing statistics to support their business model. Our youth will be able to buy houses as prices crash by 50%
david, eastbourne,
Anne or her friends are surely not trying to sell their portfolios?
A declaration of interest in such articles would be useful
kenny, london,
Rents aren't going up here in Plymouth at all. There again I suppose when people refer to the 'South West' they think of chocolate box villages and quant seaside towns, not a Naval Base!
Brian Roberts , Plymouth, Devon
Utter nonsense. Some landlords with luck might keep rents flat, but all face steep increases in interest payments and falling capital value for their "investments." Hence their net returns (post maintenance, taxes etc) will be negative, possibly forever. Landlords: time to cut losses, sell now!
Peter, London,
Rents are going up? Only for the simple minded. Landlords are desperate for tenants to pay their mortgages. Always pay less than the asking price. Flatly refuse any rent rises. No one will turn down a paying tenant in this economic environment.
joe smith, london, england
Oh dear.
Do paragon by any chance rely on what their borrower's tell them for the rent figures? I suspect they do. Still if there is one thing sub-prime taught us it is that people never fib on mortgage applications. Oh, hang on...
Ian Bevan, London,
Anne, learn when to stop digging that hole! If you are going to make big claims at least back them with statisitics.If you can't then let me help,
> 15 sellers for every 1 buyer
> Prices dropping at fastest rate since 1992
> More BTL mortgages removed than FTB mortgages
What ones do you use?
Paul, Brighton,
I have to say that the research from Paragon appears to be self serving. The ONS tracks rental prices across the UK and their data shows that rents are keeping track with inflation.
Anecdotally - I rent and have seen no evidence of increasing rents.
roger, Tunbridge wells, UK
Spin doesn't work as houseprices.co.uk reveals exactly which properties have been snapped up. Take N12, for example, there were just four completions in March vs. 54 in March 2007.
Peter Vuorela, London,
Even if rents are up 20% that is only a 1% increase in rental yield (5% x 1.2 = 6%) and is probably more than offset by rising borowing costs.
With prices down 8%+ over the last year, the average landlord's equity is down a much bigger % than this.
How is that doing OK thank you?!
Paul, London,
My rent in the South West went up at CPI this year, so there must be a lot of fools around if the average increase is 29.2%!
P Davis is right - why are estate agents going under if there are so many of these landlords snapping up property?
The crash is happening - open your eyes.
I Wood, Bristol, England
Anne,
A few weeks ago you we're busy talking up the house price market. Clearly you've now moved on to talking BTL up. If the economy deteriorates, many people may lose their homes over misselling of huge volumes of BTL propeties.
And what would you know about being close to thirty?
Robert, Hull, UK
The die hard property believer still spinning the 'property is best' yarn eh? Let me ask the author, if the properties are being snapped up why are the estate agents complaining? Why are there more properties on the market than ever before? By the way my rent has remained the same!
P Davis, manchester,
Edwarde Sanspoisson, I am amazed that you find it funny that our youth cant afford to buy a simple property. Maybe you are one of those expats stuck in France that cant afford to return to our great nation
john, bath,
It all depends on where the property is located. Thus London will do better than the Outer Hebrides.
John, London, England
LOL. Just LOL.
Edwarde Sanspoisson, Montreuil Sur La Mer, France