House prices drop another 0.7%

This is Good for Landlords

Cheaper houses means landlords can buy more - if they can get the finance, that is

FTBs are stuck renting because even if houses become a bit cheaper, they can't raise the deposit finance...and haven't a clue how to find a bargain

I doubt these minor cuts to housing benefit will have much impact - will even drive up rents in cheaper areas...

About time we had a troll filter on the site :o)

FAO Chris

I ask you a question is Landlord X wrong or is he telling the truth

I do indeed think he is right

Prices are down Very few folks are buying so any Landlord with cash would be a fool not to buy

He is right to about LHA it makes very little differance to me as a landlord as i dont like LHA

IM sure we will again have comments but im looking forward to tham about us Landlords being the bad guys

Sticks and stones I think

OH by the way I think the graf is wrong its too high in real terms it should show prices back to 2003 leval about 125k

The prices will cont to fall for some time untill we reach 2002 leval around 110k this would bring the earniing ratio back where it should be

but what do i know imn only a Landlord

another problem is difficulty in obtaining a mortgage, eg desposits are now required (which they should always be)

unless you have to sell I would let for the next 5 - 7 years

Caomparing the rate of decline with the peak of the crash is a great piece of lazy journalism. What exactly does this tell us?

Landlords, you may get bargains, but surely your capital values are also falling and you will have more difficulty raising finance. Also it is only a bargain if the the price goes back up.

I would reccomend everyone studies the following graph

http://www.housepricecrash.co.uk/images/bubble-lifecycle.gif

I'll leave it up to you to decide whether or not this this particular bubble is just leaving the 'return to normal section of the curve'.

MC

For me it has nothing to do with capital value

I only buy on yeild so the deal has to make me money from rental income

property will rise but not for a long time but when it dose thats the cream but im happy with the milk at present

What is the point of yield if you lose all your capital? Yields also assumes rental values will not begin to fall if we see further capital reductions?

FAO MC

Good point and in the short term your right

let me put it another way I buy a flat with a deposit of 15k

after paying all costs perm month mortgage ect i make a profit of £230 nett

thats £2760 per year

in another way thats over 15% on my cash deposit a great return and I have a property where the rent will grow over the next 20 years

so its a very long term plan hope that helps

but you are right capital values will fall futher but one day it will rise but when is anyones guess

At the present time landlords are the only buyers stepping forward to purchase mediocre properties in areas of economic stagnation. As has been stated, they can find tenants because many people have no viable alternative.

However I think their businesses can only expand so far before unsecured risk will call a halt to further use of the bank's money.

e.g. A Landlord buys 20 Houses @ £60,000 a piece = £1,200,000

His stake @ 25% deposit would be £300,000

Average amount of capital repaid. @10% = £120,000

Landlords equity in the properties would be £420,000

The Bank's equity would therefore be £780,000

But if the mark to market value of the properties has dropped by 10% the bank would be in possession of £78,000 of unsecured capital.

It stands to reason therefore the a mortgage lender will take this vulnerabilty into account before advancing further loans to a but-to-let landlord.

A 20 year plan is good, however, yout 15% return ignores voids, tax, repairs renewals and any downturn in rent or increase in interest costs. What happens if your property drops in value by £15k (as I assume these are low quality assets?) or even more than £15k? It could take >7 years just to get your capital back.

I wonder which idiots are still lending to resi investors at 75% LTV? Minimum 60% and medium assets not dss slums.

Banks have limited capital so risk/reward in resi means they have little incentive to invest capital in this segment.

Hi MC

You have to remmeber I have been buying properties since 1984

So I look at my property on a whole and not one property

when new landlords come into the market they are most vanrable to losinbg money on repairs and insurance bad debts ect

But when yiu have a cash rich business as I do its handy to have repairs ect to bring down my tax bill

Its all about size

Infact when I started this bussiness I never made a profit for 10 years but the propertys i bought then now yeild over 40%

You need to look at the much bigger picture

Anon 1

Im not sure the lenders are idiots

they cahrge landlords through the nose at present

high valuation fees

high arrangement fees

for less risk as you say it 25% deposits now if not more So I think there on a safe bet

and if you are an exxperinaced landlord which most are who are buying NOW they know what they are doing

and just another point the properties i am buying now which are reposetion are not from Landlords but from normal purchasers

it makes you think

Banks are no fools today I think they have learned there leson hopefully

So you worked for free for 10 years but now make 40% yields due to a property bubble that is slowly inflating.

In my experience all those involved in property made money during the boom becasue of their experience and skill etc etc But once the boom imploded it was the govenrment or the banks fault not theirs. Essentially you took a punt on property and it paid off eventually. It was still a punt and it still is, but betting against the market is even more of a punt.

'slowly deflating'

anon

I worked as a wage slave for ten years but i was building a property bussiness at the same time

Takeing a Punt is what investment is all about wether you buy a pension or stocks and shares so im no differant from the majority of Citywire investors

It has paid off and when you say its defalteing your are correct but as i say i dont mind the property price dropping in fact i welcome it

Before the credit crunch between 2005 and 2007 I did not buy property I could not make the yeild

I kept my powder dry and now its paid off once again

im sure you will agree that investmet is a cycle and we are now in a cycle to buy and not to see

Yeilds are on the up

Being a landlord gives me freedom to do with my life what i want to do wioth my life (period)

I love it ive seen the hard time and we will see the good times again

its all a matter of time

I go with dislexic landlord and have to wholeheartedly (but respectfully) disagree with MC.

I have been in property since 1988 before it was fashionable.

I have always bought on yield and never relied on capital growth, though capital growth in the early 2000's allowed me to expand my portfolio to 42.

I stopped buying in 2006 forseeing a bubble. My whole portfolio is in very positive equity geared to around 60% overall although some of my later purchase have dropped into negative equity.

I called the bottom of the market back in April 2009 and started buying again. Distressed sales allowed purchases to be made at far lower prices there then 'market' values.

I buy in cash now with mortgage deals being so poor. My portfolio nets £14k a month net of mortgages.

I can buy a 70's ex council property in my area (high rental demand by the way) turned over for £55k. The last one i bought cost me £49k. I rent these at £550pcm as single units to LHA. £550pcm from £50k ish? Show me another investment vehicle that performs the same. By the way I have guarantors and inventories as safegurds and never lose on these- before the anti LHA brigade start.

You can see by the figures that every few months I can save up and cash out another. Price drops- how can you assume the capital value will be zero at some point? Prices may drop but long term will return- as to when who cares? In 88 I bought a property for £35k, it dropped to £26k in the early 90's and at its peak in the noughties was £114k- it sure hasn't dropped back to anything near either of the other two values. Yet I have seen my rent increase over this period from £65pw to £127pw. The properties fall in value didn't bother me then and does'nt bother me now.

I have stopped buying for the moment (as I am making too much money for the taxman) and am pumping 10s of £1000's into my properties 'maintainence and repair' program to keep my tax out of the 50% bracket and also ensuring that should the lettings market become more competitive I am in the best position to compete. Also it's a great pr exercise for your tenants to see money going into 'their' home.

Bottom end property- its the future. These are my personal roots having grown up in a single parent family in a council house. This is all I do for a damn good living. Not bragging- not my style- just putting forward my positive views on buying right now.

There is so much psychology going here, people – ie sellers, egged on by agents – are just not willing to countenance that the game may well truly be up, and so are having to wait and wait and wait for sale...that will get worse before it gets better, especially as it appears to have dawned on buyers that the boot is on the other foot now, increasingly firmly. Just a look at the uk house price to earnings ratio chart tells you there is ways to go yet, and down..... http://www.mindfulmoney.co.uk/2123/economic-impact/uk-house-price-falls-accelerating.html

Anon 1,

I think that perhaps you are a safer class of investor than the likes of Dislexic Landlord and others on here but "taking a punt" and "betting against the market" is a bit of a risk and Dislexic Landlord would have took a bit of a major hit from 1989 to 1995 during the property market downturn.

If LL's buy "on the dip" I agree it can be dangerous because the bottom of the house price cycle is not known yet, but these long time LL's can carry the hit because they are averaging out the cost of their houses held in their portfolio. Also when it is hard to sell a house like now, sometimes a real bargain pops up in the right area at the right price. If the bargain achieves the right rental income then it is not a major problem if it drops another say 5% to 8% after purchase

I do the same with shares and investment trusts, loading up the portfolio when the prices are subjected to a correction and on a long term basis it generally pays off.

I appreciate your philosophy. I just believe that the correction will be much longer and harder than people anticpate. For a start the fall in prics has yet to be driven by the banks putting out their vast property portfolios to auction (as they did last time the market crashed) but now provisions have been made and loses taken, they will start to. At the same time they are not feeding new money into the market with most property books being wound down to balance the loan to deposit ratios the banks built up during the boom.

so in short keep your powder dry.

Paul Smart

I will join you in the 50% club to if it was not for repairs ect

we are lucky we have the forsite and move forward

Im glad its worked for you as it has for me

You said the magic words you started in the 80s so we are hardly speculators we are investors

im sure you will have lots of commenst as I do

good hunting

Anonymous 1 & 2

None of us have a crystal ball (unfortunately!!), but if we take your hypothisis as being correct of the market going into a deeper correction than you think people actually expect, then I do not believe it is still grounds for major concern.

As we have said buy on yield- and for me at the bottom of the market- and if the capital values fall it needn't be a worry- you still have a viable cashflow positive business.

I see it as a bit like the relationship of a companies value on the stock market- it can go up and it can go down- but the business is still a viable one providing positive cashflow.

The difference between the stock market and property as I see it though- though some will disagree- is that long term from here prices will stabalise, recover and increase. We have all the distortions of shortage of lending, oversupply of property for sale and buyer confidence in play at the moment. I could be wrong but I believe in ten years from now- just as a figure- lending will have improved and pent up demand for housing will drive up prices whether we like it or not.

The old chestnut of not enough properties being built (by a long way) and an ever increasing population will ensure this happens as demand outweighs supply.

In the meantime asset value is totally unimportant to anybody apart from the short term investor.

By the way capital growth is not the be all and end all in property investment. I got into landlording based on monthly returns for providing a service and still see it that way for the bulk.

I have investments in Western New York State that I purchased in 2007 when I exited the UK 'buying into a bubble' market.

Their market is not driven by the rollercoaster of rises and falls like ours. My contacts out there find that concept of boom and bust odd. They have a market that grows by around 2% a year and has done generally for decades which keeps it inline with general inflation.

The landlords there including me work purely on monthly returns for providing a service.

Dislexic landlord we are indeed lucky to have started in the 80's and we have the experience of previous ups and downs. Our long term view keeps us safe as service providers- may your repair bills (that appear to hit you quite hard) dwindle this coming 12 months!!

Paul

Credit to anyone whos built up their own source of income over 20 yrs. When you talk of BTL most people think of new 2 bed flats for sale in places you would want to live yourself... but there is no yield in this at the prices they sell for. Dislexic and all your cronies you are a new generation of which none have gone before. Its all well and good owning tens of props but how do you intend to realise your investment - no one's going to buy a whole portfolio of dumps off you - you will rely on rent for evermore. Lets hope your kids want to be LLs. I would rather hold an investment i can liquidate with a few clicks of the mouse.

Anonymous3 you are very wrong. My places are dumps. This is the poor attitude to the less well off in society that the people who have never lived in such places hold. As such you should be grateful you have no in depth knowledge of being there.

My places are admittedly in the less 'des res' places but I am proud to say they are all furbished to a standard I would live in myself. All my tenants are lower income and housing benefit- I cater for the nice people of this world who just happen not to have much money. They still deserve and get my respect and the same standard that they would expect in a better area but can't afford- just they are in a poorer area- I do not operate as a slumlord. They are highly appreciative a such a respective approach. They aspire to the better area but don't have the money- this is my childhood history and I am not ashamed of that- it gives me a greater insight into the needs of the less well off and a fantastic springboard to promote a successful business model from.

I personally laugh at those that speak to me of wanting to do property but not the s***holes I have. They are certainly not that and I think fantastic- you go ahead and throw your money at something that returns nothing and turns into a capital loss and cashflow negative- it's a hoot. Keeps them from getting in my way too in my markets. If your investing do your homework- rule of thumb- the more you spend on the property the smaller the returns and percentage less capital growth if and when it comes. Lost track of the people that have asked my advice, gone in the opposite direction and now regret it. I did my honest best for them but of course everyone else knows best.

As for my legacy- you are very very wrong. I could sell all my 'dumps' as you see the poorer area housing as being very quickly and at a handsome profit even on my noughties purchases- they are selling better than the higher priced properties with smaller losses. Low prices and yields of 14%+ even in todays market .Who wants to buy a classy portfolio with pathetic returns? My portfolio offers high yields and return on investment that are unprecedented and at an affordable price. But honestly- I really dont see the point in selling assets that net £14k a month after expenses, but before taxes do you? Why would you liquidate such a business?? I wish to pass my highly successful business (inarguable) down to provide a fantastic income for my little ones whom I am schooling in professional successful landlordism.

With all due respect you have the bit about the two bed 'twees' investors buy correct, but are pitifully naive in my (the real) world of property- no disrespect intended. Do you have any real world experience or just a spectators view? If it's real world then I pity you for your mistakes but if it's spectating I hope I am contributing to your knowledge base. And by the way 20 years of investing does not make a new breed in my book- thats old school who didn't do something fashionable. The new breed are the idiots that follow the ethos of 'you can't go wrong in property'- you most certainly can and people do and have done to their peril.

paul

Fao Anon

I have never sold property and have no intention of doing so my reasons is as follows

Costs to sell

Legal Costs

Capital Gains Tax

Estate agents Costs

Then I would have to reinvest and the question is where as Ive said befor properties that were purchased in the 1980 yeild over 40% where would I get an income stream like that

as for my Children takeing over from me when i leave this earth I have spoken to Him and he is now working with me in the bussiness and is more than happy to take over subject to the IHT being paid

and As he says if he did not want the hassel he could give it to manageing agents just like the rich and the famous

dear Paul Smart

YOu echo all my thoughts but you can put it down on paper a lot better than me

You Bussiness model sounds the same as mine as is tour approuch to running the bussiness

Kindest regards

Dislexic (Ms)

Dislexic thank you.

We do sound very similar in our approach- we got into property with an income stream in mind not capital growth- in all honesty in my early days I had no idea that capital growth came as part and parcel of the cycle. My focus was on running the property stuff alongside the day job. Not taking any profit just using the surplus income to pay off the finance and that one day in my 40's I would have a number of properties owned outright that would give me my income or could be sold (again not expecting growth).

By the way I bought my first house at 19 (im now in my 40's) and first investment a few short years later. There were no rules or guru's then- we just had our own belief and instinct to follow.

My daughter is 10 has grown up in the rental environment in all its good and bad forms from an early age. She knows it will all be hers when I go. At that point as you correctly point out she can run the business, hand it over to managers and take a purely passive income or of course sell the whole damn lot!! I don't care a long as she is happy.

As for the concern someone made the comment of not being able to sell our 'dumps'- which of course they are not- how wrong could one person be?? These are the sought after properties!! Prime first time buyer stuff and heaven for an investor- wish people would think what they are saying before they open their ridiculous and offensive mouths!

As for where this all started - house price falls. I wish everyone could take a chill pill on the affair, it's really not that significant.

If you need a place to live and can buy then do it- you will waste a lot more money renting for two years whilst waiting for prices to drop than you will buying now. I know people that took that approach before the lending got bad and now cannot buy at all as they cant raise the new deposits- renting now for the long term. What a waste.

If your an investor- particularly cash rich- then go and buy if the income figures stack up. If they dont your looking in the wrong place. I can make the figures work in todays market.

A scenario- with an average of £6k per annum on a property net of mortgages, a property value of 60k and a 10% drop in prices to the trough. It takes a year to make up the fall- if it happens- and then your capital value is sorted again.

As I say in regards to prices people should relax- the only converns for example is if your in negative equity and you have to sell. Then you have good reason for concern!

Chill out!!

"If you need a place to live and can buy then do it- you will waste a lot more money renting for two years whilst waiting for prices to drop than you will buying now."

It all depends which end of the market you are in. I came out of ownership 3 1/2 yrs ago - have paid 30K in rent. The houses i might have bought in 07 have dropped 60- 70 K so far. I 'll keep renting because there's further to go, and its hedging against further falls. The flat i rent has dropped 50Kin value in that time.

the goverment may in the future tax buy to lets on income and the goverment may also force houses that are repossed to be advertised to gain full capital price for the debt owner as it should be done then no back door deals can be done

Perhaps dislexic landlord should spend some of his/her enormous wealth on spelling lessons and a course in ethics. (That's not a county by the way)

its quite amazing on how an educated man as yourself can make such a remark

it just goes to show that education is not the most important thing in life

but mannars are

what else can one expect fromn a pig but a grunt

Paul Smart, you refer to the US market being more stable

"Their market is not driven by the rollercoaster of rises and falls like ours. My contacts out there find that concept of boom and bust odd".

This is at odds with recent reports of a new wave of repossessions. Comment please?

I have been following the melt down of the U.S. property market on a website called "The Big Picture" Its a blog run by macro economic guru and trained lawyer Barry Ritholtz.

The main topic for discussion has moved from mis-sold subprime mortgages, thro' the mire of colateral debt obligations (CDOs) and credit default swaps (CDSs) to the bail out by the federal reserve of those very establishments which caused the whole sorry mess in the first place.

However the saga is by no means over. Far from being given assistance, those unfortunate enough to be unable to meet their monthly mortgage payments, are being hounded out of their homes by unscrupulous foreclosure specialists. The process has been exposed as fraudulent because these firms have been hiring "Robosigners" (people without proper legal qualifications, who have been signing thousands of foreclosure notices without due diligence to the tracebility of legal title)

Some occupiers have been forced out of their houses although they owned them outright, and never had a mortgage in the first place!

It is true to say however that American laws governing real estate are different to ours. e.g. The mortgagor (bank) has no right to further regress if the mortgagee (defaulter) surrenders possession. Whereas under UK law a bank would be able charge the defaulter for the outstanding balance if he could not recover the full amount of the debt through the sale of the property.

Unfortunately it is much more of a headache to glean information on Barry's blog because he goes into his subjects in much more detail than here on Citywire, but if you can stand the pain you would come to realise that America has serious problems of poverty, and accusations of corruption and manipulation.

It's grim up North, it's grim down South too for some poor souls, but not half as grim as it is abroad.

My apologies Dislexic, my comments were out of order.

I am happy to accept your apoligies

we all say things we dont mean

Have a good weekend

Anonymous5 you required my comment.

Apologies for the delay I have been away.

I am not talking about the US market as a whole- that cannot be done. The place is so vast and and areas like florida and california for example are driven in a completely different way to the area I am specifically referring to. The US doesn't have one market -it is manyfold and contrasts totally.

The area I am referring to is WNY state. Cities such as Buffalo and Rochester over near Niagra falls. There has been no significant changes there for years- I did my homework well before buying. Having decided 3 years on it wasnt' for me I have sold 4 out of 6. I have sold 2 at a small profit, one at a slight loss (predominantly as I had a bad manager who let the propert deteriorate), and one at the same price I paid.

It looks like I may take a hit on the last two- my mistake in buying a bum property- a gambler can't win every bet!!

Overall though I have still ended up positive due to the currency game- I bought when you could get more than $2 to the £1.

Anonymous 4

maybe I am misunderstanding? but we do pay income tax on buy to let-wish I didn't i would be a lot better off!! And there is already in place a legal duty of care to the repossessed by the lender to ensure they can get the maximum available. Thats why you see the ridiculous asking prices way above current market values for the first couple of months whilst they try and achieve this before being forced to reduce to the prevailing market value at the time. Goverment legislation- Landlords are well used to them the government are well documented for interfering with no positive effect on areas that don't require it- this would be another example.

Anonymous 3 if that works for you then I am genuinely pleased for you and sincerely hope your hedging pays off. My direct experience is all at the bottom end with low priced investors and FTB's and it is them my comments are geared to. Even though prices have fallen a lot they find themselves worse off- they pay £1000's in rent per year now for god knows how long as they cannot meet the new lending criteria. If they had bought pre tightening rather than holding back they would have paid more for the property. But they wouldn't be spending the property savings available now on rent, and if they could buy now the profiteering by banks on the mortgage rates still would leave them no better off. The only difference now is that they still rent and do not own s the lenders won't let them- and possibly never will for a long time to come.

I must say though they are some herendous price drops you speak of- I can only assume you are speaking about the identikit new build luxury city living flats (sorry apartments!!) they were trying to convince us we all aspire to?- Which was a crazy idea but a lot fell for it.

I haven't witnessed anything like those drops even in the markets of £150k to £250k ,which I also watch for my own personal reasons, in the geographical areas of the country I deal with.

Paul