Wealth Coach Diaries: Nicola’s Week
Are you panicking about the property market? Or just about the economy generally? I was watching the news last night and right next to the headline about the awful building conditions of schools in China, a major contributory factor in the disaster out there, I spotted one that said “Banks pull the plug on buy-to-let landlords”.
So I went looking for it this morning. Found it on Google of course at at The Times Online. Here is just a snippet of this “good-times” article…By Lauren Thompson and Grainne Gilmore.
“The era of the amateur landlord has all but ended, with banks effectively refusing to lend to new entrants to the buy-to-let market. Thousands of existing landlords also face huge increases in the cost of remortgaging, experts said yesterday. The warning came as HBOS, Britain’s biggest group of lenders, imposed the third increase in the cost of residential mortgages in as many weeks. Cheltenham & Gloucester, the fourth-biggest lender, also increased some of its rates for the second time in three weeks. First-time landlords, including parents eager to buy a house for their student children, will now find it almost impossible to enter the housing market. Lenders have stopped offering buy-to-let loans or severely tightened their lending criteria for prospective landlords and many of the existing one million buy-to-let mortgage holders approaching the end of their terms.
The development comes as senior figures in the housing industry predict up to two years of declining house prices. The problems in the buy-to-let market are compounded by fears that the target of many would-be landlords – apartment blocks in cities such as Birmingham, Manchester and Cardiff – are facing a rapid decline in their value.
Katie Tucker, of the broker John Charcol, said: “After another week of turmoil in mortgage markets, novice landlords now face huge difficulties securing a loan, and thousands of existing landlords coming to the end of fixed-rate deals will find it very hard and very expensive to switch mortgage providers if they have not built up at least 75 per cent equity in their buy-to-let property.” This week Abbey withdrew virtually its entire range of buy-to-let mortgages, leaving only an expensive fixed-rate deal of 6.99 per cent for direct customers…..”
READ MORE HERE >>> (if you can bear it!)
Notice they are talking about amateur landlords (none of our Money Gym-ers can be called that), about how new build are going to be worst hit (we always steer our cleints well away from over-priced new builds) and I have to ask what on earth any self respecting landlord would be doing getting their buy-to-let from a high street building society - really, I have no idea…………
However, the “Related links” section included “Housing gloom: the silver lining” and if you need cheering up you can read that one here where David Budworth says
“A falling property market does have some benefits! The storm clouds looming over the housing market grow darker every day. But for some aspiring homeowners there could be a silver lining, with bargains emerging as asking prices tumble and sellers become ever more desperate to get properties off their hands. It takes courage to buy at a time when some commentators are predicting that house prices could fall a further 15 per cent. Even Britain’s biggest lenders and surveyors, which have an interest in talking up the market, now admit that they expect property prices to fall. Asking prices for properties new to the market were down by an average of 0.1 per cent over the past month, according to Rightmove.co.uk, the property website. In some regions the slide has been even more severe: in the North West prices fell by 1.4 per cent and in London by 0.9 per cent. And it could become much worse. David Miles, chief economist at Morgan Stanley, the investment bank, says that up to 1.2 million people - one in ten homeowners - could be pushed into negative equity, where their mortgages are greater than the value of their property.
As the gloom spreads, though, bargains are beginning to emerge. Michael Holt, of Charterhouse Standard Holdings, has been buying residential property on behalf of private investors for more than a decade and says: “We are spotting some great bargains. Even if the market continues to struggle in the near term, buy and hold for five or ten years and you will almost certainly make a healthy profit.”
Now, if you study all that carefully you will see that, again, there is hardly any fact, but plenty of opinion. On the one hand “some commentators are predicting a further 15% fall, whereas in some regions the “severe slide” has been 1.4% in one month……even multiplying that by 12 months, I can’t get it to make 15%.
The average fall has been 0.1% which on a property of £200k means a drop of….ooooohhhh…..£200 on value.
My ex-business coach, Chris Barrow just posted a blog post entitled “How Can We Be Expected To Work In Such Conditions?” and really, I have to agree with him! 
