Landlords Christmas Tale
This is the true story of a landlord’s Christmas tale. Sleigh bells are ringing, the log fire crackles above the hiss and spit of a turkey roasting in the oven. So if you are sitting comfortably, I will begin.
Scrooge, the landlord, has been haunted and spooked by many ghouls and apparitions this year.
The ghost of buy-to-let past
Landlords were promised ever rising property prices. Easy profits. An abundant supply of employed and affluent tenants. Rising rental demand from increasing numbers of immigrants fleeing poverty in Eastern Europe.
Banks threw cheap money at anybody who wanted it for property investment. Landlords were rich and briefly became public enemy No.1, as Scrooge the landlord was perceived as driving up the prices of property beyond what struggling first time buyers could afford. Pilloried by the media, politicians and the public, Scrooge the landlord had few friends apart from Nathaniel the grasping mortgage broker.
The ghost of buy-to-let present
The haze cleared and instead of a panacea for easy money the city centre citadels of endless riches vanished in the mist as quickly as they appeared. The unbelievable prices of these buy-to-let palaces were shown to have valuations built on sand and greed.
Many 1st time landlords were left holding an over priced property, as the buy-to-let money go round came to a grinding halt. The credit crunch, a banking crisis, buy-to-let loan costs rocketed and nobody wanted to lend to landlords unless the banks could take a landlords vital organs as security.
Accidental landlords everywhere, as owner occupiers gave up at selling their property at virtually any price. Falling rents, plummeting property prices and silence by the media and the moaning 1st time buyers who previously blamed landlords for all their ills. Eastern European tenants disappearing quicker than the snow in a Warsaw spring as they turned tail on basket case UK. Scrooge the landlord was not happy.
The ghost of buy-to-let future
“But does it have to be like this?” Scrooge exclaimed.
Scrooge the landlord was led from his chair by Jacob Marley his former mortgage broker, now growing and selling organic vegetables.
“What next for renting residential property in the UK?” Scrooge asked.
Jacob looked glum and recounted the vision.
Repossessions will rise particularly for new build shoe box developments in city centres as some novice landlords throw in the towel despite interest rates continuing to fall to new record levels.
Smart professional investors with access to equity or good credit lines continue to snap up bargains at auctions. Most will avoid buying identikit city centre repossessions fearing oversupply in the rental market, uncertain resale values and knowing high service charges will squeeze their rental profits.
Inflation disappears and deflation rears its ugly head. Property investment is an ugly word as the Brits love affair with property is seriously tested. Some dodgy middle men continue to make money out of unsuspecting investors who still believe that property at any price will deliver them their buy-to-let dream.
“But wait” Scrooge shouts, “what next?” Jacob Morley, clutching one of his organic leeks manages a faint smile. Registering a knowing look he starts. The future Mr Scrooge is clear:
Landlording will loose its’ lustre. Property prices will continue to fall in 2009, probably by 10-15%. Smart landlords buying at auction will increasingly be able to pick up a bargain as sale prices over correct. Buy-to-let as a trade mark will be about as popular as a turkey’s life insurance policy at Xmas.
Landlords shouldn’t expect a bounce in house values. Wait for an election in 2010 and pray, nay vote and ensure that prudence and his cronies gets booted out. The kick start will come with a new government in 2010 deflation turns to inflation as all the cheap money feeds into the economy.
Interest rates will rise aggressively in 2010 & 11. Landlords need to lock into the best fixed rate deals some time in 2010 to ensure they don’t get clobbered by surging buy-to-let mortgage interest payments.
Look for the Olympic feel good factor to kick in 2011 to fire up a recovery in the housing market as the UK gets bored of being depressed and starts to spend once again. Lending costs and availability remains tight. But for those landlords able to raise finance, property investment returns will turn positive.
Scrooge the landlord listened to all this with interest and then finally spoke.
“But Jacob, does it have to be this way!?”
Jacob pondered for a second and then answered.
“I’m afraid so my son. Property investing is a long-term game. Be patient. By playing the buy-to-let game you are laying the foundations of your future riches in 2025. Only idiots believe there is gain without a little pain. Redemption never came easy!”