The 2013 buy to let goldrush

I think your scenario is interesting but incorrect.

I agree with you that the price of new build will rise substantially in the short term And so will builders profits.

But even for new build I think the long term will be a drop in new build prices after, say, 5 years large gains.

Why?Because those 20% loans have to be repaid to the government /refinanced or start bearing interest. Also interest rates will perhaps be substantially higher and many people who bought at rock bottom with large mortgages won't be able to pay. Again. All we are getting is an inflationary boom/bust cycle again in new houses.

The second hand market will be largely in the doldrums. There will be virtually no gain because there is no incentive to buy them. So there will be a 2 tier market.

Whoever wants to buy a second hand house will be much worse off doing so. It will distort the housing market. But you'll generally get a lot more house for your money.

I suggest the best way out of a second hand house now and in the foreseeable future is to do a buy to let mortgage of it and release some equity, and then buy a new house.

Any ideas who would be best to help with the finance Mark?

Well 2013 was always going to be the turning point in the property market! I am long enough in the tooth to have seen several cycles of boom and bust and the tide is turning. Based on the basic principle of economics, supply and demand, we are an island, housing stock is limited and the population is increasing. 2012 gave us a feel good factor with the diamond jubilee and the Olympics. People are sick of recession and want to move on. Other disasters in the economies of Europe have given us more confidence in our own and recent government incentives have been the icing on the cake. So will this mean more home ownership and less market for the buy to let? I do not think so. Young people like renting. It gives them flexibility in their careers, in their children's education and let's face it spares them the burdens of home ownership when the landlord will fix it. That said from the heart as I have to install a new boiler in one of my properties! Middle aged people are also looking to their pension shortcomings. Where can you have full control over your pension fund? Only by owning all the funds yourself! The elderly more and more are ridding the burden of home ownership if only to defeat long term care costs so all in all the property market has to move forward.

Does anyone want my properties ? I got sucked into this awful business back in the bubble of 2006/07. Been in negative equity ever since.

Countless problems with tenants, tradesmen, housing benefit departments, tenancy deposit schemes, etc...

Oh, that's for approx. £200 per month of profit per property at lowest ever base-rate trackers (before repairs, tenants who can't pay or won't pay), and always hoping to avoid the big bills (roof, boilers, strutural...) or bank hoping to rip-off change terms

So for the new generation of 'wannabees'... DON'T listen... !

Neil, I know exactly where you are coming from....

No 2013 will not be the return to stupendous growth in house prices despite what the CEBR state.

The simple fact is the housing market is still hugely overvalued. The bubble is being propped up 0.5% interest rates, foreign investors panicking recklessly overpaying for London property as some perverse cash box and stupid sub prime lending to first time buyers.

It does not make for a healthy market. As the economic conditions get worse the cost of borrowing will go up irrelevant of base rates. Inflation is out of control and wages are still frozen.

If you want to speculate on house price growth do it with your own money and don't encourage others. I just see people getting burnt right left and center.

@Neil - hang on in there. I purchased my first property at the top of the market cycle in the late 80's. I still own it and it has quadrupled in value.

Somebody once taught me that "winners never quit and quitters never win".

Several of my friends handed their keys back to the banks and building societies in 1992 when interest rates peaked at 15%. Some of them were bankrupted as a consequence and are only just recovering.

I did the opposite. We all went through a tough time . I worked my socks off, not just in terms of working 18 hour days for many, many years but also working smart.

I know that I came off best.

I also purchased properties at the peak of the 2007/8 property boom. I'm in negative equity on some of those properties too.

20 years from now I will be 65.

With a bit of luck I will still be alive, I will still own them and I will be enjoying the benefit. In the meantime, as Gavin has stated, I count myself lucky that interest rates are at a record low as opposed to a record high and also that rental demand it also at a record high.

Being a landlord is a very tough business, there is far more to learn than you can possibly imagine in the first decade or so but I am very glad I stuck with it.

I wish you well.

I am always very cautious with any predictions having studied economics, follow the BofE reports and seen many cycles in my previous banking career. No economist can really predict trends much further ahead than maybe 2-3 years as the economy is like nature in that every input change or stimulus affects another part of the economy usually in the opposite direction. It is this balance that is hard to control and predict.

From an informed gut feeling and past experience of the market I would say that if you have money and can borrow at reasonable LTVs now would be a good time to buy. Yes existing Landlords are in difficulty due to house price decreases high LTVs and lenders pulling out of the market and this is very unfortunate, and caused by a combination of the perfect storm.

However the first rule in economics is the rule of scarcity. If a resource is not infinite like air it will have a value with a price dependent on the balance of Supply and Demand.

Housing is currently scarce whether you want to rent or buy and in the short term will continue to be so as even when times were good supply did not exceed the demand for new houses.

Prices have already dropped and what is holding back larger increases in price is the suppression of demand from the lack of credit and confidence.

If the economy has improved, which will take over 3 years, enough for there to be a need to increase interest rates what I think you will see drop is the margins on lending as banks will have finished re-capitalising and competition will be greater. Therefore any BofE rate increases I do not think will have a proportional effect on customer costs.

Demand and Supply forces will I believe dictate that if you have money and can invest carefully at the bottom of a depression, this is where people make profit and has historically always been so.

please let me know about any deals you have.

"The simple fact is the housing market is still hugely overvalued. The bubble is being propped up 0.5% interest rates, foreign investors panicking recklessly overpaying for London property as some perverse cash box and stupid sub prime lending to first time buyers."

Yes, true, but I think things will be just as they were after the early 90's bubble, things will stagnate for 10 to 15 years before everyone realises property is once again under valued and there will be another boom. I doubt that interest rates can now ever rise much or if they do it will take years. In order for them to rise there will have to be a re-biasing of the mortgage rates people are getting in the market now and that is a slow process because were it to be swift loads of people would go bust and the economy would suffer.

Like Mark A I also bought in the early 90's boom and have done well out of that. I bought too during 06-07 and those properties are not in negative equity (because I was careful what I bought) but have not gained in value much either. Like mark my strategy is basically "20 years from now I will be 65."

Basically property allows me to hold an asset class at little or no cost to myself for donkeys years. That asset class is more likely to rise in value than shares for capacity reasons, for fuel pricing reasons and so on. It could all go horribly wrong but fingers crossed ......

Totally incorrect as far as i am concerned. Its just speculation to help landlord get a better price on their properties. I have foind no evidence that the house prises are rising at all.