The unravelling of the great buy-to-let scam

James

A surprising number of these city-centre flats that you might think are ideal for the council to purchase as social housing do not meet the council's minimum requirements for social housing. In essence, the council thinks they're not fit to live in.

Cynic

James is right, and the Gov't (Prescott) reduced the minimum size regulations so most of these blocks have a bunch of one-room Studios. I was offered one of these in Hove for a cool £200k it was a tiny pokey little room where you were supposed to cook, eat, sleep everything!

Tiny little windows to meet stringent insulation regulations made the place like a cell - it was scary!!

One Bed Flats (Two Rooms) were little better and they were asking up to £300k!!!! MAD!!! SCAM!!

Most of these blocks will be demolished and history will record one of the biggest scams ever - you can bet palms were well greased, but how high up the greasy-pole?

Dave Martin

same thing is happening here in sydney. Blocks of apartments are lying empty but apparently we have a massive housing shortage...I hope the crash hits hard.

Nick

James - of course, people who are self-funding but not rich always get the worst deal. I recollect many years ago my mother said of an estate "must be council: no private developer would've left that much green space". She was right.
As for tiny flats, I guess those in decent locations could work for students, once the prices are 90% down.

Teddy Bear

Good article.

It is simply amazing the prices that people were prepared to pay for these new build luxury apartments - note at repossession auction they are always described as "purpose built flats" - bang goes the illusion of luxury. It really was mass delusion that in this country, the country that probably is most against dwelling in blocks of flats in Europe, people were so easily hoodwinked into thinking that this was the future, a source of never ending income and capital gain. How many millions went to the property companies that built and sold these brick tulip bulbs and how is it that these same companies have apparently burned their profits?

Dylan Summers

Excellent article. Ironically, though, I believe many housing associations are turning down the chance to buy newbuild apartments on grounds of poor location, inadequate size and poor build quality!

B McCarty

If I may..... ha ha haaa a-ha haaaaa ha ha HA HAAAAAA
HAAAAAAAAAAAAAAAAAAAAAA!!!!!

Griff

Those who purchased a property off plan on the advice of a "property club" and who also paid money for the privilege, really didn,t do their home work and were sold a dream, that has turned into a nightmare.

Too many people taking a cut of the money from the builder before the owner actually gets the keys, they should ask themselves who pays for the fancy seminars, the ads in the papers, the guest speakers.

Also they should have asked themselves what is likely to happen if 200 identical flats go on to the rental market in the same month, rents are hardly likely to rise.

Buy to let isn,t a bad concept, but investors should have done the work themselves, and identified properties in areas that they were familiar with, and that were established properties at a realistic price, not new builds at inflated prices.

For what its worth I think those BTL investors who have avoided the new builds are sitting not too bad, I also believe that those who have lost money through purchasing new builds and then allowing them to be repossessed have hugely contributed to the stats that evidence a housepricecrash.

Dave Jobson

Mr Clark, You certainly put a negative slant on this mystery investor. You seem to be using the fact he doesn't answer his phone as an opportunity to put two & two together and deliberately make five. Everyone loves to hate BTL landlords & see them fail it seems. Yet they simply invest in & provide one of life's basic needs... namely
accommodation for people that don't want to buy, or don't want to save up a deposit to buy because they'd rather rack up mounds of credit card dept buying things they can't afford & live beyond their means.

Apparently it's a sin to invest in property as a pension, but OK to have your pension fund instead in multi national corps that run sweatshops in the 3rd world like something from Oliver Twist, Arms companies making killing machines, GM food companies & mining companies that dig wealth out of poor people’s land & leave them with nothing. In the process of opting for a pension like this one can also expect the insurance/pension company rake of a fat cut in the process. In fact most people don't even know or care where the equity component of their savings & pension funds are invested unless they are the tiny minority of ethical investors.

This mystery property investor you refer to probably bought his properties well before the peak so has plenty of equity. When his morgages come out of fixed rate & become base rate trackers, the amount over base is predetermined in his initial mortgage offer & unaffected by recent increases in the overbase rate. You mistakenly you seem to think otherwise. So check your facts first.

Yes lets all hate BTL landlords. Make generalisations about them. Gloat over them losing their fortunes. When in fact sorry to disappoint you but most BTL landlords like me haven't, because most had the sense not to go into buying up new properties at the peak anyway. They did their sums & could see that the annual rental yield (annual rent x 100/property price) on new builds simply isn't high enough to service the loan interest, let alone make a profit.
As for property crashes.

My flats which are all between 20 & 40 years old, have dropped a mere 10% in value in the last year or so, but it makes no difference because I'm not selling them. How much have equity based pensions dropped in the last year ? A lot more.

If you want to have a go at anyone then have a go at the bankers & bulding society policy makers who permitted 5 x salary mortgages & 100% mortgages. But then you can hardly blame them for raking in nice bonuses & commissions by being encouraged to lend such high amounts. They weren't breaking the rules. The government simply left the banking business far too unregulated. Meaning investors money simply hasn’t been safe with banks & building societies unless the taxpayer gets roped in to bail them out.

As for credit card dept. We need a return to the old higher purchase rules of the 1960’s where nothing can be bought without a 25% deposit from the buyer.

Finally there’s the rumour that house became high because BTL investors sent the prices high. I somehow think the fact we live in a small overcrowded island with strict planning rules & mass immigration sending the population ever higher whilst at the same time too few homes are built, is more to do with high house prices than BTL landlords.

Finally I don’t blame the mystery BTL investor for not answering his phone when you Mr Clark try to ring him.

Mike Wilson

I always thought it was utterly immoral that 'investors' were allowed to constantly leverage the 'equity' (real or imagined) in their various properties to build up portfolios of 50 properties. What did they think - that only 1 person in 50 should be allowed to own properties and the other 49 of us would be happy to rent off them.

The worst thing about it is that their grubby and naked greed pushed the housing market to truly daft prices - pricing out a young generation of would be first time buyers and causing others to tie mortgage nooses around their necks that will last the rest of their lives - or see them into bankruptcy.

And what did our prudent chancellor, Mr. Gordon Brown, do while all this was going on? Absolutely nothing - except count and spend the stamp duty as fast as he could.

robert saggese

He / she who dares "as they say" greed is going to take you out but unfortunately it also takes out the innocent ones
Remind me Great Britain, !!! whats Great :0(

Adrian

None of this is news to me all of this and more was predicted many years ago. The outcome was always predictable by those with enough brain cells to think for themselves. Its nice to see the media finally catching up though.

Thank Grodon Brown for this mess.

Dave Jobson

Mike Wilson
My tenants simply don't want to buy becuase they are only in the city for a year or two due to careers or studies or whatever. Or they are waiting for prices to fall further or various other reasons etc etc. A tiny minority of people are BTL landlords. Just as a small minority of people own garages or shops. Are you saying that no rental property should be available for those that wish to rent ?
Absurd !
Are you going to ban people from owning shops next !
Read my 1st post. BTW where is your pension invested ?
Prices shot high due to low interest rates compared to the 90's & lack of supply of houses/flats & immigration. Also insufficiently regulated lenfding institutions throwing savers money at uncredit worthy people getting 100% mortgages at 5x salary. But you have to blame landlords. You simply don't know what you are talking about.

James

You seem to be writing with the advantage of 20/20 hindsight. All the markers were there before the American sub prime crash, the bigger the incentives offered the less comfortable I was with buying, so I didn't, I just watched, the same as other thinking investors did. Whatever you think, we still own our properties and, so long as we have not bitten off more than we can chew, we are in a position to take advantage of the recovery when it comes, and it will come. If you have your pension in shares you are going to be lucky to see anything like what you were expecting. I am not gloating over that, so why in hell's name do you gloat over the situation some hardworking landlords have got into?