lorenzo
02-09-2007, 08:46 AM
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http://business.scotsman.com/index.cfm?id=1394162007
Buy-to-let king says boom is over
TERESA HUNTER
BUY-to-let investors, many of whom have borrowed heavily to invest in portfolios of properties, will be watching the property market jitters closely. Their nerves are likely to have been rattled by predictions from one of Britain's biggest landlords that 20% price falls are on the way.
In the view of Andreas Panayiotou, chairman of the Ability Group, the writing is on the wall for the sector, as landlords struggle with rising borrowing costs and stagnant rents. If property inflation also subdues, then the scope to offset income losses against capital growth disappears.
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Panayiotou said: "I think everything is overvalued by 20%. Things have been getting way out of control. Prices need to drop to bring returns above the cost of funds."
There is no doubt that the buy-to-let boom has influenced the dynamics of the recent property scene. Such landlords now own 11% of the UK housing stock, or some 2.5 million properties. A dire shortage of residential property, particularly for young buyers, is said to have underpinned the current bubble, and will according to commentators prevent a collapse in prices.
But others, not least Panayiotou, say that plenty of new property is being built, but it is snapped up by investors who squeeze first-time buyers out. In some cases the buyers are simply looking to cash in on soaring house prices and cannot be bothered to rent out. Such properties are left empty.
He alleged: "There are blocks across the country where most of the flats have been bought by buy-to-let investors and many are empty."
However, Paragon, the UK's biggest buy-to-let lender, rushed to defend the industry's record. Paragon's Nigel Terrington said: "Clearly interest rates have gone up faster than rents, but rates go up and down. Rents simply go up, and we know that they have traditionally risen in line with earnings. Buy-to-let investors hold their properties for an average 16 years. They are not concerned with what happens over six months."
He also rejected the description of buy-to-let investors as vultures gobbling up homes.
He argued: "I don't accept that there are blocks of flats lying around empty, that is a bizarre concept.
"Occasionally you will have an area which has become overbuilt or suddenly very unfashionable. Sometimes a university will move a big department to another building across town and that can affect where the students want to live. But these are exceptions to the rule."
He also disputed that yields had fallen to around 3.5%, much lower than the 6% currently available from bank deposits. "Across the UK as a whole, yields have been around 6%. It is true they are lower in very expensive areas such as Edinburgh or London. But university towns do very well, with landlords typically getting a 1% superior yield from student lets than other rentals."
http://business.scotsman.com/index.cfm?id=1394162007
Buy-to-let king says boom is over
TERESA HUNTER
BUY-to-let investors, many of whom have borrowed heavily to invest in portfolios of properties, will be watching the property market jitters closely. Their nerves are likely to have been rattled by predictions from one of Britain's biggest landlords that 20% price falls are on the way.
In the view of Andreas Panayiotou, chairman of the Ability Group, the writing is on the wall for the sector, as landlords struggle with rising borrowing costs and stagnant rents. If property inflation also subdues, then the scope to offset income losses against capital growth disappears.
Advert for scotsman.com's football briefing
Panayiotou said: "I think everything is overvalued by 20%. Things have been getting way out of control. Prices need to drop to bring returns above the cost of funds."
There is no doubt that the buy-to-let boom has influenced the dynamics of the recent property scene. Such landlords now own 11% of the UK housing stock, or some 2.5 million properties. A dire shortage of residential property, particularly for young buyers, is said to have underpinned the current bubble, and will according to commentators prevent a collapse in prices.
But others, not least Panayiotou, say that plenty of new property is being built, but it is snapped up by investors who squeeze first-time buyers out. In some cases the buyers are simply looking to cash in on soaring house prices and cannot be bothered to rent out. Such properties are left empty.
He alleged: "There are blocks across the country where most of the flats have been bought by buy-to-let investors and many are empty."
However, Paragon, the UK's biggest buy-to-let lender, rushed to defend the industry's record. Paragon's Nigel Terrington said: "Clearly interest rates have gone up faster than rents, but rates go up and down. Rents simply go up, and we know that they have traditionally risen in line with earnings. Buy-to-let investors hold their properties for an average 16 years. They are not concerned with what happens over six months."
He also rejected the description of buy-to-let investors as vultures gobbling up homes.
He argued: "I don't accept that there are blocks of flats lying around empty, that is a bizarre concept.
"Occasionally you will have an area which has become overbuilt or suddenly very unfashionable. Sometimes a university will move a big department to another building across town and that can affect where the students want to live. But these are exceptions to the rule."
He also disputed that yields had fallen to around 3.5%, much lower than the 6% currently available from bank deposits. "Across the UK as a whole, yields have been around 6%. It is true they are lower in very expensive areas such as Edinburgh or London. But university towns do very well, with landlords typically getting a 1% superior yield from student lets than other rentals."